Washington D.C. 20549
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report ……………….. |
(Exact name of Registrant as specified in its charter
and translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Title of each class | Trading Symbol | Name of each exchange on which registered |
Ordinary Shares, NIS 0.90 Par Value | TATT | NASDAQ Global Market |
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ |
U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
Page | |||
1 | |||
4 | |||
4 | |||
4 | |||
4 | |||
A. | Selected Financial Data | 4 | |
B. | Capitalization and Indebtedness | 6 | |
C. | Reasons for the Offer and Use of Proceeds | 6 | |
D. | Risk Factors | 6 | |
25 | |||
A. | Business Overview | 28 | |
B. | Government Regulations | 54 | |
C. | Property, Plants and Equipment | 56 | |
58 | |||
58 | |||
A. | Research and Development, Patents and Licenses | 81 | |
B. | Trend Information | 81 | |
C. | Off-Balance Sheet Arrangements | 82 | |
D. | Tabular Disclosure of Contractual Obligations | 82 | |
84 | |||
A. | Directors and Senior Management | 84 | |
B. | Board Practices | 91 | |
C. | Employees | 107 | |
D. | Share Ownership | 108 | |
110 | |||
A. | Major Shareholders | 110 | |
B. | Related Party Transactions | 112 | |
C. | Interests of Experts and Counsel | 112 | |
113 | |||
A. | Consolidated Statements and Other Financial Information | 113 | |
B. | Significant Changes | 113 | |
113 | |||
A. | Offer and Listing Details | 113 | |
B. | Plan of Distribution | 113 | |
C. | Markets | 114 | |
D. | Selling Shareholders | 114 | |
E. | Dilution | 114 | |
F. | Expense of the Issue | 114 | |
114 | |||
A. | Share Capital | 114 | |
B. | Memorandum and Articles of Association | 114 | |
C. | Exchange Controls | 116 | |
D. | Taxation | 116 | |
E. | Dividends and Paying Agents | 133 | |
F. | Statement by Experts | 133 | |
G. | Documents on Display | 133 | |
H. | Subsidiary Information | 134 |
134 | ||
135 | ||
135 | ||
135 | ||
135 | ||
135 | ||
137 | ||
137 | ||
137 | ||
138 | ||
139 | ||
139 | ||
139 | ||
139 | ||
141 | ||
141 | ||
141 | ||
141 |
Due to the adverse impact of COVID-19 on the aerospace industry and consequently on TAT’s business, TAT has resolved to take additional actions in fiscal year 2021 to improve its cost structure in order to cope effectively with the impact of COVID-19 on its business. Specifically, we intend to execute a plan during 2021 by which we would transfer our activity from our leased facility in Gedera, Israel to a facility in Kiryat Gat, Israel which is leased by our wholly-owned subsidiary Turbochrome from the Israel Land Authority (“ILA”) pursuant to a long-term lease agreement expiring in 2045 (with no rental payments due to the ILA in respect of such lease), and to our partially owned facility in Tulsa, Oklahoma. These actions will enable us to concentrate our heat exchanges cores activity in the United States allowing for better operational flow, getting closer to our customer base and cutting fixed costs.
Year Ended December 31, | ||||||||||||||||||||
2020 | 2019(*) | 2018(*) | 2017(*) | 2016(*) | ||||||||||||||||
(in thousands, except share and per share data) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Products | $ | 22,739 | $ | 25,019 | $ | 23,151 | $ | 36,053 | $ | 30,431 | ||||||||||
Services | 52,620 | 72,460 | 64,570 | 63,106 | 59,829 | |||||||||||||||
Total revenues | 75,359 | 97,479 | 87,721 | 99,159 | 90,260 | |||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Products | 20,751 | 21,557 | 23,807 | 28,096 | 23,788 | |||||||||||||||
Services | 46,173 | 60,622 | 55,969 | 51,313 | 48,131 | |||||||||||||||
Total cost of revenues | 66,924 | 82,179 | 79,776 | 79,409 | 71,919 | |||||||||||||||
Gross profit | 8,435 | 15,300 | 7,945 | 19,750 | 18,341 | |||||||||||||||
Operating expenses: | �� | |||||||||||||||||||
Research and development, net | 185 | 113 | 458 | 621 | 1,054 | |||||||||||||||
Selling and marketing | 4,369 | 4,929 | 4,754 | 4,772 | 3,695 | |||||||||||||||
General and administrative | 7,612 | 7,654 | 7,901 | 8,668 | 9,364 | |||||||||||||||
Other expenses (income) | 315 | - | (4 | ) | 53 | (138 | ) | |||||||||||||
12,481 | 12,696 | 13,109 | 14,114 | 13,975 | ||||||||||||||||
Operating income (loss) from continuing operations | (4,046 | ) | 2,604 | (5,164 | ) | 5,636 | 4,366 | |||||||||||||
Financial expenses, net | (770 | ) | (422 | ) | (88 | ) | (286 | ) | (166 | ) | ||||||||||
Income (loss) from continuing operations before taxes on income | (4,816 | ) | 2,182 | (5,252 | ) | 5,350 | 4,200 | |||||||||||||
Taxes on income (tax benefit) | (1,517 | ) | 589 | (1,464 | ) | 2,333 | 3,865 | |||||||||||||
Income (loss) from continuing operations after taxes on income (tax benefit) | (3,299 | ) | 1,593 | (3,788 | ) | 3,017 | 335 | |||||||||||||
Share in results of equity investment of affiliated companies | (185 | ) | (132 | ) | (140 | ) | (210 | ) | (55 | ) | ||||||||||
Net income (loss) from continuing operations | (3,484 | ) | 1,461 | (3,928 | ) | 2,807 | 280 | |||||||||||||
Loss from discontinued operation before income tax | $ | (1,845 | ) | $ | (655 | ) | $ | (480 | ) | $ | (411 | ) | $ | (218 | ) | |||||
Net income (loss) attributable to TAT Technologies’ shareholders | $ | (5,329 | ) | $ | 806 | $ | (4,408 | ) | $ | 2,396 | $ | 62 | ||||||||
Basic and diluted net income (loss) per share: | ||||||||||||||||||||
Net income (loss) per share attributable to controlling interest | (0.6 | ) | 0.1 | (0.5 | ) | 0.27 | 0.01 | |||||||||||||
$ | (0.6 | ) | $ | 0.1 | $ | (0.5 | ) | $ | 0.27 | $ | 0.01 | |||||||||
Weighted average number of shares used in computing: | ||||||||||||||||||||
Basic net income (loss) per share | 8,874,696 | 8,874,696 | 8,864,885 | 8,848,028 | 8,828,444 | |||||||||||||||
Diluted net income (loss) per share | 8,874,696 | 8,874,696 | 8,864,885 | 8,909,072 | 8,830,764 | |||||||||||||||
Cash dividend per share | $ | - | $ | - | $ | - | $ | 0.34 | $ | 0.34 |
As of December 31, | ||||||||||||||||||||
2020 | 2019(*) | 2018(*) | 2017(*) | 2016(*) | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Working capital | $ | 54,260 | $ | 62,934 | $ | 62,778 | $ | 67,042 | $ | 66,683 | ||||||||||
Total assets | 116,121 | 114,675 | 103,287 | 111,977 | 109,583 | |||||||||||||||
Long-term liabilities, excluding current maturities | 10,657 | 8,601 | 4,312 | 5,083 | 3,322 | |||||||||||||||
Shareholders’ equity | $ | 80,281 | $ | 85,370 | $ | 84,294 | $ | 88,574 | $ | 88,652 |
(i) | Manufacturers based in the United States, such as the Hughes-Treitler division of Ametek Inc., Boyd Corporation, , Collins Aerospace, Honeywell International, and Triumph Thermal Systems; |
(ii) | Manufacturers based in Europe such as HS Marston Aerospace Ltd., a subsidiary of Collins Aerospace, Secan and Liebherr-Aerospace Toulouse S.A.; and |
(iii) | Manufacturers based in Asia such as Sumitomo Precision Products from Japan. |
• The ability to adapt faster to changes in customer requirements and industry conditions or trends; |
• Greater access to capital; |
• Stronger relationships with customers and suppliers; |
• Greater name recognition; |
• Access to superior technology and greater marketing resources; |
• The ability to offer complete systems in addition to components; and |
• The ability to bundle heat transfer components and solutions and other aircraft components. |
• | Suspend TAT or any of its subsidiaries from receiving new contracts pending resolution of alleged violations of procurement laws or regulations; |
• | Terminate existing contracts, with or without cause, at any time; |
• | Condition the receipt of new contracts on conditions which are beyond the control of TAT; |
• | Reduce the value of existing contracts; |
• | Audit the contract-related costs and fees of TAT and its subsidiaries, including allocated indirect costs; and |
• | Control or prohibit the export of products of TAT and its subsidiaries. |
• | Governmental embargoes or foreign trade restrictions; |
• | Changes in U.S. and foreign governmental regulations; |
• | Changes in foreign exchange rates; |
• | Tariffs; |
• | Other trade barriers; |
• | Political, economic and social instability; and |
• | Difficulties collecting accounts receivable. |
• | Issuance of equity securities that would dilute TAT’s shareholders’ percentages of ownership; |
• | Large one-time write-offs; |
• | The incurrence of debt and contingent liabilities; |
• | Difficulties in the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies; |
• | Diversion of management’s attention from other business activities and concerns; |
• | Contractual disputes; |
• | Risks of entering geographic and business markets in which TAT has no or only limited prior experience; and |
• | Potential loss of key employees of acquired organizations. |
• | Quarterly variations in TAT’s operating results; |
• | Operating results that vary from the expectations of securities analysts and investors; |
• | Changes in expectations as to TAT’s future financial performance, including financial estimates by securities analysts and investors; |
• | Announcements of technological innovations or new products by TAT or TAT’s competitors; |
• | Announcements by TAT or TAT’s competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
• | Announcements by third parties of significant claims or proceedings against us; |
• | Additions or departures of key personnel; |
• | Future sales of TAT’s ordinary shares (by our controlling shareholders or others); |
• | De-listing of TAT’s shares from NASDAQ and/or from the TASE; |
• | Stock market price and volume fluctuation; |
• | Legal proceedings against TAT’s controlling shareholders; and |
• | Regulatory actions by securities authorities which impacts TAT’s interaction with securities analysts and institutional investors. |
• | Enancing OEM capabilities — capitalizing on our technical expertise, experience and reputation in the market of heat transfer solutions to expand the scope of our OEM offerings to new aircrafts or to new platforms in the existing aircrafts. |
• | Expand the scope of MRO services — leveraging our technical expertise, engineering resources and facilities to broaden MRO services to additional types of aircraft and additional aircraft systems, subsystems and components while developing the required technical expertise to provide these additional MRO services. |
• | Increasing market share — continuing aggressive marketing efforts to win new customers as well as to expand activities with existing customers, partly by focusing on cross selling opportunities between our different businesses. As part of our efforts, we also intend to expand our marketing presence in existing territories, like the United States and Western Europe as well as new territories, where TAT currently has a smaller presence and fewer customers, such as Eastern Europe, Latin America and Asia. |
• | Effective synergy among group members — enhancing the synergies between our various businesses. For example, by supplying Limco with heat transfer components manufactured in Gedera, we enable Limco to offer a superior product and more competitive pricing on its MRO services, thereby improving Limco's overall competitive position in the market. |
• | Organic growth and M&A — in addition to growing our existing businesses organically as detailed above, we intend to evaluate complementary acquisition opportunities. |
Aircraft manufacturers | Boeing, Cessna, Pilatus, Embraer, Lockheed Martin, Honda Aircraft, Cirrus, IAI, Parker. |
System manufacturers/integrators and defense contractors | Liebherr, Thales, Rafael, Elbit, IAI, Lockheed Martin, Eaton Aerospace, Parker Hannifin Corporation, Safran (Snecma). |
U.S. Domestic and international airlines and air cargo carriers | Air France-KLM, FedEx, SAS, Swiss, EL AL, Delta Airlines, United, Air Canada Jazz, Republic Airways, DHL, Austrian Airlines, TAM, Thai, Korean Air, Air India, Swiftair, Allegiant Air, Empire Airlines, Mountain Air Cargo, Alliance Airlines, CAM – Cargo Aircraft Management, ASL airlines, Virgin Australia. |
Maintenance service centers | Fokker, Honeywell International, Kellstrom Commercial, Aero Kool, Lufthansa Technik, UTAS-Hamilton Sundstrand, SR Technics, Embraer, Evergreen Aviation Component Services, Turkish Technic, Delta Tech Ops, ST Aerospace Engineering, , Gulfstream, IAI, Aerothrust, Summit Aviation, Haeco Americas, Jet Engine Technologies, Turbine Engine Solution, Turbine Engine Center and Cargolux. |
Governments and military air forces | U.S. Army, U.S. Air Force and U.S. Navy; Israeli Ministry of Defense, IAF; Belgium Air Force, Polish Air Force, Portuguese Air Force |
• | Complete system manufacturers that either independently or through subcontractors, design, develop and manufacture complete systems (such as a manufacturer of aircraft hydraulic systems) directly for the platform manufacturer (i.e., for business jets). These companies will typically compete on bids for complete systems and/or projects where the components/products TAT develops are part of the complete system. In such cases, it is very likely that these companies will subcontract to companies such as TAT the design and manufacturing of one or a few components in the system. Although some of these companies have the capabilities to design and manufacture each standalone component in a complete system (i.e., a heat exchanger integrated in hydraulic systems) they usually do not compete with TAT in projects where there is a specific requirement for a stand-alone component. |
• | Component manufacturers, such as TAT, for which the design and manufacture of components (such as heat exchangers or other types of heat transfer solutions) is the main business (and which are normally situated in the “value chain” one tier below the system manufacturers, such as a manufacturer of an aircraft’s hydraulic system and two tiers below the platform manufacturer, such as a manufacturer of a new aircraft). These companies typically compete in projects where there is a specific requirement for a standalone aviation component (such as a heat exchanger or other types of heat transfer solutions) and in tenders by manufacturers of complete systems or products for sub-contractors. Although some of the component manufacturers have the capabilities to design, develop and manufacture a complete system (i.e., environmental control system for a business jet) for a certain platform, these companies usually do not compete on projects for complete systems in which their manufactured component constitutes a small part of the complete system, mainly due to the high barriers to entry and to the difficulty to move up the “value chain” from a component supplier to a whole system manufacturer. |
• | The ability to adapt faster to changes in customer requirements and industry conditions or trends; |
• | Greater access to capital; |
• | Stronger relationships with customers and suppliers; |
• | Greater name recognition; |
• | Access to superior technology and greater marketing resources; |
• | Ability to offer complete systems in addition to components; and |
• | The ability to bundle heat transfer solutions and other aircraft components. |
• | Service divisions of OEMs – generally, each OEM of products in the heat transfer solutions segment has the necessary capabilities to provide MRO services for products it designs and manufactures throughout its lifetime, commencing with the initial warranty period and through the after-market period. Service divisions of OEMs may also acquire capabilities to service products of other OEMs to further expand their MRO services. |
• | Service centers – which often provide MRO services for a broad range of components and systems. These service centers can be either the in-house maintenance services of commercial airlines or other independent service providers, such as TAT or Limco. |
• | Ability to bundle heat transfer and other aircraft components; |
• | Access to greater marketing resources; |
• | Access to superior technology; and |
• | Greater resources which allows for better turnaround time. |
• | Better name recognition; |
• | Ability to bundle aviation and other aircraft components; |
• | Stronger relationships with customers and suppliers; |
• | Lower cost structure; |
• | Regional support near customers’ location; |
• | Access to greater marketing resources; |
• | Access to superior technology |
• | Greater access to capital; and |
• | Greater resources which allows for better turnaround time. |
• | The ability to adapt faster to changes in customer requirements and industry conditions or trends; |
• | Better name recognition; |
• | Ability to bundle jet engine and other aircraft components; |
• | Stronger relationships with customers, OEMs and suppliers; |
• | Lower cost structure; |
• | Regional support near customers’ location; |
• | Access to greater marketing resources; |
• | Access to superior technology; |
• | Greater access to capital; and |
• | Greater resources which allows for better turnaround time |
• | Engaging in active efforts to preserve its customer base in existing projects, while working to broaden and increase its involvement with such clients. |
• | Conducting marketing activities aimed at penetrating new geographical markets and winning new customers, while taking advantage of the unique knowledge and expertise that TAT and its subsidiaries have gained in various areas. |
• | Entering into additional related operating segments that will enable TAT and its subsidiaries to fulfill their growth potential. |
• | Providing customers with the best value, including competitive prices, by tailoring comprehensive service packages that combine the design and planning of an OEM component, the manufacture of such component, and the provision of maintenance services. |
• | Extending MRO capabilities in order to establish a ‘one-stop-shop’ center for comprehensive MRO services for the types of aircraft Limco and/or Piedmont and/or Turbochrome target. |
• | Enhancing our engineering capabilities in order to support customer needs related to new projects and in order to certify MRO services that differ from processes previously approved by the FAA, EASA or other regulatory authorities. This allows shortening the long and complex approval process, streamlining the design and certification process and reducing costs. |
• | Leveraging operational efficiencies to achieve shorter delivery times and reduce costs. |
• | Investing in new technologies and manufacturing techniques in the heat transfer solutions product line. |
• | Investing in innovations and improvements aimed at enhancing the quality and performance of our existing solutions and services as well as the development of new products in an effort to strengthen our market position and enter into more advanced platforms. |
(i) | OEM of heat transfer solutions and aviation components, such as heat exchangers, pre-coolers and oil/fuel hydraulic coolers (through our Gedera facility); |
(ii) | MRO services for heat transfer components and OEM of heat transfer solutions (through our Limco subsidiary); |
(iii) | MRO services for aviation components (through our Piedmont subsidiary); and |
(iv) | Overhaul and coating of jet engine components (through our Turbochrome subsidiary). |
Year Ended December 31, | ||||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
Revenues in Thousands | % of Total Revenues | Revenues in Thousands | % of Total Revenues | Revenues in Thousands | % of Total Revenues | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
OEM of heat transfer solutions and aviation components | $ | 26,071 | 33.3 | % | $ | 26,589 | 26.1 | % | $ | 24,707 | 26.5 | % | ||||||||||||
MRO services for heat transfer components and OEM of heat transfer solutions | 20,835 | 26.5 | % | 34,433 | 33.7 | % | 31,344 | 33.6 | % | |||||||||||||||
MRO services for aviation components | 31,189 | 39.7 | % | 38,687 | 37.9 | % | 32,487 | 34.9 | % | |||||||||||||||
Overhaul and coating of jet engine components | 3,546 | 4.5 | % | 8,610 | 8.4 | % | 9,697 | 10.4 | % | |||||||||||||||
Eliminations | (3,141 | ) | (4 | )% | (6,287 | ) | (6.2 | )% | (5,057 | ) | (5.4 | )% | ||||||||||||
Total Revenues | $ | 75,359 | 100 | % | $ | 102,032 | 100 | % | $ | 93,178 | 100 | % |
Years Ended December 31, | ||||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
Revenues in Thousands | % of Total Revenues | Revenues in Thousands | % of Total Revenues | Revenues in Thousands | % of Total Revenues | |||||||||||||||||||
United States | $ | 47,095 | 62.5 | % | $ | 61,930 | 60.7 | % | $ | 54,032 | 58.0 | % | ||||||||||||
Israel | 6,851 | 9.1 | % | 7,088 | 6.9 | % | 6,924 | 7.4 | % | |||||||||||||||
Other | 21,413 | 28.4 | % | 33,014 | 32.4 | % | 32,222 | 34.6 | % | |||||||||||||||
Total | $ | 75,359 | 100.0 | % | $ | 102,032 | 100.0 | % | $ | 93,178 | 100.0 | % |
• | Inventory valuation |
• | Income taxes |
• | Allowance for doubtful accounts |
Year Ended December 31 | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Revenues | ||||||||||||
OEM of heat transfer solutions and aviation components | $ | 26,071 | $ | 26,589 | 24,707 | |||||||
MRO services for heat transfer components and OEM of heat transfer solutions | 20,835 | 34,433 | 31,344 | |||||||||
MRO services for aviation components | 31,189 | 38,687 | 32,487 | |||||||||
Overhaul and coating of jet engine components | 3,546 | 4,057 | 4,240 | |||||||||
Eliminations | (3,141 | ) | (6,287 | ) | (5,057 | ) | ||||||
Total revenues | 75,359 | 97,479 | 87,721 | |||||||||
Cost of revenues | ||||||||||||
OEM of heat transfer solutions and aviation components | 21,703 | 23,998 | 25,612 | |||||||||
MRO services for heat transfer components and OEM of heat transfer solutions | 17,885 | 27,852 | 27,659 | |||||||||
MRO services for aviation components | 26,961 | 33,337 | 28,561 | |||||||||
Overhaul and coating of jet engine components | 3,312 | 3,460 | 3,287 | |||||||||
Eliminations | (2,937 | ) | (6,468 | ) | (5,343 | ) | ||||||
Total cost of revenues | 66,924 | 82,179 | 79,776 | |||||||||
Gross profit | 8,435 | 15,300 | 7,945 | |||||||||
Research and development costs, net | 185 | 113 | 458 | |||||||||
Selling and marketing | 4,369 | 4,929 | 4,754 | |||||||||
General and administrative | 7,612 | 7,654 | 7,901 | |||||||||
Other expenses (income) | 315 | - | (4 | ) | ||||||||
Operating income (loss) | (4,046 | ) | 2,604 | (5,164 | ) | |||||||
Financial expense, net | (770 | ) | (422 | ) | (88 | ) | ||||||
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 equity investment | (3,299 | ) | 1,593 | (3,788 | ) | |||||||
Share in results of affiliated company and impairment of share in affiliated companies | (185 | ) | (132 | ) | (140 | ) | ||||||
Net income (loss) from continued operation | $ | (3,484 | ) | $ | 1,461 | $ | (3,928 | ) | ||||
Net loss from discontinued operation | (1,845 | ) | (655 | ) | (480 | ) | ||||||
Net income (loss) | $ | (5,329 | ) | $ | 806 | $ | (4,408 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Revenues | ||||||||||||
OEM of heat transfer solutions and aviation components | 30.6 | % | 27.5 | % | 28.2 | % | ||||||
MRO services for heat transfer components and OEM of heat transfer solutions | 27.4 | 35.2 | 35.7 | |||||||||
MRO services for aviation components | 41.4 | 39.5 | 37.0 | |||||||||
Overhaul and coating of jet engine components | 4.7 | 4.2 | 4.8 | |||||||||
Eliminations | (4.1 | ) | (6.4 | ) | (5.7 | ) | ||||||
Total revenues | 100 | 100 | 100 | |||||||||
Cost of revenues | ||||||||||||
OEM of heat transfer solutions and aviation components | 28.8 | 24.6 | 29.1 | |||||||||
MRO services for heat transfer components and OEM of heat transfer solutions | 23.7 | 28.5 | 31.5 | |||||||||
MRO services for aviation components | 35.7 | 34.2 | 32.5 | |||||||||
Overhaul and coating of jet engine components | 4.4 | 4.2 | 3.7 | |||||||||
Eliminations | (3.8 | ) | (6.6 | ) | (6.1 | ) | ||||||
Cost of revenues | 88.8 | 84.9 | 90.7 | |||||||||
Gross profit | 11.2 | 15.1 | 9.3 | |||||||||
Research and development costs, net | 0.2 | 0.1 | 0.5 | |||||||||
Selling and marketing | 5.9 | 5 | 5.4 | |||||||||
General and administrative | 10.1 | 7.8 | 9 | |||||||||
Other income | 0.4 | * | * | |||||||||
16.6 | 12.9 | 14.9 | ||||||||||
Operating income (loss) | (5.4 | ) | 2.2 | (5.6 | ) | |||||||
Financial expense, net | (1 | ) | (0.4 | ) | (0.1 | ) | ||||||
Income (loss) before taxes on income (tax benefit) | (6.4 | ) | 1.8 | (5.7 | ) | |||||||
Taxes on income (tax benefit) | (2 | ) | 0.6 | (1.6 | ) | |||||||
income (loss) before equity investment | (4.4 | ) | 1.2 | (4.1 | ) | |||||||
Share in results of affiliated company and impairment of share in affiliated companies | (0.2 | ) | (0.1 | ) | (0.2 | ) | ||||||
Net income (loss) from continued operation | (4.6 | ) | 1.1 | (4.3 | ) | |||||||
Net loss from discontinued operation | (2.5 | ) | (0.2 | ) | (0.4 | ) | ||||||
Net income (loss) | (7.1 | )% | (0.4 | )% | (4.8 | )% |
Year ended December 31, 2019 compared with Year ended December 31, 2018
Israel and the European Union Community, known now as the “European Union,” concluded a Free Trade Agreement in July 1975 that confers some advantages with respect to Israeli exports to most European countries and obligates Israel to lower its tariffs with respect to imports from these countries over a number of years. In 1985, Israel and the United States entered into an agreement to establish a Free Trade Area. The Free Trade Area has eliminated all tariff and some non-tariff barriers on most trade between the two countries. On January 1, 1993, an agreement between Israel and the European Free Trade Association, known as the “EFTA,” established a free-trade zone between Israel and the EFTA nations. In November 1995, Israel entered into a new agreement with the European Union, which includes a redefinition of rules of origin and other improvements, such as allowing Israel to become a member of the Research and Technology programs of the European Union. In recent years, Israel has established commercial and trade relations with a number of other nations, including Russia, China, India, Turkey and other nations in Eastern Europe and the Asia-Pacific region.
1. | In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses ("Topic 326"): Measurement of Credit Losses on Financial Instruments. The guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance will be effective for the fiscal year beginning on January 1, 2020, including interim periods within that year. The new standard does not have a material effect on the Company's financial statements upon adoption. |
1. | In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes. (Topic 740)” ("the Update"). The amendments in this Update simplify the accounting for income taxes by removing the following exceptions in ASC 740: 1. Exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; 2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; 3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary;4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. |
Year Ended December 31, | ||||||||||||
(in thousands) | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Net cash provided by operating activities | $ | 5,947 | $ | 3,551 | $ | 2,155 | ||||||
Net cash used in investing activities | (5,407 | ) | (3,279 | ) | (3,841 | ) | ||||||
Net cash provided by (used in) financing activities | 7,652 | - | 197 | |||||||||
Net cash provided by (used in) discontinued activities | 153 | (263 | ) | (75 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 8,345 | 9 | (1,564 | ) | ||||||||
Cash and cash equivalents at beginning of the year | 15,959 | 15,950 | 17,514 | |||||||||
Cash and cash equivalents at end of the year | $ | 24,304 | $ | 15,959 | $ | 15,950 |
Contractual Obligations | Payments due by Period (Amounts in Thousands US$) | |||||||||||||||||||
Total | Less than 1 year | 1-3 Years | 3-5 Years | More than 5 years | ||||||||||||||||
Operating lease obligations | 7,907 | 1,800 | 3,276 | 2,334 | 497 | |||||||||||||||
Purchase commitments | 8,577 | 7,721 | 856 | - | - | |||||||||||||||
Total | $ | 16,484 | $ | 9,521 | $ | 4,132 | $ | 2,334 | $ | 497 |
Name | Age | Position | |||
Amos Malka | 68 | Chairman of the Board of Directors | |||
Igal Zamir | 55 | Chief Executive Officer and President | |||
Ehud Ben - Yair | 57 | Chief Financial Officer | |||
Yair Raz | 65 | EVP Global Strategy | |||
Eitan Shabtay | 51 | EVP Engineering and Technologies | |||
Ohad Milo | 46 | General Manager of Gedera | |||
Adi Fine | 47 | EVP Human Resources | |||
Dave Thomas | 57 | General Manager of Piedmont | |||
Greg Watson | 51 | General Manager of Limco | |||
Michael Chen* | 56 | General Manager of Turbochrome | |||
Ron Ben-Haim | 51 | Director | |||
Amiram Boehm | 49 | Director | |||
Avi Shani (1)(2)(3)(4) | 73 | External Director | |||
Dafna Gruber (1)(3)(4) | 55 | Independent Director | |||
Aviram Halevi (1)(2)(3)(4) | 63 | External Director |
Salaries, fees, Commissions and bonuses (Amounts in Thousands US$) | Other benefits (Amounts in Thousands US$) | |||||||
All directors and executive officers as a group (16 executives) | $ | 2,754 | $ | 138 |
Information Regarding Covered Executives (1) (Amounts in Thousands US$) | ||||||||||||||||||||
Name and Principal Position(2) | Base Salary | Benefits and Perquisites(3) | Variable Compensation(4) | Equity-Based Compensation(5) | Total | |||||||||||||||
Igal Zamir, CEO and President | 336 | 81 | 110 | 2 | 529 | |||||||||||||||
Ehud Ben- Yair, CFO | 215 | 62 | 48 | 18 | 343 | |||||||||||||||
Ohad Milo, President of Gedera | 158 | 50 | 37 | 24 | 269 | |||||||||||||||
Dave Thomas, President of Piedmont | 190 | 13 | 117 | 31 | 351 | |||||||||||||||
Greg Watson, President of Limco | 203 | 13 | 20 | 2 | 238 |
(1) | All amounts reported in the table are in terms of cost to TAT, as recorded in our financial statements. | |
(2) | Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the average conversion rate for the year ended December 31, 2020. | |
(3) | Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to each executive, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car or car allowance, medical insurance and benefits, risk insurance (e.g., life, disability, accident), convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent with our guidelines. | |
(4) | Amounts reported in this column refer to variable compensation mainly bonus payments according to the company's incentive plan as recorded in our financial statements for the year ended December 31, 2019 and were paid during 2020 in respect of performance related to fiscal year 2019 results. | |
(5) | Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2020 in connection with equity-based compensation granted to the Covered Executive. |
• | The majority includes at least a majority of the shares voted by shareholders other than controlling shareholders or shareholders who have a personal interest in the election of the external directors (excluding a personal interest that is not related to a relationship with the controlling shareholders); or |
• | The total number of shares held by non-controlling shareholders and disinterested shareholders that voted against the election of the external director does not exceed 2% of the aggregate voting rights of the company. |
• | The majority includes at least a majority of the shares voted by shareholders who have no personal interest in the transaction; or |
• | The total number of shares held by disinterested shareholders that voted against the approval of the transaction does not exceed 2% of the aggregate voting rights of our company. |
• | The majority includes at least a majority of the shares voted by shareholders other than our controlling shareholders or shareholders who have a personal interest in the adoption of the compensation policies; or |
• | The total number of shares held by non-controlling shareholders and disinterested shareholders that voted against the adoption of the compensation policies does not exceed 2% of the aggregate voting rights of our company. |
Active Chairman | CEO | Other Executives | |
Company Target | 100% | 75% - 100% | 50%-100% |
Personal KPIs | NONE | NONE | 0%-30% |
Personal Evaluation | NONE | 0%-25% | 0%-20% |
• | Breach of his or her duty of care to the company or to another person; |
• | Breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause to assume that his act would not prejudice the company’s interests; |
• | Monetary liability imposed upon the office holder in favor of another person; |
• | A monetary obligation imposed on the office holder in favor of another person who was injured by a violation, as this term is defined in section 52(54)(a)(1)(a) of the Israeli Securities Law, 1968 (“Israeli Securities Law”); and |
• | Expenses expended by the office holder, including reasonable litigation expenses, and including attorney's fees, in respect of any proceeding under chapters 8-C, 8-D or 9-A of the Israeli Securities Law or in respect to any monetary sanction. |
• | Monetary liability imposed on the office holder in favor of another person by any judgment, including a settlement or an arbitrator’s award approved by a court; |
• | Reasonable litigation expenses, including attorney’s fees, actually incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the office holder or the imposition of any monetary liability in lieu of criminal proceedings, or concluded without the filing of an indictment against the office holder and a monetary liability was imposed on the officer holder in lieu of criminal proceedings with respect to a criminal offense that does not require proof of criminal intent; |
• | A monetary obligation imposed on the office holder in favor of another person who was injured by a violation, as this term is defined in section 52(54)(a)(1)(a) of the Israeli Securities Law; |
• | Expenses expended by the office holder, including reasonable litigation expenses, and including attorney's fees, in respect of any proceeding under chapters 8-C, 8-D or 9-A of the Israeli Securities Law or in respect to any monetary sanction; |
• | Reasonable litigation expenses, including attorneys’ fees, incurred by such office holder or which were imposed on him by a court, in proceedings the company instituted against the office holder or that were instituted on the company’s behalf or by another person, or in a criminal charge from which the office holder was acquitted, or in a criminal proceeding in which the office holder was convicted of a crime which does not require proof of criminal intent; or |
• | Any other liability, payment or expense which the company may indemnify its office holders under the Israeli Company Law, the Israeli Securities Law or other Israeli law. |
• | Undertake in advance to indemnify an office holder, except that with respect to a financial liability imposed on the office holder by any judgment, settlement or court-approved arbitration award, the undertaking must be limited to types of occurrences, which, in the opinion of the company’s board of directors, are, at the time of the undertaking, foreseeable due to the company’s activities and to an amount or standard that the board of directors has determined is reasonable under the circumstances; and |
• | Undertake in advance to indemnify an office holder for reasonable litigation expenses, including attorney’s fees, actually incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the office holder or the imposition of any monetary liability in lieu of criminal proceedings, or concluded without the filing of an indictment against the office holder and a monetary liability was imposed on the officer holder in lieu of criminal proceedings with respect to a criminal offense that does not require proof of criminal intent. |
• | Undertake in advance to indemnify an office holder for reasonable litigation expenses, including attorneys’ fees, incurred by such office holder or which were imposed on him by a court, in proceedings the company instituted against the office holder or that were instituted on the company’s behalf or by another person, or in a criminal charge from which the office holder was acquitted, or in a criminal proceeding in which the office holder was convicted of a crime which does not require proof of criminal intent. |
• | Retroactively indemnify an office holder of the company. |
• | Breach by the office holder of his duty of loyalty, except with respect to insurance coverage or indemnification if the office holder acted in good faith and had reasonable grounds to assume that the act would not prejudice the company; |
• | Breach by the office holder of his duty of care if such breach was committed intentionally or recklessly, unless the breach was committed only negligently; |
• | Any act or omission committed with intent to derive an unlawful personal gain; and |
• | Any fine or forfeiture imposed on the office holder. |
• | The majority of the company’s board of directors qualifies as independent directors, as defined under NASDAQ Marketplace Rules. |
• | The compensation of the chief financial officer and all other executive officers be determined, or recommended to the board of directors for determination, either by (i) a majority of the independent directors or (ii) a compensation committee comprised solely of independent directors. |
• | Director nominees must be selected or recommended for the board of directors, either by (a) a majority of independent directors or (b) a nominations committee comprised solely of independent directors. |
Name | Number of Ordinary Shares Beneficially Owned(1) | Percentage of Ownership(2) | ||||||
FIMI Funds (3) | 5,254,908 | 59.21 | % | |||||
Yelin Lapidot Holdings Management Ltd. (4) | 587,261 | 6.62 | % |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. |
(2) | The percentages shown are based on 8,874,696 ordinary shares issued and outstanding as of December 31, 2020 (net of 274,473 dormant shares). |
(3) | Based on a Schedule 13D filed on August 14, 2013, and on Schedule 13D/A filed on December 12, 2016, FIMI Funds, FIMI FIVE 2012 Ltd., Shira and Ishay Davidi Management Ltd. and Mr. Ishay Davidi share voting and dispositive power with respect to the 5,254,908 ordinary shares held by the FIMI Funds. FIMI FIVE 2012 Ltd. is the managing general partner of the FIMI Funds. Shira and Ishay Davidi Management Ltd. controls FIMI FIVE 2012 Ltd. Mr. Ishay Davidi controls the Shira and Ishay Davidi Management Ltd. and is the Chief Executive Officer of all the entities listed above. The principal business address of each of the above entities and of Mr. Davidi is c/o FIMI FIVE 2012 Ltd., Electra Tower, 98 Yigal Alon St., Tel Aviv 6789141, Israel. |
(4) | This information is based on information provided in the Schedule 13G/A filed with the SEC by Dov Yelin, Yair Lapidot and Yelin Lapidot Holdings Management Ltd. (collectively, “Yelin Lapidot”) on February 10, 2020. The business address of Yelin Lapidot is 50 Dizengoff Street, Dizengoff Center, Gate 3, Top Tower, 13th floor, Tel Aviv 64332, Israel. |
(5) | This information is based on information provided in the Schedule 13G/A filed with the SEC by Itshak Sharon (Tshuva), Delek Group Ltd. And The Phoenix Holdings Ltd. on February 18, 2020. The business address of Itshak Sharon (Tshuva) and Delek Group Ltd. is 19 Abba Eban blvd, P.O.B. 2054, Herzliya, 4612001, Israel and the address of the Phoenix Holdings Ltd. is Derech Hashalom 53, Givataim, 53454, Israel. |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Income - | ||||||||||||
Sales to related-party company (*) | $ | 173 | $ | 596 | $ | 1,251 | ||||||
Cost and expenses - | ||||||||||||
Supplies from related party (*) | $ | 362 | $ | 552 | $ | 59 |
December 31, | ||||||||
2020 | 2019 | |||||||
Trade receivables and other receivables (*) | $ | 740 | $ | 706 | ||||
Trade payables and other payables (*) | $ | 122 | $ | 154 |
• | Amortization of purchases of acquired technology and patents over an eight-year period for tax purposes; |
• | Amortization of specified expenses incurred in connection with a public issuance of securities over a three-year period for tax purposes; |
• | Right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli Industrial Companies; and |
• | Accelerated depreciation rates on equipment and buildings. |
• | An individual citizen or resident of the United States or an individual treated as a U.S. citizen or resident for U.S. federal income tax purposes; |
• | A corporation or other entity taxable as a corporation for U.S. federal income tax purposes created or organized in or under the laws of the United States, any State or the District of Columbia; |
• | An estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | Any trust if (A)(i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States persons have the authority to control all substantial decisions of the trust, or (B) such trust validly elects to be treated as a United States person. |
• | Insurance companies; |
• | Dealers in stocks, securities or currencies; |
• | Financial institutions and financial services entities; |
• | Real estate investment trusts; |
• | Regulated investment companies; |
• | Persons that receive ordinary shares in connection with the performance of services; |
• | Tax-exempt organizations; |
• | Persons that hold ordinary shares as part of a straddle or appreciated financial position or as part of a hedging, conversion or other integrated instrument; |
• | Persons who hold the ordinary shares through partnerships or other pass-through entities; |
• | Individual retirement and other tax-deferred accounts; |
• | Expatriates of the United States and certain former long-term residents of the United States; |
• | Persons liable for the alternative minimum tax; |
• | Persons having a “functional currency” other than the U.S. dollar; and |
• | Direct, indirect or constructive owners of 10% or more, by voting power or value, of our company. |
• | that gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States, and, if a tax treaty applies, is attributable to a permanent establishment or fixed base of the Non-U.S. Holder in the United States; or |
• | in the case of any gain realized by an individual Non-U.S. Holder, that holder is present in the United States for 183 days or more in the taxable year of the sale or exchange, and other conditions are met. |
(a) | Disclosure Controls and Procedures |
(b) | Management's Annual Report on Internal Control over Financial Reporting |
• | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
• | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
• | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the company’s assets that could have a material effect on the financial statements. |
(c) | Attestation report of independent registered public accounting firm |
Year Ended December 31, | ||||||||
Services Rendered | 2020 | 2019 | ||||||
Audit (1) | $ | 192,834 | $ | 206,847 | ||||
Tax (2) | 26,198 | 20,216 | ||||||
Total | $ | 219,032 | $ | 227,063 |
(1) | Audit fees are for audit services for each of the years shown in the table, including fees associated with the annual audit and reviews of our quarterly financial results, consultations on various accounting issues and audit services provided in connection with other statutory or regulatory filings. |
(2) | Tax fees relate to professional services rendered for tax compliance and tax advice. These services include assistance regarding international and Israeli taxation. |
o | The securities issued amount to 20% or more of our outstanding voting rights before the issuance; |
o | Some or all of the consideration is other than cash or listed securities or the transaction is not in accordance with market terms; and |
o | The transaction will increase the relative holdings of a shareholder that holds 5% or more of our outstanding share capital or voting rights or that it will cause any person to become, as a result of the issuance, a holder of more than 5% of our outstanding share capital or voting rights. |
Consolidated Financial Statements of the Company | |
Report of Independent Registered Public Accounting Firm | F-2-F-3 |
Consolidated Balance Sheets | F-4-F-5 |
Consolidated Statements of Operations | F-6-F-7 |
Consolidated Statements of Comprehensive Income | F-8 |
Consolidated Statements of Changes in Shareholders Equity | F-9 |
Consolidated Statements of Cash Flows | F-10-F-11 |
Notes to Consolidated Financial Statements | F-12-F-54 |
1.1 | Memorandum of Association of the Registrant (1) |
2.1 | Specimen Certificate for Ordinary Shares (1) |
4.2 | Agreement dated February 10, 2000, by and between the Registrant and TAT Industries Ltd. (English summary translation) (2) |
4.3 |
4.4 |
4.5 |
4.6 |
4.7 |
4.8 |
4.9 |
12.1 |
12.2 |
13.1 |
13.2 |
14.1 |
(1) | Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 1992, and incorporated herein by reference. |
(2) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 1999, and incorporated herein by reference. |
(3) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2006, and incorporated herein by reference. |
(4) | Filed as an exhibit to the Registrant’s Registration Statement on Form F-4 filed on May 7, 2009 and incorporated herein by reference. |
(5) | Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2007, and incorporated herein by reference. |
(6) | Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010, and incorporated herein by reference. |
(7) | Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2012, and incorporated herein by reference. |
(8) | Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2013, and incorporated herein by reference. |
(9) | Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2014, and incorporated herein by reference. |
TAT TECHNOLOGIES LTD. | |||
By: | /s/ Ehud Ben-Yair | ||
Ehud Ben-Yair | |||
Chief Financial Officer (Principal Accounting Officer) | |||
Date: March 30, 2021 |
Page | |
F-2 - F-3 | |
F-4 - F-5 | |
F-6 - F-7 | |
F - 8 | |
F - 9 | |
F-10 - F-11 | |
F-12 - F-54 |
Tel-Aviv, Israel | /s/ Kesselman & Kesselman |
March 30, 2021 | Certified Public Accountants (lsr.) |
A member firm of PricewaterhouseCoopers International Limited |
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 |
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 | ) |
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 |
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 | ) |
Share capital | Accumulated other comprehensive income (loss) | |||||||||||||||||||||||||||
Number of shares issued | Amount | Additional paid-in capital | 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 |
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 | ) |
NOTE 1 - | GENERAL |
a. | TAT Technologies Ltd., (“TAT” or the “Company”) an Israeli corporation, incorporated in 1985, is a leading provider of solutions and services to the aerospace and defense industries, focused mainly on the following four segments: (i) original equipment manufacturing (“OEM”) of heat transfer solutions and aviation accessories through our Gedera facility; (ii) MRO services for heat transfer components and OEM of heat transfer solutions through our Limco subsidiary; (iii) MRO services for aviation components through our Piedmont subsidiary; and (iv) overhaul and coating of jet engine components through our Turbochrome subsidiary. TAT targets the commercial aerospace (serving a wide range of types and sizes of commercial and business jets), military aerospace and ground defense sectors. TAT’s shares are listed on both the NASDAQ (TATT) and Tel-Aviv Stock Exchange. |
b. | The ongoing COVID-19 pandemic adversely effected and continues to have an adverse effect on TAT’s industry and the markets in which TAT operates. The COVID-19 outbreak has significantly impacted the aviation market in which TAT’s customers operate and has resulted in a reduction of TAT’s business with some of these customers. In order to mitigate the impact of the decline in business as a result of the pandemic, TAT implemented measures to reduce its expenses, including a reduction in its headcount as well as other cost savings measures. Given the current macro-economic environment and the uncertainties regarding the potential impact of COVID-19 on TAT’s business, there can be no assurance that TAT’s estimates and assumptions used in the measurement of various assets and liabilities in the financial statements will prove to be accurate predictions of the future. |
c. | TAT has the following wholly owned subsidiaries: Limco-Piedmont Inc. (“Limco-Piedmont”), and Turbochrome Ltd. (“Turbochrome”). Additionally, the Company holds 51% of TAT-Engineering LLC (“TAT-Engineering”), hereinafter collectively referred to as the “Group”. |
d. | On November 25, 2015, the Company signed an agreement with Russian-based Engineering Holding of Moscow (“Engineering”), to establish a new facility for the provision of services for heat transfer products. The new company, TAT-Engineering LLC, is based in Novosibirsk’s Tolmachevo airport. TAT-Engineering, LLC shall provide services for heat transfer products. 51% of TAT-Engineering LLC's shares are held by TAT and the remaining 49% are held by Engineering. The accounting treatment of the joint venture is based on the equity method due to variable participating rights granted to Engineering. The new entity was established in January 2016. |
a. | Basis of Presentation |
b. | Use of estimates in the preparation of financial statement |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
c. | Functional currency |
d. | Principles of consolidation |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
f. | Accounts receivable, net |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
g. | Inventory |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
h. | Property, plant and equipment |
Years | ||
Buildings and leasehold improvements | 7 - 39 | |
Machinery and equipment | 3 - 17 | |
Motor vehicles | 6 - 7 | |
Office furniture and equipment | 3 - 17 | |
Software | 3-5 |
i. | Grants from Israel Innovation Authority (IIA): |
j. | Investment in affiliates and share in results of equity investment of affiliated companies |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
k. | Leases |
l. | Identified intangible assets |
m. | Impairment of long-lived assets |
n. | Treasury Shares |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
o. | Revenue recognition |
p. | Revenue recognition (cont) |
q. | Warranty costs |
r. | Research and development |
s. | Fair value measurement |
s. | Fair value measurement (cont) |
t. | Concentrations of credit risk |
u. | Income taxes |
u. | Income taxes (cont.) |
v. | Earnings per share |
w. | Share-based compensation |
NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (CONT) |
w. | Share-based compensation (cont) |
x. | Comprehensive income (loss) |
y. | Contingencies |
z. | Derivatives and hedging |
aa. | Recently Issued Accounting Principles: |
(1) | In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses ("Topic 326"): Measurement of Credit Losses on Financial Instruments. The guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance will be effective for the fiscal year beginning on January 1, 2020, including interim periods within that year. The new standard does not have a material effect on the Company's financial statements upon adoption. |
(1) | In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes. (Topic 740)” ("the Update"). The amendments in this Update simplify the accounting for income taxes by removing the following exceptions in ASC 740: 1. Exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items; 2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; 3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary;4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. |
December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Derivative financial instruments | - | $ | 128 | - | $ | 128 |
December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Derivative financial instruments | - | $ | 27 | - | $ | 27 |
a. | Derivative financial instruments: |
NOTE 4 - | INVENTORY |
December 31, | ||||||||
2020 | 2019 | |||||||
Raw materials and components | $ | 11,281 | $ | 13,064 | ||||
Work in progress | 15,432 | 11,387 | ||||||
Spare parts | 13,147 | 18,272 | ||||||
Finished goods | 1,363 | 604 | ||||||
Total inventory (**) | $ | 41,223 | $ | 43,327 |
December 31, | ||||||||
2020 | 2019 | |||||||
Balance sheets: | ||||||||
Current assets | $ | 320 | $ | 466 | ||||
Non-current assets | 1,211 | 1,383 | ||||||
Current liabilities | 1,088 | 1,040 |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Statements of operation: | ||||||||||||
Revenues | $ | 413 | $ | 877 | $ | 1,534 | ||||||
Gross loss | (153 | ) | (228 | ) | (154 | ) | ||||||
Loss from continuing operations | (365 | ) | (291 | ) | (266 | ) | ||||||
Net losses attributable to the Company | (185 | ) | (132 | ) | (140 | ) |
December 31, | ||||||||
2020 | 2019 | |||||||
Cost: | ||||||||
Land and buildings | $ | 15,762 | $ | 14,863 | ||||
Machinery and equipment | 57,922 | 49,667 | ||||||
Motor vehicles | 313 | 410 | ||||||
Office furniture and equipment | 1,895 | 1,811 | ||||||
Software | 1,371 | 1,420 | ||||||
77,263 | 68,171 | |||||||
Less: Accumulated depreciation | 51,526 | 47,566 | ||||||
Depreciated cost | $ | 25,737 | $ | 20,605 |
Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||
Operating lease expenses | 2,158 | 1,297 |
Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||
Operating cash flows from operating leases (non-cash finance expense) | 566 | 354 | ||||||
Right-of-use assets obtained in exchange for lease obligations (non-cash) | 1,756 | 648 |
December 31, 2020 | December 31, 2019 | |||||||
Operating Leases | ||||||||
Operating lease right-of-use assets | 6,767 | 6,664 | ||||||
Current operating lease liabilities | 1,614 | 1,330 | ||||||
Non-current operating lease liabilities | 5,758 | 5,688 | ||||||
Total operating lease liabilities | 7,372 | 7,018 | ||||||
Weighted Average Remaining Lease Term | ||||||||
Operating leases - Israel | 4 years | 5 years | ||||||
Operating leases – United States | 5 years | 6 years | ||||||
Weighted Average discount rate | ||||||||
Operating leases - Israel | 4.5 | % | 4.5 | % | ||||
Operating leases – United States | 4.84 | % | 4.84 | % |
Year | Amount | |||
2021 | $ | 1,852 | ||
2022 | 1,784 | |||
2023 | 1,737 | |||
2024 | 1,623 | |||
2025 and after | 653 | |||
Total lease payments | 7,649 | |||
Less imputed interest | (277 | ) | ||
Total | $ | 7,372 |
December 31, | ||||||||
2020 | 2019 | |||||||
Customer relationships | ||||||||
Cost | $ | 671 | $ | 671 | ||||
Impairment | (298 | ) | ||||||
Accumulated amortization | (373 | ) | (289 | ) | ||||
Amortized cost | $ | - | $ | 389 |
December 31, | ||||||||
2020 | 2019 | |||||||
Commercial license | ||||||||
Cost | $ | 1,513 | $ | - | ||||
Accumulated amortization | (38 | ) | - | |||||
Amortized cost | $ | 1,475 | $ | - |
Year | Amount | |||
2021 | $ | 1,477 | ||
2022 | 1,428 | |||
2023 | 864 | |||
2024 | 864 | |||
2025 and after | 333 | |||
$ | 4,966 |
December 31, | ||||||||
2020 | 2019 | |||||||
Employees and payroll accruals | $ | 2,714 | $ | 3,332 | ||||
Accrued expenses | 716 | 937 | ||||||
Authorities | 415 | 810 | ||||||
Advances from customers | 1,263 | 513 | ||||||
Warranty provision | 250 | 235 | ||||||
Accrued royalties and rebate sales commissions | 1,200 | 1,517 | ||||||
Other | 133 | 49 | ||||||
$ | 6,691 | $ | 7,393 |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Income - | ||||||||||||
Sales to related-party company (*) | $ | 173 | $ | 596 | $ | 1,251 | ||||||
Cost and expenses - | ||||||||||||
Supplies from related party (*) | $ | 362 | $ | 552 | $ | 59 |
December 31, | ||||||||
2020 | 2019 | |||||||
Trade receivables and other receivables (*) | $ | 740 | $ | 706 | ||||
Trade payables and other payables (*) | $ | 122 | $ | 154 |
NOTE 12 - | LONG-TERM EMPLOYEE-RELATED OBLIGATIONS |
NOTE 12 - | LONG-TERM EMPLOYEE-RELATED OBLIGATIONS (CONT) |
Year | Amount | |||
2021 | $ | 54 | ||
2022 | 166 | |||
2023 | 240 | |||
2024 | 43 | |||
2025 | - | |||
Thereafter (through 2030) | 906 | |||
Total | $ | 1,409 |
a. | Commissions arrangements: |
b. | Royalty commitments: |
(1) | TAT is committed to pay royalties to third parties, ranging from 12% to 20% of sales of products developed by the third parties. Royalty expenses were $174, $42 and $148 for the years ended December 31, 2020, 2019 and 2018, respectively. The royalties were recorded as part of the cost of revenues. |
(2) | Piedmont is committed to pay royalties to a third party, ranging 5% to 13% of sales of products purchased from the third party. That third party is the exclusive manufacturer of the products for which Piedmont provides MRO services. |
(1) | In order to secure TAT's liability to the Israeli customs, the Company provided bank guarantees in amounts of $39, $62 and $31. The guarantees are linked to the consumer price index and is valid until March 2021, January 2022 and January 2023, respectively. |
(2) | In order to secure TAT's liability to the lessor of its premises, the Company provided a bank guarantee in the amount of $849. The guarantee is linked to the consumer price index in Israel and is valid until January 2022. |
a. | TAT's Ordinary shares confer upon their holders voting rights, the right to receive dividends, if declared, and any amounts payable upon the dissolution, liquidation or winding up of the affairs of TAT. |
b. | Stock option plans: |
b. | Stock option plans (cont.): |
(1) | On February 6, 2018, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 3,893 Options, at an exercise price of $11.11 per share, to senior executives |
(2) | On February 28, 2018, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 50,000 Options, at an exercise price of $10.74 per share, to senior executive. |
(3) | On May 13, 2018, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 70,000 Options, at an exercise price of $9.12 per share, to senior executive. |
(4) | On November 22, 2018, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 50,000 Options, at an exercise price of $7.35 per share, to senior executives. |
(5) | On August 29, 2019, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 50,000 Options, at an exercise price of $5.65 per share, to senior executives. |
(6) | On September 22, 2019, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 50,000 Options, at an exercise price of $5.32 per share, to senior executive. |
(7) | On September 26, 2019, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 50,000 Options, at an exercise price of $5.26 per share, to senior executive. |
(8) | On October 15, 2020, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 50,000 Options, at an exercise price of $4.58 per share, to senior executive. |
2020 | 2019 | 2018 | ||||
Expected stock price volatility | 44.7% – 43.5% | 34.2% – 36.8% | 32.6% – 40.8% | |||
Expected option life (in years) | 3.5-5 | 3.5-5 | 3.5-5.5 | |||
Risk free interest rate | 0.12% – 0.25% | 1.44% – 1.63% | 1.71% – 2.87% | |||
Dividend yield | 0% | 0% | 0% - 5% |
b. | Stock option plans (cont.): |
Year ended December 31, | Year ended December 31, | Year ended December 31, | ||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | |||||||||||||||||||
Outstanding at the beginning of the year | 571,460 | $ | 7.53 | 528,268 | $ | 9.03 | 365,000 | $ | 8.53 | |||||||||||||||
Granted | 50,000 | 4.58 | 170,000 | 5.44 | 273,893 | 9.70 | ||||||||||||||||||
Forfeited | - | - | (126,808 | ) | 11.19 | (83,957 | ) | 9.85 | ||||||||||||||||
Exercised | - | - | - | - | (26,668 | ) | 7.15 | |||||||||||||||||
Outstanding at the end of the year | 621,460 | 7.26 | 571,460 | 7.53 | 528,268 | $ | 9.03 | |||||||||||||||||
Exercisable at the end of the year | 381,629 | $ | 7.91 | 264,389 | $ | 7.74 | 163,438 | $ | 8.34 |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Numerator for EPS: | ||||||||||||
Net income (loss) | $ | (5,329 | ) | $ | 806 | $ | (4,408 | ) | ||||
Denominator for EPS: | ||||||||||||
Weighted average shares outstanding – basic | 8,874,696 | 8,874,696 | 8,864,885 | |||||||||
Dilutive shares | - | - | - | |||||||||
Weighted average shares outstanding – diluted | 8,874,696 | 8,874,696 | 8,864,885 | |||||||||
EPS: | ||||||||||||
Basic and diluted | $ | (0.6 | ) | $ | 0.1 | $ | (0.5 | ) |
2020 | 2019 | |||||||||
Assets: | ||||||||||
Account receivables | $ | - | $ | 821 | ||||||
Inventory | - | 580 | ||||||||
Fixed assets, net | - | 438 | ||||||||
Costumers’ relationship | - | 388 | ||||||||
Total Assets | $ | - | $ | 2,227 | ||||||
Liability: | ||||||||||
Account payables | $ | 179 | $ | 158 | ||||||
Total Liabilities | $ | 179 | $ | 158 |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Revenue: | ||||||||||||
Services | $ | 955 | $ | 4,553 | $ | 5,457 | ||||||
Cost of revenue: | ||||||||||||
Services | 1,062 | 4,291 | 5,011 | |||||||||
Gross profit (loss) | (107 | ) | 262 | 446 | ||||||||
Operating expenses: | ||||||||||||
Research and development, net | 42 | (39 | ) | 95 | ||||||||
Selling and marketing | 90 | 330 | 159 | |||||||||
General and administrative | 191 | 598 | 658 | |||||||||
323 | 889 | 912 | ||||||||||
Operating income (loss) | (430 | ) | (627 | ) | (466 | ) | ||||||
Financial expenses (income) | - | 28 | 14 | |||||||||
Loss on disposal of discontinued operation (1) | 1,415 | - | - | |||||||||
Net Income (loss) | $ | (1,845 | ) | $ | (655 | ) | $ | (480 | ) |
(1) | During 2020, the Company writes off the following assets belonging to the discontinued operation: Inventory of $464, Accounts receivable of $233, Fixed assets of $363 and Customers' relationships of $355. |
NOTE 17 - | TAXES ON INCOME |
a. | Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law"): |
NOTE 17- | TAXES ON INCOME (CONT) |
a. | Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law") (cont.): |
b. | Corporate tax rate in Israel |
c. | U.S. subsidiaries |
NOTE 17- | TAXES ON INCOME (CONT) |
d. | Tax assessments |
Turbochrome income tax assessments are considered final through 2015. |
Limco-Piedmont income tax assessments are considered final through 2016. |
e. | Income tax reconciliation: |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Income (loss) before taxes on income (tax benefit) from continued operationas reported in the statements of income | $ | (4,816 | ) | $ | 2,182 | $ | (5,252 | ) | ||||
Statutory tax rate in Israel | 23 | % | 23 | % | 23 | % | ||||||
Theoretical taxes on income (tax benefit) | $ | (1,108 | ) | $ | 501 | $ | (1,207 | ) | ||||
Increase (decrease) in taxes on income resulting from: | ||||||||||||
Tax adjustment for foreign subsidiaries subject to a different tax rate | 50 | (26 | ) | (9 | ) | |||||||
Reduced tax rate on income derived from "Preferred Enterprises" plans | 580 | 204 | 346 | |||||||||
Earnings from foreign subsidiaries (1) | (2,338 | ) | 91 | (338 | ) | |||||||
Valuation allowance for exchange rates differences on deferred taxes not recorded on capital losses | - | (125 | ) | (42 | ) | |||||||
Deferred tax assets from discontinued operation loss | (138 | ) | (49 | ) | (36 | ) | ||||||
Reduced deferred tax asset from expecting utilization of carryforward losses | 1,984 | - | - | |||||||||
Tax in respect of prior years | (345 | ) | - | (481 | ) | |||||||
Temporary differences for which no deferred taxes were recorded | (377 | ) | (55 | ) | 8 | |||||||
Permanent differences | 24 | 55 | 245 | |||||||||
Other adjustments | 151 | (7 | ) | 50 | ||||||||
Taxes on income (tax benefit) as reported in the statements of income | $ | (1,517 | ) | $ | 589 | $ | (1,464 | ) |
NOTE 17 - | TAXES ON INCOME (CONT) |
f. | Income (loss) before taxes on income (tax benefit) is comprised as follows: |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Domestic (Israel) | $ | (4,499 | ) | $ | (1,931 | ) | $ | (4,781 | ) | |||
Foreign (United States) | (317 | ) | 4,113 | (471 | ) | |||||||
$ | (4,816 | ) | $ | 2,182 | $ | (5,252 | ) |
g. | Taxes on income (tax benefit) included in the statements of income: |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Current: | ||||||||||||
Domestic (Israel) | $ | - | $ | - | $ | - | ||||||
Foreign (United States) | - | 181 | (881 | ) | ||||||||
- | 181 | (881 | ) | |||||||||
Deferred: | ||||||||||||
Domestic (Israel) | (683 | ) | (397 | ) | (813 | ) | ||||||
Foreign (United States) | (489 | ) | 805 | 711 | ||||||||
(1,172 | ) | 408 | (102 | ) | ||||||||
Previous years: | ||||||||||||
Domestic (Israel) | (134 | ) | ||||||||||
Foreign (United States) | (211 | ) | - | (481 | ) | |||||||
(345 | ) | - | (481 | ) | ||||||||
$ | (1,517 | ) | $ | 589 | $ | (1,464 | ) |
h. | Deferred income taxes: |
December 31, | ||||||||
2020 | 2019 | |||||||
Deferred tax assets: | ||||||||
Provision for current expected credit losses | $ | 41 | $ | 67 | ||||
Provisions for employee benefits | 272 | 470 | ||||||
Inventory | 987 | 964 | ||||||
Intangible assets | - | 42 | ||||||
Capital tax losses carryforward | 3,500 | 3,500 | ||||||
Net operating losses carryforward | 3,017 | 1,669 | ||||||
Other | 224 | 96 | ||||||
Deferred tax assets, before valuation allowance | $ | 8,041 | $ | 6,808 | ||||
Valuation allowance | (5,484 | ) | (3,500 | ) | ||||
Deferred tax assets, net | $ | 2,557 | $ | 3,308 | ||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | (1,647 | ) | (2,159 | ) | ||||
Intangible assets | (318 | ) | - | |||||
Earnings from foreign subsidiaries (1) | - | (1,953 | ) | |||||
Other temporary differences deferred tax liabilities | (26 | ) | (68 | ) | ||||
Deferred tax liabilities | $ | (1,991 | ) | $ | (4,180 | ) | ||
Net | $ | 566 | $ | (872 | ) |
(1) | The Company record an accrual that related to a deferred tax liability due to the possibility of future distribution of earnings from foreign subsidiaries of the Company. During 2020, the Company received loans from commercial banks in the US and Israel. As part of the loan terms, the company cannot distribute dividends to its shareholders during the next five years. Therefore, the company wrote off the differed tax liability. |
NOTE 17 - | TAXES ON INCOME (CONT) |
h. | Deferred income taxes (cont.): |
Balance, December 31, 2017 | 3,417 | |||
Additions during the year | (42 | ) | ||
Balance, December 31,2018 | $ | 3,375 | ||
Deductions during the year | 125 | |||
Balance, December 31,2019 | $ | 3,500 | ||
Additions during the year | 1,984 | |||
Balance, December 31,2020 | $ | 5,484 |
NOTE 18 - | SEGMENT INFORMATION |
a. | Segment Activities Disclosure: |
- | 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. |
- | 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. |
- | 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. The discontinued operation regarding to the JT8D activity is part of the coating jet engines component segment thus the numbers for this segment were related for the years 2018 and 2019. |
NOTE 18 - | SEGMENT INFORMATION (CONT) |
b. | Segments statement operations disclosure: |
Year ended December 31, 2020 | ||||||||||||||||||||||||
OEM of Heat Transfer Solutions and Aviation Accessories | MRO Services for heat transfer components and OEM of heat transfer solutions | MRO services for Aviation Components | Overhaul and coating of jet engine components | Elimination of inter-company sales | Consolidated | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Sale of products and services | $ | 20,179 | $ | 20,445 | $ | 31,189 | $ | 3,546 | $ | - | $ | 75,359 | ||||||||||||
Intersegment revenues | 2,946 | 195 | - | - | (3,141 | ) | - | |||||||||||||||||
Total revenues | 23,125 | 20,640 | 31,189 | 3,546 | (3,141 | ) | 75,359 | |||||||||||||||||
Cost of revenues | 21,703 | 17,885 | 26,961 | 3,312 | (2,937 | ) | 66,924 | |||||||||||||||||
Gross profit | 1,422 | 2,755 | 4,228 | 234 | (204 | ) | 8,435 | |||||||||||||||||
Research and development | (3 | ) | (2 | ) | 7 | 183 | - | 185 | ||||||||||||||||
Selling and marketing | 1,429 | 1,152 | 1,527 | 261 | - | 4,369 | ||||||||||||||||||
General and administrative | 2,183 | 2,054 | 2,732 | 643 | - | 7,612 | ||||||||||||||||||
Other expenses (income) | - | 21 | - | 294 | - | 315 | ||||||||||||||||||
Operating income (loss) | $ | (2,187 | ) | $ | (470 | ) | $ | (38 | ) | (1,147 | ) | $ | (204 | ) | $ | (4,046 | ) | |||||||
Financial expenses, net | 770 | |||||||||||||||||||||||
Loss before tax benefits | (4,816 | ) |
b. | Segments statement operations disclosure (cont.) |
Year ended December 31, 2019 | ||||||||||||||||||||||||
OEM of Heat Transfer Solutions and Aviation Accessories | MRO Services for heat transfer components and OEM of heat transfer solutions | MRO services for Aviation Components | Overhaul and coating of jet engine components | Elimination of inter-company sales | Consolidated | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Sale of products and services | $ | 20,552 | $ | 34,183 | $ | 38,687 | $ | 4,057 | $ | - | $ | 97,479 | ||||||||||||
Intersegment revenues | 6,037 | 250 | - | - | (6,287 | ) | - | |||||||||||||||||
Total revenues | 26,589 | 34,433 | 38,687 | 4,057 | (6,287 | ) | 97,479 | |||||||||||||||||
Cost of revenues | 23,998 | 27,852 | 33,337 | 3,460 | (6,468 | ) | 82,179 | |||||||||||||||||
Gross profit (loss) | 2,591 | 6,581 | 5,350 | 597 | 181 | 15,300 | ||||||||||||||||||
Research and development | 58 | 83 | 7 | (35 | ) | - | 113 | |||||||||||||||||
Selling and marketing | 1,530 | 1,638 | 1,334 | 427 | - | 4,929 | ||||||||||||||||||
General and administrative | 1,978 | 2,734 | 2,408 | 534 | - | 7,654 | ||||||||||||||||||
Operating income (loss) | $ | (975 | ) | $ | 2,126 | $ | 1,601 | $ | (329 | ) | $ | 181 | $ | 2,604 | ||||||||||
Financial expenses, net | 422 | |||||||||||||||||||||||
Loss before taxes on income | 2,182 |
NOTE 18 - | SEGMENT INFORMATION (CONT) |
b. | Segments statement operations disclosure (cont.) |
Year ended December 31, 2018 | ||||||||||||||||||||||||
OEM of Heat Transfer Solutions and Aviation Accessories | MRO Services for heat transfer components and OEM of heat transfer solutions | MRO services for Aviation Components | Overhaul and coating of jet engine components | Elimination of inter-company sales | Consolidated | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Sale of products and services | $ | 20,065 | $ | 30,929 | $ | 32,487 | $ | 4,240 | $ | - | $ | 87,721 | ||||||||||||
Intersegment revenues | 4,642 | 415 | - | - | (5,057 | ) | - | |||||||||||||||||
Total revenues | 24,707 | 31,344 | 32,487 | 4,240 | (5,057 | ) | 87,721 | |||||||||||||||||
Cost of revenues | 25,612 | 27,659 | 28,561 | 3,287 | (5,343 | ) | 79,776 | |||||||||||||||||
Gross profit | (905 | ) | 3,685 | 3,926 | 953 | 286 | 7,945 | |||||||||||||||||
Research and development | 287 | 98 | - | 73 | - | 458 | ||||||||||||||||||
Selling and marketing | 1,512 | 1,660 | 1,324 | 258 | - | 4,754 | ||||||||||||||||||
General and administrative | 2,384 | 2,375 | 2,631 | 511 | - | 7,901 | ||||||||||||||||||
Other expenses | (2 | ) | - | (2 | ) | - | - | (4 | ) | |||||||||||||||
Operating income (loss) | $ | (5,086 | ) | $ | (448 | ) | $ | (27 | ) | $ | 111 | $ | 286 | (5,164 | ) | |||||||||
Financial expenses, net | 88 | |||||||||||||||||||||||
Income before taxes on income | (5,252 | ) |
NOTE 18 - | SEGMENT INFORMATION (CONT) |
c. | The following financial information identifies the assets, depreciation and amortization, and capital expenditures to segments: |
Year ended December 31, 2020 | ||||||||||||||||||||||||||||
OEM of Heat Transfer Solutions and Aviation Accessories | MRO Services for heat transfer components and OEM of heat transfer solutions | MRO services for Aviation Components | Overhaul and coating of jet engine components | Discontinued operation | Amounts not allocated to segments | Consolidated | ||||||||||||||||||||||
Total assets | 32,536 | 21,525 | 41,433 | 6,073 | - | 14,554 | 116,121 | |||||||||||||||||||||
Depreciation and amortization | 1,400 | 1,020 | 799 | 846 | - | - | 4,065 | |||||||||||||||||||||
Expenditure for segment assets | 765 | 556 | 9,410 | 309 | - | - | 11,040 |
Year ended December 31, 2019 | ||||||||||||||||||||||||||||
OEM of Heat Transfer Solutions and Aviation Accessories | MRO Services for heat transfer components and OEM of heat transfer solutions | MRO services for Aviation Components | Overhaul and coating of jet engine components | Discontinued operation | Amounts not allocated to segments | Consolidated | ||||||||||||||||||||||
Total assets | 29,149 | 31,031 | 34,264 | 7,967 | 2,227 | 10,037 | 114,675 | |||||||||||||||||||||
Depreciation and amortization | 1,601 | 1,031 | 786 | 954 | - | - | 4,372 | |||||||||||||||||||||
Expenditure for segment assets | 1,600 | 1,180 | 803 | 239 | - | - | 3,822 |
NOTE 19 - | ENTITY-WIDE DISCLOSURE |
a. | Total revenues - by geographical location were attributed according to customer residential country as follows: |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Total revenues | Total revenues | Total revenues | ||||||||||
Sale of products | ||||||||||||
Israel | $ | 3,355 | $ | 3,464 | $ | 2,893 | ||||||
United States | 12,284 | 14,181 | 13,013 | |||||||||
Other | 7,100 | 7,374 | 7,245 | |||||||||
$ | 22,739 | $ | 25,019 | $ | 23,151 |
Year ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Total revenues | Total revenues | Total revenues | ||||||||||
Sale of Services | ||||||||||||
Israel | $ | 3,543 | $ | 3,624 | $ | 4,031 | ||||||
United States | 34,765 | 43,196 | 35,562 | |||||||||
Other | 14,312 | 25,640 | 24,977 | |||||||||
$ | 52,620 | $ | 72,460 | $ | 64,570 |
b. | Total long-lived assets - by geographical location were as follows: |
December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Israel | $ | 15,071 | $ | 16,692 | $ | 12,894 | ||||||
United States | 18,908 | 11,354 | 8,530 | |||||||||
Total | $ | 33,979 | $ | 28,046 | 21,424 |
c. | Major Customers |
Warranty provision | Provision for current expected credit losses | |||||||
Balance, as of December 31, 2017 | 306 | 623 | ||||||
Additions | 214 | 135 | ||||||
Deductions | (235 | ) | (482 | ) | ||||
Balance, as of December 31, 2018 | $ | 285 | $ | 276 | ||||
Additions | 115 | 84 | ||||||
Deductions | (165 | ) | (46 | ) | ||||
Balance, as of December 31, 2019 | $ | 235 | $ | 314 | ||||
Additions | 80 | 194 | ||||||
Deductions | (65 | ) | (202 | ) | ||||
Balance, as of December 31, 2020 | $ | 250 | $ | 306 |