Tat Technologies Ltd 20-F for FY2021
Tat Technologies Ltd (TATT)
About this 20-F
Tat Technologies Ltd filed this 20-F on March 14, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $77.97M
- up 3.5% from $75.36M a year earlier
- Net loss
- $3.56M
- compared with a net loss of $5.33M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
OR
For the fiscal year ended
OR
For the transition period from ________ to ________
Date of event requiring this shell company report ………………
Commission file number:
(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)
Chief Executive Officer
Telephone: +
Email:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or Common stock as of the close of the period covered by the annual report:
Ordinary Shares, par value NIS 0.90 per share……………
(as of December 31, 2021)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
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A. |
Selected Financial Data |
4 | |
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B. |
Capitalization and Indebtedness |
6 | |
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C. |
Reasons for the Offer and Use of Proceeds |
6 | |
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D. |
Risk Factors |
7 | |
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25 | |||
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A. |
Business Overview |
28 | |
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B. |
Government Regulations |
55 | |
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C. |
Property, Plants and Equipment |
56 | |
| 58 | |||
| 58 | |||
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A. |
Research and Development, Patents and Licenses |
82 | |
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B. |
Trend Information |
82 | |
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C. |
Off-Balance Sheet Arrangements |
82 | |
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D. |
Tabular Disclosure of Contractual Obligations |
82 | |
| 84 | |||
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A. |
Directors and Senior Management |
84 | |
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B. |
Board Practices |
91 | |
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C. |
Employees |
106 | |
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D. |
Share Ownership |
107 | |
|
109 | |||
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A. |
Major Shareholders |
109 | |
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B. |
Related Party Transactions |
111 | |
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C. |
Interests of Experts and Counsel |
112 | |
| 112 | |||
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A. |
Consolidated Statements and Other Financial Information
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112 | |
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B. |
Significant Changes |
112 | |
| 113 | |||
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A. |
Offer and Listing Details |
113 | |
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B. |
Plan of Distribution |
113 | |
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C. |
Markets |
113 | |
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D. |
Selling Shareholders |
113 | |
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E. |
Dilution |
113 | |
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F. |
Expense of the Issue |
113 | |
| 113 | |||
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A. |
Share Capital |
113 | |
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B. |
Memorandum and Articles of Association |
114 | |
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C. |
Exchange Controls |
115 | |
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D. |
Taxation |
115 | |
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E. |
Dividends and Paying Agents |
132 | |
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F. |
Statement by Experts |
132 | |
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G. |
Documents on Display |
133 | |
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H. |
Subsidiary Information |
133 | |
| 134 | ||
| 134 | ||
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134 | ||
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135 | ||
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138 | ||
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Year Ended December 31, |
||||||||||||||||||||
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2021 |
2020 |
2019 |
2018 |
2017 |
||||||||||||||||
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(in thousands, except share and per share data) |
||||||||||||||||||||
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Revenues: |
||||||||||||||||||||
|
Products |
$ |
25,870 |
$ |
22,739 |
$ |
25,019 |
$ |
23,151 |
$ |
36,053 |
||||||||||
|
Services |
52,103 |
52,620 |
72,460 |
64,570 |
63,106 |
|||||||||||||||
|
Total revenues |
77,973 |
75,359 |
97,479 |
87,721 |
99,159 |
|||||||||||||||
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Cost of revenues: |
||||||||||||||||||||
|
Products |
23,761 |
20,751 |
21,557 |
23,807 |
28,096 |
|||||||||||||||
|
Services |
42,942 |
46,173 |
60,622 |
55,969 |
51,313 |
|||||||||||||||
|
Total cost of revenues |
66,703 |
66,924 |
82,179 |
79,776 |
79,409 |
|||||||||||||||
|
Gross profit |
11,270 |
8,435 |
15,300 |
7,945 |
19,750 |
|||||||||||||||
|
Operating expenses: |
||||||||||||||||||||
|
Research and development, net |
517 |
185 |
113 |
458 |
621 |
|||||||||||||||
|
Selling and marketing |
5,147 |
4,369 |
4,929 |
4,754 |
4,772 |
|||||||||||||||
|
General and administrative |
8,354 |
7,612 |
7,654 |
7,901 |
8,668 |
|||||||||||||||
|
Other expenses (income) |
(468 |
) |
315 |
- |
(4 |
) |
53 |
|||||||||||||
|
Restructuring expenses, net |
1,755 |
- |
- |
- |
- |
|||||||||||||||
|
15,305 |
12,481 |
12,696 |
13,109 |
14,114 |
||||||||||||||||
|
Operating income (loss) from continuing operations |
(4,035 |
) |
(4,046 |
) |
2,604 |
(5,164 |
) |
5,636 |
||||||||||||
|
Financial expenses, net |
(540 |
) |
(770 |
) |
(422 |
) |
(88 |
) |
(286 |
) | ||||||||||
|
Income (loss) from continuing operations before taxes on income
|
(4,575 |
) |
(4,816 |
) |
2,182 |
(5,252 |
) |
5,350 |
||||||||||||
|
Taxes on income (tax benefit) |
(662 |
) |
(1,517 |
) |
589 |
(1,464 |
) |
2,333 |
||||||||||||
|
Income (loss) from continuing operations after taxes on income (tax
benefit) |
(3,913 |
) |
(3,299 |
) |
1,593 |
(3,788 |
) |
3,017 |
||||||||||||
|
Share in results of equity investment of affiliated companies
|
(76 |
) |
(185 |
) |
(132 |
) |
(140 |
) |
(210 |
) | ||||||||||
|
Net income (loss) from continuing operations |
(3,989 |
) |
(3,484 |
) |
1,461 |
(3,928 |
) |
2,807 |
||||||||||||
|
Net income(loss) from discontinued operation |
$ |
427 |
$ |
(1,845 |
) |
$ |
(655 |
) |
$ |
(480 |
) |
$ |
(411 |
) | ||||||
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Net income (loss) attributable to TAT Technologies’ shareholders
|
$ |
(3,562 |
) |
$ |
(5,329 |
) |
$ |
806 |
$ |
(4,408 |
) |
$ |
2,396 |
|||||||
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Basic and diluted net income (loss) per share: |
||||||||||||||||||||
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Net income (loss) per share attributable to controlling interest
|
(0.4 |
) |
(0.6 |
) |
0.1 |
(0.5 |
) |
0.27 |
||||||||||||
|
$ |
(0.4 |
) |
$ |
(0.6 |
) |
$ |
0.1 |
$ |
(0.5 |
) |
$ |
0.27 |
||||||||
|
Weighted average number of shares used in computing: |
||||||||||||||||||||
|
Basic net income (loss) per share |
8,874,696 |
8,874,696 |
8,874,696 |
8,864,885 |
8,848,028 |
|||||||||||||||
|
Diluted net income (loss) per share |
8,874,696 |
8,874,696 |
8,874,696 |
8,864,885 |
8,909,072 |
|||||||||||||||
|
Cash dividend per share |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
0.34 |
||||||||||
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As of December 31, |
||||||||||||||||||||
|
2021 |
2020 |
2019 |
2018 |
2017 |
||||||||||||||||
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(in thousands) |
||||||||||||||||||||
|
Working capital |
$ |
47,404 |
$ |
54,260 |
$ |
62,934 |
$ |
62,778 |
$ |
67,042 |
||||||||||
|
Total assets |
110,833 |
116,121 |
114,675 |
103,287 |
111,977 |
|||||||||||||||
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Long-term liabilities, excluding current maturities |
9,472 |
10,657 |
8,601 |
4,312 |
5,083 |
|||||||||||||||
|
Shareholders’ equity |
$ |
76,784 |
$ |
80,281 |
$ |
85,370 |
$ |
84,294 |
$ |
88,574 |
||||||||||
| (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.
|
www.tat-technologies.com. The information on TAT’S website is not incorporated by reference into this annual report.
| • |
Enhancing 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. During 2021 TAT started moving the heat transfer activity from its Gedera facility to Limco facility. Such transaction will
leverage the company's internal Cinergy, create a one large independent MRO\OEM center for heat exchangers, As part of this transaction
TAT will build its strategic R&D center for HX in the US. |
| • |
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, Textron, Pilatus, Embraer, Lockheed
Martin, Honda Aircraft, Cirrus, Gulfstream. |
|
System manufacturers/integrators and
defense contractors |
Liebherr, Thales, Rafael, Elbit, IAI,
Parker, Lockheed Martin, Eaton Aerospace, Parker Hannifin Corporation, Safran (Snecma). |
|
U.S. Domestic and international airlines
and air cargo carriers |
Air France-KLM, Lufthansa, 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, Air New-Zeeland. |
|
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, |
|||||||||||||||||||||||
|
|
2021 |
2020 |
2019 |
|||||||||||||||||||||
|
|
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 |
$ |
25,977 |
33.3 |
% |
$ |
26,071 |
33.3 |
% |
$ |
26,589 |
26.1 |
% | ||||||||||||
|
MRO services for heat transfer components and OEM of heat transfer
solutions |
18,846 |
24.2 |
% |
20,835 |
26.5 |
% |
34,433 |
33.7 |
% | |||||||||||||||
|
MRO services for aviation components |
33,232 |
42.6 |
% |
31,189 |
39.7 |
% |
38,687 |
37.9 |
% | |||||||||||||||
|
Overhaul and coating of jet engine components |
3,834 |
4.9 |
% |
3,546 |
4.5 |
% |
4,057 |
8.4 |
% | |||||||||||||||
|
Eliminations |
(3,916 |
) |
(5 |
)% |
(3,141 |
) |
(4 |
)% |
(6,287 |
) |
(6.2 |
)% | ||||||||||||
|
Total Revenues |
$ |
77,973 |
100 |
% |
$ |
75,359 |
100 |
% |
$ |
97,479 |
100 |
% | ||||||||||||
|
|
Years Ended December 31, |
|||||||||||||||||||||||
|
|
2021 |
2020 |
2019 |
|||||||||||||||||||||
|
|
Revenues in Thousands |
% of Total Revenues |
Revenues in Thousands |
% of Total Revenues |
Revenues in Thousands |
% of Total Revenues |
||||||||||||||||||
|
United States |
$ |
47,947 |
61.5 |
% |
$ |
47,095 |
62.5 |
% |
$ |
61,930 |
60.7 |
% | ||||||||||||
|
Israel |
7,745 |
9.9 |
% |
6,851 |
9.1 |
% |
7,088 |
6.9 |
% | |||||||||||||||
|
Other |
22,281 |
28.6 |
% |
21,413 |
28.4 |
% |
33,014 |
32.4 |
% | |||||||||||||||
|
Total |
$ |
77,973 |
100.0 |
% |
$ |
75,359 |
100.0 |
% |
$ |
102,032 |
100.0 |
% | ||||||||||||
| • |
Inventory valuation |
| • |
Income taxes |
| • |
Allowance for current expected credit losses (CECL) |
|
|
Year Ended December 31 |
|||||||||||
|
|
2021 |
2020 |
2019 |
|||||||||
|
|
(in thousands) |
|||||||||||
|
Revenues |
||||||||||||
|
OEM of heat transfer solutions and aviation components |
$ |
25,977 |
$ |
26,071 |
$ |
26,589 |
||||||
|
MRO services for heat transfer components and OEM of heat transfer solutions
|
18,846 |
20,835 |
34,433 |
|||||||||
|
MRO services for aviation components |
33,232 |
31,189 |
38,687 |
|||||||||
|
Overhaul and coating of jet engine components |
3,834 |
3,546 |
4,057 |
|||||||||
|
Eliminations |
(3,916 |
) |
(3,141 |
) |
(6,287 |
) | ||||||
|
Total revenues |
77,973 |
75,359 |
97,479 |
|||||||||
|
Cost of revenues |
||||||||||||
|
OEM of heat transfer solutions and aviation components |
24,044 |
21,703 |
23,998 |
|||||||||
|
MRO services for heat transfer components and OEM of heat transfer solutions
|
16,922 |
17,885 |
27,852 |
|||||||||
|
MRO services for aviation components |
26,444 |
26,961 |
33,337 |
|||||||||
|
Overhaul and coating of jet engine components |
2,978 |
3,312 |
3,460 |
|||||||||
|
Eliminations |
(3,685 |
) |
(2,937 |
) |
(6,468 |
) | ||||||
|
Total cost of revenues |
66,703 |
66,924 |
82,179 |
|||||||||
|
Gross profit |
11,270 |
8,435 |
15,300 |
|||||||||
|
Research and development costs, net |
517 |
185 |
113 |
|||||||||
|
Selling and marketing |
5,147 |
4,369 |
4,929 |
|||||||||
|
General and administrative |
8,354 |
7,612 |
7,654 |
|||||||||
|
Other expenses (income) |
(468 |
) |
315 |
- |
||||||||
|
Restructuring expenses, net |
1,755 |
- |
- |
|||||||||
|
Operating income (loss) |
(4,035 |
) |
(4,046 |
) |
2,604 |
|||||||
|
Financial expense, net |
(540 |
) |
(770 |
) |
(422 |
) | ||||||
|
Income (loss) before taxes on income (tax benefit) |
(4,575 |
) |
(4,816 |
) |
2,182 |
|||||||
|
Taxes on income (tax benefit) |
(662 |
) |
(1,517 |
) |
589 |
|
income (loss) before equity investment |
(3,913 |
) |
(3,299 |
) |
1,593 |
|||||||
|
Share in results of affiliated company and impairment of share in
affiliated companies |
(76 |
) |
(185 |
) |
(132 |
) | ||||||
|
Net income (loss) from continued operation |
$ |
(3,989 |
) |
$ |
(3,484 |
) |
$ |
1,461 |
||||
|
Net income (loss) from discontinued operation |
427 |
(1,845 |
) |
(655 |
) | |||||||
|
Net income (loss) |
$ |
(3,562 |
) |
$ |
(5,329 |
) |
$ |
806 |
|
|
Year Ended December 31, |
|||||||||||
|
|
2021 |
2020 |
2019 |
|||||||||
|
Revenues |
||||||||||||
|
OEM of heat transfer solutions and aviation components |
33.3 |
% |
30.6 |
% |
27.5 |
% | ||||||
|
MRO services for heat transfer components and OEM of heat transfer solutions
|
24.2 |
27.4 |
35.2 |
|||||||||
|
MRO services for aviation components |
42.6 |
41.4 |
39.5 |
|||||||||
|
Overhaul and coating of jet engine components |
4.9 |
4.7 |
4.2 |
|||||||||
|
Eliminations |
(5 |
) |
(4.1 |
) |
(6.4 |
) | ||||||
|
Total revenues |
100 |
100 |
100 |
|||||||||
|
Cost of revenues |
||||||||||||
|
OEM of heat transfer solutions and aviation components |
30.8 |
28.8 |
24.6 |
|||||||||
|
MRO services for heat transfer components and OEM of heat transfer solutions
|
21.7 |
23.7 |
28.5 |
|||||||||
|
MRO services for aviation components |
33.9 |
35.7 |
34.2 |
|||||||||
|
Overhaul and coating of jet engine components |
3.8 |
4.4 |
4.2 |
|||||||||
|
Eliminations |
(4.7 |
) |
(3.8 |
) |
(6.6 |
) | ||||||
|
Cost of revenues |
85.5 |
88.8 |
84.9 |
|||||||||
|
Gross profit |
14.5 |
11.2 |
15.1 |
|||||||||
|
Research and development costs, net |
0.7 |
0.2 |
0.1 |
|||||||||
|
Selling and marketing |
6.6 |
5.9 |
5 |
|||||||||
|
General and administrative |
10.7 |
10.1 |
7.8 |
|||||||||
|
Other expenses (income) |
(0.6 |
) |
0.4 |
* |
||||||||
|
Restructuring expenses, net |
2.2 |
|||||||||||
|
19.6 |
16.6 |
12.9 |
||||||||||
|
Operating income (loss) |
(5.1 |
) |
(5.4 |
) |
2.2 |
|||||||
|
Financial expense, net |
0.7 |
1 |
0.4 |
|||||||||
|
Income (loss) before taxes on income (tax benefit) |
(5.8 |
) |
(6.4 |
) |
1.8 |
|||||||
|
Taxes on income (tax benefit) |
(0.8 |
) |
(2 |
) |
0.6 |
|||||||
|
income (loss) before equity investment |
(5 |
) |
(4.4 |
) |
1.2 |
|||||||
|
Share in results of affiliated company and impairment of share in
affiliated companies |
(0.1 |
) |
(0.2 |
) |
(0.1 |
) | ||||||
|
Net income (loss) from continued operation |
(5.1 |
) |
(4.6 |
) |
1.1 |
|||||||
|
Net income (loss) from discontinued operation |
0.5 |
(2.5 |
) |
(0.2 |
) | |||||||
|
Net income (loss) |
(4.6 |
)% |
(7.1 |
)% |
(0.4 |
)% | ||||||
|
|
Year Ended December 31, |
|||||||||||
|
|
(in thousands) |
|||||||||||
|
|
2021 |
2020 |
2019 |
|||||||||
|
Net cash provided by (used in) operating activities |
$ |
(2,269 |
) |
$ |
5,947 |
$ |
3,551 |
|||||
|
Net cash used in investing activities |
(15,639 |
) |
(5,407 |
) |
(3,279 |
) | ||||||
|
Net cash provided by financing activities |
6,042 |
7,652 |
- |
|||||||||
|
Net cash provided by (used in) discontinued activities |
777 |
153 |
(263 |
) | ||||||||
|
Net increase (decrease) in cash and cash equivalents |
(11,089 |
) |
8,345 |
9 |
||||||||
|
Cash and cash equivalents at beginning of the year |
24,304 |
15,959 |
15,950 |
|||||||||
|
Cash and cash equivalents at end of the year |
$ |
13,215 |
$ |
24,304 |
$ |
15,959 |
||||||
|
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 |
3,158 |
1,168 |
1,470 |
324 |
196 |
|||||||||||||||
|
Purchase commitments |
17,108 |
12,038 |
4,312 |
240 |
518 |
|||||||||||||||
|
Total |
$ |
20,266 |
$ |
13,206 |
$ |
5,782 |
$ |
564 |
$ |
714 |
||||||||||
|
Name |
Age |
Position | ||
|
Amos Malka |
69 |
Chairman of the Board of Directors | ||
|
Igal Zamir |
|
56 |
|
Chief Executive Officer and President |
|
Ehud Ben - Yair |
58 |
Chief Financial Officer | ||
|
Eitan Shabtay |
52 |
EVP Engineering and Technologies | ||
|
Yossi Bonfil |
51 |
General Manager of Gedera | ||
|
Adi Fine |
48 |
EVP Human Resources | ||
|
Dave Thomas |
58 |
General Manager of Piedmont | ||
|
Greg Watson |
52 |
General Manager of Limco | ||
|
Ron Ben-Haim |
52 |
Director | ||
|
Amiram Boehm |
50 |
Director | ||
|
Moti Glick (1)(2)(3)(4) |
|
69 |
|
External Director |
|
Ronnie Meninger (1)(3)(4) |
|
65 |
|
Independent Director |
|
Aviram Halevi (1)(2)(3)(4) |
64 |
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 (15 executives) |
$ |
2,656 |
$ |
180 |
||||
|
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 |
357 |
89 |
27 |
38 |
511 |
|||||||||||||||
|
Ehud Ben- Yair, CFO |
230 |
61 |
31 |
26 |
348 |
|||||||||||||||
|
Dave Thomas, President of Piedmont |
204 |
28 |
26 |
32 |
290 |
|||||||||||||||
|
Adi Fine, EVP HR |
167 |
56 |
- |
36 |
259 |
|||||||||||||||
|
Eitan Shabtay, EVP Engineering and Technologies
|
167 |
56 |
19 |
15 |
257 |
|||||||||||||||
| (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, 2021. |
|
(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
2021 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, 2021 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%-30% |
| • |
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 |
% | |||||
| (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, 2021 (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. |
|
Year ended December 31, |
||||||||||||
|
2021 |
2020 |
2019 |
||||||||||
|
Income - |
||||||||||||
|
Sales to related-party company (*) |
$ |
88 |
$ |
173 |
$ |
596 |
||||||
|
Cost and expenses - |
||||||||||||
|
Supplies from related party (*) |
$ |
654 |
$ |
362 |
$ |
552 |
||||||
|
December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Trade receivables and other receivables (*) |
$ |
799 |
$ |
740 |
||||
|
Trade payables and other payables (*) |
$ |
95 |
$ |
122 |
||||
| • |
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. |
|
Year Ended December 31, |
||||||||
|
Services Rendered |
2021 |
2020 |
||||||
|
Audit (1) |
$ |
192,834 |
$ |
192,834 |
||||
|
Tax (2) |
17,685 |
26,198 |
||||||
|
Total |
$ |
210,519 |
$ |
219,032 |
||||
| (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-56 |
|
1.1 |
Memorandum of Association of the Registrant (1)
|
|
4.2 |
Agreement dated February 10, 2000, by
and between the Registrant and TAT Industries Ltd. (English summary translation) (2) |
|
101.INS |
Inline XBRL Instance Document. |
|
|
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
|
101.DEF |
Inline XBRL Taxonomy Definition Linkbase Document. |
|
|
|
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| (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 14, 2022 |
|||
TAT TECHNOLOGIES LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
INDEX
|
Page | |
|
F-2 - F-3 |
(PCAOB ID: Number
|
F-4 - F-5 | |
|
F-6 - F-7 | |
|
F-8 | |
|
F-9 | |
|
F-10 - F-11 | |
|
F-12 - F-56 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
TAT Technologies Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TAT Technologies Ltd. and its subsidiaries (the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of changes in shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
F - 2
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory - Write down of obsolete and unmarketable inventory
As described in Notes 2 and 4 to the consolidated financial statements, the Company's consolidated inventory balance was $41,003 thousand as of December 31, 2021. The Company writes down its inventory for estimated obsolescence and unmarketable inventory equal to the difference between the cost of inventory and net realizable value based upon assumptions for future demand and market conditions. Changes in these assumptions could have a significant impact on the inventory's valuation.
The principal considerations for our determination that performing procedures relating to the write down of obsolete and unmarketable inventory is a critical audit matter are the significant judgement by management when determining the assumptions relating to the future demand, market conditions, and sales forecasts. This in turn led to a high degree of auditor judgement, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to future demand and market conditions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others: (i) utilizing historical inventory usage data to analyze the relationship between the inventory impairment calculated, the inventory on hand, and the sales over time; (ii) evaluating management’s ability to accurately estimate future demand by comparing actual inventory usage to estimates made in prior years; (iii) comparison of management’s assumptions related to market conditions to available external market data for a sample of inventory items; (iv) evaluating the accuracy of the impairment by selecting a sample of inventory items and evaluating supporting documentation regarding current and historical sales patterns; (v) assessing whether management's assumptions related to future demand and market conditions were consistent with evidence obtained in other areas of the audit.
|
|
/s/ |
|
March 14, 2022 |
Certified Public Accountants (lsr.) |
|
A member firm of PricewaterhouseCoopers International Limited |
We have served as the Company's auditor since 2009.
F - 3
|
TAT TECHNOLOGIES LTD. |
|
|
|
CONSOLIDATED BALANCE SHEETS
|
|
U.S. dollars in thousands |
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
| ||||||||
|
ASSETS | ||||||||
|
| ||||||||
|
CURRENT ASSETS: | ||||||||
|
Cash and cash equivalents |
$ |
|
$ |
| ||||
|
Accounts receivable, net of allowance for credit losses of $ |
|
| ||||||
|
Inventory, net |
|
| ||||||
|
Other current assets and prepaid expenses |
|
| ||||||
|
| ||||||||
|
Total current assets |
|
| ||||||
|
| ||||||||
|
NON-CURRENT ASSETS: | ||||||||
|
Restricted deposit |
|
| ||||||
|
Investment in affiliates |
|
| ||||||
|
Funds in respect of employee rights upon retirement |
|
| ||||||
|
Deferred income taxes |
|
| ||||||
|
Property, plant and equipment, net |
|
| ||||||
|
Operating lease right of use assets |
|
| ||||||
|
Intangible assets, net |
|
| ||||||
|
| ||||||||
|
Total non-current assets |
|
| ||||||
|
| ||||||||
|
Total assets |
$ |
|
$ |
| ||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
|
TAT TECHNOLOGIES LTD. |
|
|
|
CONSOLIDATED BALANCE SHEETS
|
|
U.S. dollars in thousands, except share data |
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
| ||||||||
|
LIABILITIES AND EQUITY | ||||||||
|
| ||||||||
|
CURRENT LIABILITIES: | ||||||||
|
Current maturities of long-term loans |
$ |
|
$ |
| ||||
|
Credit line from bank |
|
| ||||||
|
Accounts payable |
|
| ||||||
|
Accrued expenses |
|
| ||||||
|
Operating lease liabilities |
|
| ||||||
|
Provision for restructuring plan |
|
| ||||||
|
Liabilities belong to discontinued operation |
|
| ||||||
|
| ||||||||
|
Total current liabilities |
|
| ||||||
|
| ||||||||
|
NON-CURRENT LIABILITIES: | ||||||||
|
Long-term loans |
|
| ||||||
|
Liability in respect of employee rights upon retirement |
|
| ||||||
|
Operating lease liabilities |
|
| ||||||
|
| ||||||||
|
Total non-current liabilities |
|
| ||||||
|
| ||||||||
|
COMMITMENTS AND CONTINGENCIES (NOTE 15) | ||||||||
|
| ||||||||
|
Total liabilities |
|
| ||||||
|
| ||||||||
|
EQUITY: | ||||||||
|
Ordinary shares of NIS |
|
| ||||||
|
Additional paid-in capital |
|
| ||||||
|
Treasury shares, at cost, |
( |
) |
( |
) | ||||
|
Accumulated other comprehensive income |
|
| ||||||
|
Retained earnings |
|
| ||||||
|
Total shareholders' equity |
|
| ||||||
|
| ||||||||
|
Total liabilities and shareholders' equity |
$ |
|
$ |
| ||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
|
TAT TECHNOLOGIES LTD. |
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
U.S. dollars in thousands |
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Revenue: | ||||||||||||
|
Products |
$ |
|
$ |
|
$ |
| ||||||
|
Services |
|
|
| |||||||||
|
|
|
| ||||||||||
|
| ||||||||||||
|
Cost of revenue: | ||||||||||||
|
Products |
|
|
| |||||||||
|
Services |
|
|
| |||||||||
|
|
|
| ||||||||||
|
| ||||||||||||
|
Gross profit |
|
|
| |||||||||
|
| ||||||||||||
|
Operating expenses: | ||||||||||||
|
Research and development, net |
|
|
| |||||||||
|
Selling and marketing |
|
|
| |||||||||
|
General and administrative |
|
|
| |||||||||
|
Other (income) expenses |
( |
) |
|
| ||||||||
|
Restructuring expenses, net |
|
|
| |||||||||
|
| ||||||||||||
|
|
|
| ||||||||||
|
| ||||||||||||
|
Operating income (loss) |
( |
) |
( |
) |
| |||||||
|
| ||||||||||||
|
Financial expenses |
( |
) |
( |
) |
( |
) | ||||||
|
Financial income |
|
|
| |||||||||
|
| ||||||||||||
|
Income (loss) before taxes on income (tax benefit) |
( |
) |
( |
) |
| |||||||
|
| ||||||||||||
|
Taxes on income (tax benefit) |
( |
) |
( |
) |
| |||||||
|
| ||||||||||||
|
Income (loss) before share of equity investment |
( |
) |
( |
) |
| |||||||
|
| ||||||||||||
|
Share in results of equity investment of affiliated companies |
( |
) |
( |
) |
( |
) | ||||||
|
| ||||||||||||
|
Net income (loss) from continued operation |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
U.S. dollars in thousands, except share and per share data |
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
| ||||||||||||
|
Net income (loss) from discontinued operation |
$ |
|
$ |
( |
) |
$ |
( |
) | ||||
|
Net income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
| ||||||||||||
|
Net income (loss) per share basic and diluted from continued operation |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
Net income (loss) per share basic and diluted from discontinued operation |
$ |
|
$ |
( |
) |
$ |
( |
) | ||||
|
Net income (loss) per share basic and diluted |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
| ||||||||||||
|
Weighted average number of shares outstanding: | ||||||||||||
|
Basic and diluted |
|
|
| |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
U.S. dollars in thousands |
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Net income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
Other comprehensive income (loss), net | ||||||||||||
|
Net unrealized gains (losses) from derivatives |
( |
) |
|
| ||||||||
|
Reclassification adjustments for gains from derivatives included in net income |
( |
) |
( |
) |
( |
) | ||||||
|
Total other comprehensive income (loss) |
$ |
( |
) |
$ |
|
$ |
| |||||
|
| ||||||||||||
|
Total comprehensive income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|
|
U.S. dollars in thousands, except share data |
|
Ordinary shares |
Accumulated | |||||||||||||||||||||||||||
|
Number of shares issued |
Amount |
Additional paid-in capital |
other comprehensive income (loss) |
Treasury shares |
Retained earnings |
Total equity | ||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2018 |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
| |||||||||||||
|
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2019: | ||||||||||||||||||||||||||||
|
Comprehensive income |
- |
- |
- |
|
- |
|
| |||||||||||||||||||||
|
Share based compensation |
- |
- |
|
- |
- |
- |
| |||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2019 |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
| ||||||||||||||
|
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2020: | ||||||||||||||||||||||||||||
|
Comprehensive income (loss) |
- |
- |
- |
|
- |
( |
) |
( |
) | |||||||||||||||||||
|
Share based compensation |
- |
- |
|
- |
- |
- |
| |||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2020 |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
|
$ |
| |||||||||||||||
|
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2021: | ||||||||||||||||||||||||||||
|
Comprehensive loss |
- |
- |
- |
( |
) |
- |
( |
) |
( |
) | ||||||||||||||||||
|
Share based compensation |
- |
- |
|
- |
- |
- |
| |||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2021 |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
|
$ |
| |||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 9
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
U.S. dollars in thousands |
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
| ||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
|
Net income (loss) from continued operations |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
| ||||||||||||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
|
Depreciation and amortization |
|
|
| |||||||||
|
Gain from change in fair value of derivatives |
( |
) |
( |
) |
( |
) | ||||||
|
Non cash finance expense |
( |
) |
|
| ||||||||
|
Lease modification |
( |
) |
|
| ||||||||
|
Provision for restructuring expenses (see note 9) |
|
|
| |||||||||
|
Change in provision for doubtful accounts |
|
( |
) |
| ||||||||
|
Share in results of affiliated companies |
|
|
| |||||||||
|
Share based compensation |
|
|
| |||||||||
|
Liability in respect of employee rights upon retirement |
|
( |
) |
( |
) | |||||||
|
Impairment of intangible assets |
|
|
| |||||||||
|
Impairment of fixed assets |
|
|
| |||||||||
|
Capital gain from sale of fixed assets |
( |
) |
|
| ||||||||
|
Deferred income taxes, net |
( |
) |
( |
) |
( |
) | ||||||
|
Government loan forgiveness |
( |
) |
|
| ||||||||
|
Changes in operating assets and liabilities: | ||||||||||||
|
Decrease (increase) in trade accounts receivable |
( |
) |
|
( |
) | |||||||
|
Decrease (increase) in other current assets and prepaid expenses |
( |
) |
|
| ||||||||
|
Decrease (increase) in inventory |
( |
) |
|
( |
) | |||||||
|
Increase (decrease) in trade accounts payable |
|
( |
) |
| ||||||||
|
Increase (decrease) in accrued expenses |
( |
) |
( |
) |
| |||||||
|
Increase (decrease) in other long-term liabilities |
|
( |
) |
( |
) | |||||||
|
Net cash provided by (used in) operating activities from continued operation |
$ |
( |
) |
$ |
|
$ |
| |||||
|
| ||||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
|
Investment in affiliated company |
|
|
( |
) | ||||||||
|
Proceeds from sale of property and equipment |
|
|
| |||||||||
|
Purchase of property and equipment |
( |
) |
( |
) |
( |
) | ||||||
|
Purchase of intangible assets |
( |
) |
( |
) |
| |||||||
|
Net cash used in continued investing activities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
U.S. dollars in thousands |
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
|
Short-term credit received from banks |
|
|
| |||||||||
|
Proceeds from long-term loans received |
|
| ||||||||||
|
Net cash provided by continued financing activities |
$ |
|
$ |
|
| |||||||
|
| ||||||||||||
|
CASH FLOWS FROM DISCONTINUED ACTIVITIES: | ||||||||||||
|
Net cash provided by operating activities |
|
|
( |
) | ||||||||
|
Net cash used in investing activities |
|
|
( |
) | ||||||||
|
Net cash provided by (used in) discontinued activities |
$ |
|
$ |
|
$ |
( |
) | |||||
|
| ||||||||||||
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
( |
) |
|
| ||||||||
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR |
|
|
| |||||||||
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR |
|
|
| |||||||||
|
| ||||||||||||
|
SUPPLEMENTARY INFORMATION ON INVESTING ACTIVITIES NOT INVOLVING CASH FLOW: | ||||||||||||
|
Purchase of property, plant and equipment on credit |
$ |
|
$ |
|
$ |
| ||||||
|
Additions of operating lease right-of-use assets and operating lease liabilities |
$ |
|
$ |
|
$ |
| ||||||
|
Classification inventory to fixed assets |
$ |
|
|
| ||||||||
|
| ||||||||||||
|
Supplemental disclosure of cash flow information: | ||||||||||||
|
Interest paid |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
|
Income taxes received (paid), net |
$ |
|
$ |
( |
) |
$ |
| |||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 11
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
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 mainly through our Gedera facility and our Limco subsidiary; (ii) MRO (“Maintenance Repair and Overhaul”) services for heat transfer components and OEM of heat transfer solutions through Limco Airepair Inc our wholly-owned subsidiary; (iii) MRO services for aviation components (mainly Auxiliary Power Unit “APU” and Landing Gear “LG”) through Piedmont Aviation Component Services LLC our wholly-owned subsidiary; and (iv) overhaul and coating of jet engine components through Turbochrome our wholly-owned 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.
In June 2020, the Company's management decided to discontinue the JT8D engine blades reconditioning activity which belong to “overhaul and coating of jet engine components” segment as part of a strategic change, see note 18.
In March 2021, the Company announced on restructuring plan which include transfer the transfer of the company's activity of “OEM of heat transfer solutions and aviation accessories” to our activity of “MRO services for heat transfer components and OEM of heat transfer solutions” in Tulsa, Oklahoma and to our “overhaul and coating of jet engine components” activity in Kiryat Gat, see note 9.
The ongoing COVID-19 pandemic outbreak continued to have an adverse effect in 2021 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. As new variants of COVID-19 emerge, certain countries continue to place restrictions on businesses and travel. Global supply shortages emerged for certain products, leading to delays in delivery schedule. We actively monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of our employees, dedicating resources to support our communities, and innovating to address our customers’ needs. 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. The company's submitted and received government grants as part of the government support in business that affected from the Covid-19 pandemic. TAT remains cautious as new variants of the virus emerge and many factors remain unpredictable. Given the uncertainties regarding the continued 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.
b.TAT has the following wholly owned subsidiaries: Limco-Piedmont Inc. (“Limco-Piedmont”), and Turbochrome Ltd. (“Turbochrome”). Additionally, the Company holds
c.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
F - 12
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES
a.Basis of Presentation
The Group's financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP").
b.Use of estimates in the preparation of financial statement
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose the nature of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting years. Actual results could differ from those estimates.
As applicable to these financial statements, the most significant estimates and assumptions relate to: recoverability of inventory, provision for current expected credit loss and income taxes.
F - 13
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
c.Functional currency
The majority of the revenues of each subsidiary in the Group are generated in U.S. dollars ("dollars") and a substantial portion of the costs of each subsidiary in the Group are incurred in dollars. Accordingly, the dollar is the currency of the primary economic environment in which the Group operates and accordingly its functional and reporting currency is the dollar.
Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in currencies other than the U.S. dollar are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-dollar transactions and other items in the statements of income (indicated below), the following exchange rates are used: (i) for transactions – exchange rates at transaction dates or average rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization, etc.) – historical exchange rates. Currency transaction gains and losses are carried to financial income or expenses, as appropriate.
d.Principles of consolidation
The consolidated financial statements include the accounts of TAT and its subsidiaries.
Intercompany balances and transactions, including profits from intercompany sales not yet realized outside the Group, have been eliminated upon consolidation.
e.Cash and Cash equivalents
All highly liquid investments, which include short-term bank deposits, that are not restricted as to withdrawal or use, and short-term debentures, the period to maturity of which do not exceed three months at the time of investment, are considered to be cash equivalents.
F - 14
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
f.Accounts receivable, net
The Group’s accounts receivable balances are due from customers primarily in the airline and defense industries. Credit is extended based on evaluation of a customer’s financial condition and generally, collateral is not required. Trade accounts receivable from sales of services and products are typically due from customers within 30 - 90 days. Trade accounts receivable balances are stated at amounts due from customers net of a provision for current expected losses. Accounts outstanding longer than their original contractual payment terms are considered past due.
The Company’s accounts receivables accounting policy until December 31, 2019, prior to the adoption of the new CECL standard
Accounts receivables are stated at their net realizable value. The allowance against gross accounts receivables reflects the best estimate of losses inherent in the receivable’s portfolio determined based on historical experience, specific allowances for known troubled accounts and other currently available information. An allowance for doubtful debts is reflected in net accounts receivables. Account’s receivables are written off after all reasonable means to collect the full amount have been exhausted.
The Company’s accounts receivables accounting policy from January 1, 2020, following the adoption of the new CECL standard
Accounts receivable have been reduced by an allowance for current expected losses. The Company maintains the allowance for estimated losses resulting from the inability of the Company’s customers to make required payments. The allowance represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable considering current market conditions and supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses, and future expectations.
Write-off activity and recoveries for the periods presented were not material.
F - 15
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
g.Inventory
Inventory is measured at the lower of cost and net realizable value.
Inventories include raw materials, parts, work in progress and finished products.
Cost of raw material and parts is determined using the “moving average” basis. Cost of work in progress and finished products is calculated based on actual costs. Capitalized production costs components, mainly labor and overhead, are determined on average basis over the production period.
If actual market prices are less favorable than those projected by management, inventory write-downs may be required. When inventory written-down, a new lower cost basis for that inventory is established.
Since the Group sells products and services related to airplane accessories for airplanes that can be in service for 20 to 50 years, it must keep a supply of such products and parts on hand while the airplanes are in use. The Group writes down its inventory for estimated obsolescence and unmarketable inventory equal to the difference between the cost of inventory and net realizable value, which includes costs to sell based upon assumptions for future demand and market conditions.
F - 16
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
h.Property, plant and equipment
Property, plant and equipment are stated at cost, after deduction of the related investment grants, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, as follows:
|
Years | ||
|
| ||
|
Buildings and leasehold improvements |
| |
|
Machinery and equipment |
| |
|
Motor vehicles |
| |
|
Office furniture and equipment |
| |
|
Software |
|
Leasehold improvements are included in buildings and amortized using the straight line method over the period of the lease contract, or the estimated useful life of the asset, whichever is shorter. During 2021 the Company's management reassessed and updated the useful life of each one of the groups of fixed assets. The change in the estimated useful life was accounted for prospectively in accordance with ASC 250-10.
i.Grants from Israel Innovation Authority (IIA):
Grants received from the IIA for approved research and development projects are recognized at the time the Company is reasonably assured that it will be entitled to such grants, on the basis of the costs incurred and included as a deduction from research and development expenses. Due to the fact that the Company is defined as a "Traditional Industry Company", under the IIA regulations, the majority of grants are non-royalty bearing.
j.Investment in affiliates and share in results of equity investment of affiliated companies
Investment in which the Group exercises significant influence and which is not considered a subsidiary ("affiliate") is accounted for using the equity method, whereby the Group recognizes its proportionate share of the affiliated company's net income or loss after the date of investment. See Note 5.
The Group reviews those investments for impairment whenever events indicate the carrying amount may not be recoverable. See Note 1(c).
On consolidation, transactions between the Group and the affiliate are eliminated in the amount which related to the Group's proportionate share of the affiliate.
F - 17
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
k.Leases
The Company determines if an arrangement is a lease at inception. Balances related to operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets are recognized as the lease liability, adjusted for lease incentives received and prepayments made. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. As the Company’s leases do not provide an implicit rate, the Company’s uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term (see also note 2aa).
Revenue from Leasing Transactions under ASC 842
The Company accounts for certain leasing revenues in accordance with ASC 842, which qualify for operating lease treatment. For operating leases in which the Company is the lessor, lease payments are recognized as leasing revenue over the lease term on a straight-line basis. APUs engines subject to operating leases are classified as property, plant, and equipment and depreciated on a straight-line basis over the useful life, see Note 7.
l.Identified intangible assets
Identifiable intangible assets are comprised of definite lived intangible assets - customer relationships and commercial license which are amortized over
m.Impairment of long-lived assets
Long-lived assets, including property, plant and equipment, operating lease right of use assets and definite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets (or asset group) may not be recoverable. In the event that the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets (or asset group) is less than the carrying amount of such assets, an impairment charge would be recognized and the assets (or asset group) would be written down to their estimated fair values (see also notes 6 and 7).
n.Treasury Shares
Company shares held by the Company are presented as a reduction of equity at their cost to the Company. The treasury shares have no rights.
F - 18
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
o.Revenue recognition
The Group generates its revenues from the sale of OEM products and systems, providing MRO services (remanufacture, maintenance, repair and overhaul services and long - term service contracts) and parts services.
A contract with a customer exists only when: the parties to the contract have approved it and are committed to perform their respective obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.
Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer, excluding amounts collected on behalf of other third parties and sales taxes.
To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied.
Other major provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances.
F - 19
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
p.Revenue recognition (cont.)
The Company has adopted the following exemptions and accounting policies:
a. The Company has chosen to account for shipping as a fulfillment costs, in cases in which the shipping occurs after the customer has obtained control of a good.
b. The Company has chosen not to adjust the promised amount of consideration for the effects of a significant financing component, in cases in which the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less.
c. The Company has chosen to present all sales taxes collected from customers on a net basis.
The group recognizes revenues from the sale of OEM products when it satisfies a performance obligation, i.e. when or as the customer obtains control upon product shipment. The Group does not grant a right of return.
The Group recognizes revenues from MRO services over time as it satisfies its performance obligations. The Group satisfies its performance, according to required milestones.
Contract liabilities
Contract liabilities are mainly comprised of deferred revenues which are included under other payables.
F - 20
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
q.Warranty costs
The Group provides warranties for its products and services ranging from one to three years, which vary with respect to each contract and in accordance with the nature of each specific product. According to company's experience, most of the warranty costs incur during the first year of the contract.
The Group estimates the costs that may be incurred under its warranty and records a liability in the amount of such costs at the time revenue is recognized under accrued expenses on the company’s balance sheet. The Group periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
r.Research and development
Research and development costs, net of grants, are charged to expenses as incurred.
s.Fair value measurement
The Group measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data or active market data for similar but not identical assets or liabilities.
F - 21
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
s.Fair value measurement (cont.)
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers credit risk in its assessment of fair value.
t.Concentrations of credit risk
Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents, derivatives and accounts receivable.
Cash and cash equivalents are deposited with major banks in Israel and the United States. Such deposits in the United States may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Group's cash and cash equivalents are financially sound. Accordingly, minimal credit risk exists with respect to these financial instruments.
The Group's accounts receivable are derived mainly from sales to customers in the United States, Israel and Europe. The Group generally does not require collateral; however, in certain circumstances the Group may require letters of credit. Management believes that credit risks relating to accounts receivable are minimal since the majority of the Group's customers are world-leading manufacturers of aviation systems and aircrafts, international airlines, governments and air-forces, and world-leading manufacturers and integrators of defense and ground systems. In addition, the Group has relatively a large number of customers with wide geographic spread which mitigates the credit risk. The Group performs ongoing credit evaluation of its customers' financial condition. As part of the risk management, the company purchased a credit insurance policy from a well-known insurance company.
u.Income taxes
Income taxes are accounted for in accordance with ASC 740 "Income Taxes". This statement prescribes the use of the asset and liability method, whereby deferred tax assets and liabilities account balances are determined based on temporary differences between financial reporting and tax basis of assets and liabilities and for tax loss carry-forwards. Deferred taxes are measured using the enacted laws and tax rates that will be in effect when the differences are expected to reverse. The Group provides a valuation allowance, if it is more likely than not that a portion of the deferred income tax assets will not be realized, see note 17(h).
Taxes which would apply in the event of disposal of investments in foreign subsidiaries have not been taken into account in computing the deferred taxes, when the Group’s intention is to hold, and not to realize the investments.
Taxes which would apply in the event of distribution of earnings from foreign subsidiaries of the Company, have been taken into account in computing the deferred taxes, when there is a possibility of future distribution of earnings from such foreign subsidiaries.
F - 22
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
u.Income taxes (cont.)
The Group did not provide for deferred taxes attributable to dividend distribution out of retained tax-exempt earnings from "Approved/Benefited Enterprise" plans (see note 13(a)), since it intends to permanently reinvest them and has no intention to declare dividends out of such tax exempt income in the foreseeable future. Management considers such retained earnings to be essentially permanent in duration.
Results for tax purposes for TAT’s Israeli subsidiaries are measured and reflected in NIS.
As explained in (c) above, the consolidated financial statements are measured and presented in U.S. dollars. In accordance with ASC 740, TAT has not provided deferred income taxes on the differences resulting from changes in exchange rate and indexation.
The Group follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate resolution. The Group’s policy is to include interest and penalties related to unrecognized tax benefits within financial income (expense). Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance sheet date.
v.Earnings per share
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of the Company's Ordinary Shares, par value NIS
Diluted earnings (loss) per share are calculated by dividing the net income by the fully-diluted weighted-average number of ordinary shares outstanding during each period. Potentially dilutive shares include outstanding options granted to employees and directors, using the treasury stock method.
w.Share-based compensation
The Group applies ASC 718 "Stock Based Compensation" with respect to employees and directors’ options, which requires awards classified as equity awards to be accounted for using the grant-date fair value method. The fair value of share-based awards is estimated using the Black-Scholes valuation model, the payment transaction is recognized as expense over the requisite service period, net of estimated forfeitures. The Company estimates forfeitures based on historical experience and anticipated future conditions.
F - 23
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
w.Share-based compensation (cont)
The Group recognizes compensation cost for an award with only service conditions that has a graded vesting schedule using the accelerated method over the requisite service period for the entire award.
x.Comprehensive income (loss)
Comprehensive income in 2021, 2020 and 2019 includes, in addition to net income or loss, gains and losses of derivatives designated for cash flow hedge accounting (net of related taxes where applicable).
Reclassification adjustments for gain or loss of derivatives are included in the relevant line item in the statement of income. See also note 2 (z).
F - 24
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
y.Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Group but which will only be resolved when one or more future events occur or fail to occur. The Group’s management assesses such contingent liabilities and estimated legal fees, if any, and accrues for these costs. Such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Group or unasserted claims that may result in such proceedings, the Group’s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
Management applies the guidance in ASC 450-20-25 when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material are disclosed.
Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
z.Derivatives and hedging
The Company carries out transactions involving foreign currency exchange derivative financial instruments. The transactions are designed to hedge the Company’s exposure in currencies other than the U.S. dollar. Derivatives are recognized at fair value as either assets or liabilities in the consolidated balance sheets in accordance with ASC Topic 815, “Derivatives and Hedging”.
For derivative instruments that are designated and qualify as a cash-flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the anticipated transaction in the same period or periods during which the hedged transaction affects earnings.
If a derivative does not meet the definition of a cash flow hedge, the changes in the fair value are included in "financial expense (income), net".
For derivative instruments that qualify for hedge accounting, the cash flows associated with these derivatives are reported in the consolidated statements of cash flows consistently with the classification of the cash flows from the underlying hedged items that these derivatives are hedging.
F - 25
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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|
U.S. dollars in thousands |
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (CONT)
aa.Restructuring Costs
Restructuring costs have been recorded in connection with TAT’s restructuring plan announced in March 2021. Following this decision and in anticipation of ongoing efficiency measures in our business, TAT’s management has made estimates and judgments regarding future plans, mainly related to employee termination benefit costs. Management also assesses the recoverability of long-lived assets employed in the business. In certain instances, asset lives have been shortened based on changes in the expected useful lives of the affected assets. Asset-related impairments and employee's severance and other related costs are reflected within asset impairments of fixed assets, provision for restructuring plan and restructuring expenses.
bb.Recently Issued Accounting Principles:
Recently adopted accounting pronouncements:
(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.
In addition, this Update also simplify the accounting for income taxes in certain topics as follows: 1. Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax; 2. Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction;3. Specifying that an entity can elect (rather than required to) allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements;4. Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.
The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The new standard does not have a material effect on the Company's financial statements upon adoption.
Accounting pronouncements issued but not yet adopted:
(1)In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which increases the transparency of government assistance including disclosure of the type of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for all entities for financial statements issued for annual periods beginning after December 15, 2021. An entity should apply the amendments either prospectively to all transactions within the scope of the ASU that are reflected in the financial statements at the date of initial application and that are entered into after that date or retrospectively to those transactions.
F - 26
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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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|
U.S. dollars in thousands |
NOTE 3 -FAIR VALUE MEASUREMENT
Recurring Fair Value Measurements
The Group measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company's financial assets and liabilities measured at fair value on a recurring basis, consisted of the following types of instruments:
|
December 31, 2021 | ||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total | |||||||||||||
|
Assets: | ||||||||||||||||
|
Derivative financial instruments |
|
$ |
|
|
$ |
| ||||||||||
|
December 31, 2020 | ||||||||||||||||
|
Level 1 |
Level 2 |
Level 3 |
Total | |||||||||||||
|
Assets: | ||||||||||||||||
|
Derivative financial instruments |
|
$ |
|
|
$ |
| ||||||||||
a.Derivative financial instruments:
The company hedges the foreign currency risk arising from probable forecasted Israeli Shekel ("ILS") expenses as part of its risk management policy. The risk management objective is to hedge the foreign currency exchange rate fluctuations associated with ILS denominated forecasted probable expenses according to the company's hedging policy. The majority of the ILS exposure arises from expected related salary expenses. The Company enters into contracts for derivative financial instruments forward contracts in order to execute its policy. Such derivatives are recognized at fair value. The fair value of forward contracts is calculated as the difference between the forward rate on valuation date and the forward rate on the original forward contract, multiplied by the transaction's notional amount. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The hedge effectiveness is assessed at the end of each reporting period.
The effective portion and the ineffective portion of the gain or loss on the hedging instrument is recognized as other comprehensive income (loss).
The effective portion is determined by looking into changes in spot exchange rate.
The change in fair value attributable to changes other than those due to fluctuations in the spot exchange rate are excluded from the assessment of hedge effectiveness and are recognized in the statement of income under financial expenses-net.
F - 27
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 3 -FAIR VALUE MEASUREMENT (CONT)
For derivative instruments that are designated and qualify as a cash-flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the anticipated transaction in the same period or periods during which the hedged transaction affects earnings.
For derivative instruments that qualify for hedge accounting, the cash flows associated with these derivatives are reported in the consolidated statements of cash flows consistently with the classification of the cash flows from the underlying hedged items that these derivatives are hedging.
As of December 31, 2021, and 2020, the Company has open forward contracts with a notional total amount of $
The carrying amounts of financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short maturities.
NOTE 4 -INVENTORY
Inventory is composed of the following:
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
| ||||||||
|
Raw materials and components |
$ |
|
$ |
| ||||
|
Work in progress |
|
| ||||||
|
Spare parts |
|
| ||||||
|
Finished goods |
|
| ||||||
|
| ||||||||
|
Total inventory (**) |
$ |
|
$ |
| ||||
(**)
Inventories write down expenses due to slow inventory amounted to $
The company maintains a wide range of exchangeable units and other spare parts related to its products and services in various locations. Due to the long lead time of its suppliers and manufacturing cycles, the company needs to forecast demand and commit significant resources towards these inventories. As such, the Company is subject to risks including excess inventory no longer relevant.
F - 28
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 5 -INVESTMENT IN AFFILIATES
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.
Summarized financial information of TAT-Engineering LLC:
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
Balance sheets: | ||||||||
|
Current assets |
$ |
|
$ |
| ||||
|
Non-current assets |
|
| ||||||
|
Current liabilities |
|
| ||||||
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Statements of operation: | ||||||||||||
|
Revenues |
$ |
|
$ |
|
$ |
| ||||||
|
Gross loss |
( |
) |
( |
) |
( |
) | ||||||
|
Net loss |
( |
) |
( |
) |
( |
) | ||||||
|
Net losses attributable to the Company |
( |
) |
( |
) |
( |
) | ||||||
NOTE 6 -PROPERTY, PLANT AND EQUIPMENT, NET
Composition of assets, grouped by major classifications, is as follows:
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
Cost: | ||||||||
|
Land and buildings |
$ |
|
$ |
| ||||
|
Machinery and equipment |
|
| ||||||
|
Motor vehicles |
|
| ||||||
|
Office furniture and equipment |
|
| ||||||
|
Software |
|
| ||||||
|
|
| |||||||
|
| ||||||||
|
Less: Accumulated depreciation |
|
| ||||||
|
Depreciated cost |
$ |
|
$ |
| ||||
Depreciation expenses amounted to $
$
F - 29
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 7 -LEASES
Lease commitments:
Limco-Piedmont leases some of its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through , certain leases contain renewal options as defined in the agreements.
TAT leases its factory in Gedera from TAT Industries until the end of . During 2021, the company negotiated with the landlord an agreement for the early termination of such lease. A termination agreement was signed between TAT and the landlord in January 2022. Pursuant to such agreement, it was agreed that TAT will vacate the facility in Gedera on March 31, 2022. Due to the execution of such agreement, the company wrote off operating ROU assets of $
The lease cost was as follows:
|
Year ended December 31, 2021 |
Year ended December 31, 2020 | |||||||
|
Operating lease expenses |
|
| ||||||
Supplemental cash flow information related to leases was as follows:
|
Year ended December 31, 2021 |
Year ended December 31, 2020 | |||||||
|
Operating cash flows from operating leases |
|
| ||||||
|
Right-of-use assets obtained in exchange for lease obligations (non-cash) |
|
| ||||||
During 2021 the company established a new business unit which provided to the company’s customers leasing services of APU engines. The result of this business unit is reported as part of the company's activity in MRO services for aviation components.
F - 30
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 7 -LEASES (CONT)
Supplemental balance sheet information related to operating leases is as follows:
|
December 31, 2021 |
December 31, 2020 | |||||||
|
Operating Leases | ||||||||
|
Operating lease right-of-use assets |
|
| ||||||
|
| ||||||||
|
Current operating lease liabilities |
|
| ||||||
|
Non-current operating lease liabilities |
|
| ||||||
|
Total operating lease liabilities |
|
| ||||||
|
| ||||||||
|
Weighted Average Remaining Lease Term | ||||||||
|
Operating leases - Israel |
|
| ||||||
|
Operating leases – United States |
|
| ||||||
|
| ||||||||
|
Weighted Average discount rate | ||||||||
|
Operating leases - Israel |
|
% |
|
% | ||||
|
Operating leases – United States |
|
% |
|
% | ||||
As of December 31, 2021, the maturities of lease liabilities were as follows:
|
Year |
Amount | |||
|
2022 |
$ |
| ||
|
2023 |
| |||
|
2024 |
| |||
|
2025 |
| |||
|
2026 |
| |||
|
2027 and after |
| |||
|
Total lease payments |
| |||
|
Less imputed interest |
( |
) | ||
|
Total |
$ |
| ||
F - 31
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 8 -INTANGIBLE ASSETS
Intangible assets:
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
Customer relationships | ||||||||
|
Cost |
$ |
|
$ |
| ||||
|
Impairment |
|
( |
) | |||||
|
Accumulated amortization |
|
( |
) | |||||
|
Amortized cost |
$ |
|
$ |
| ||||
The COVID-19 pandemic and the significant reduction in the reconditioning and coating segment (“Turbochrome”) business during 2020 were a trigger event for impairment of the customer relationships asset. The Company believes there will be no future economic benefits that will be derived from the customers attributed to this intangible asset. Therefore, the Company wrote off the amortized cost related to the customer relationships. The write off expenses recorded in 2020 P&L under Other Expenses.
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
Commercial license | ||||||||
|
Cost |
$ |
|
$ |
| ||||
|
Accumulated amortization |
( |
) |
( |
) | ||||
|
Amortized cost |
$ |
|
$ |
| ||||
On September 2020 Piedmont signed a 10 years agreement for the commercial MRO services for aviation components. Under this contract Honeywell licensed Piedmont as an authorized MRO station of APU 331-20X.
Estimated amortization expenses for the five succeeding years is $
F - 32
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 9 -RESTRUCTURING COST
In March 2021, the Company announced a restructuring plan, pursuant to which, the Company will transfer the Company's operations from its leased facility in Gedera to its facility in Tulsa, Oklahoma and to its facility in Kiryat Gat.
This will enable TAT to concentrate on heat exchanges activity in the United States allowing for better operational flow, getting closer to TAT’s customer base, and cutting fixed costs.
During 2021 the company started executing the plan which will mature during 2022.
The restructuring plan has a material impact on the company's financial statements for the year 2021 as follows:
|
Restructuring Items |
December 31, 2021 | |||
|
| ||||
|
Balance sheet | ||||
|
Provision for employee’s termination expenses |
$ |
| ||
|
Investment in building and infrastructures |
$ |
| ||
|
Investment in machineries (**) |
$ |
| ||
|
Total |
$ |
| ||
|
| ||||
|
Profit and loss | ||||
|
Restructuring expenses, net | ||||
|
Employee’s termination cost |
$ |
| ||
|
Restructuring income from lease modification |
$ |
( |
) | |
|
Restructuring expenses from asset’s impairment |
$ |
| ||
|
Other restructuring expenses |
$ |
| ||
|
Cost of sales | ||||
|
Acceleration of assets depreciation expenses |
$ |
| ||
|
Total |
$ |
| ||
* Net cash used in operating activity for restructuring expenses in 2021 was $
**
F - 33
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 10 -LONG TERM LOANS
During 2021, TAT received loans from commercial banks in an aggregate amount of $
During 2020 TAT received a loan of approximately $
The grant was recognized as a deduction from cost of revenues and the related operating expenses.
In March 2021 TAT received a short-term credit line of $
Maturities on long term loans are as follows:
|
Year |
Amount | |||
|
2022 |
$ |
| ||
|
2023 |
| |||
|
2024 |
| |||
|
2025 |
| |||
|
2026 and after |
| |||
|
$ |
| |||
NOTE 11 -GOVERNMENT GRANTS
During 2021, TAT received government grants as part of the Coronavirus Aid and Relief in total amount of $
F - 34
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 12 -ACCRUED EXPENSES
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
| ||||||||
|
Employees and payroll accruals |
$ |
|
$ |
| ||||
|
Accrued expenses |
|
| ||||||
|
Authorities |
|
| ||||||
|
Advances from customers |
|
| ||||||
|
Warranty provision |
|
| ||||||
|
Accrued royalties and rebate sales commissions |
|
| ||||||
|
Other |
|
| ||||||
|
| ||||||||
|
$ |
|
$ |
| |||||
NOTE 13 -RELATED PARTIES’ TRANSACTIONS AND BALANCES
The amounts in the table below refer to TAT-Engineering joint venture and affiliates.
Transactions:
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
| ||||||||||||
|
Revenue - | ||||||||||||
|
Sales to related-party company (*) |
$ |
|
$ |
|
$ |
| ||||||
|
Cost and expenses - | ||||||||||||
|
Supplies from related party (*) |
$ |
|
$ |
|
$ |
| ||||||
Balances:
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
| ||||||||
|
Trade receivables and other receivables (*) |
$ |
|
$ |
| ||||
|
Trade payables and other payables (*) |
$ |
|
$ |
| ||||
(*)
F - 35
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 14 -LONG-TERM EMPLOYEE-RELATED OBLIGATIONS
Severance pay:
The Company and its Israeli subsidiary are required to make severance payments upon dismissal of an employee or upon termination of employment in certain circumstances. The severance payment liability to the employees (based upon length of service and the latest monthly salary - one month’s salary for each year employed) is recorded on the Company’s balance sheet under “Liability in respect of employees rights upon retirement.” The liability is recorded as if it were payable at each balance sheet date on an undiscounted basis.
According to Section 14 of the Israeli Severance Pay Law, the Israeli company’s liability for certain employees, according to their employment agreements, make regular deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee’s retirement benefit obligation. The Company and its Israeli subsidiary are fully relieved from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. The liability accrued in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in the Company balance sheet, as the amounts funded are not under the control and management of the Company and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies (the “Contribution Plan”).
With regard to the employees that are not under the “Contribution Plan”, the liability is funded in part from the purchase of insurance policies or by the establishment of pension funds with dedicated deposits in the funds. The amounts used to fund these liabilities are included in the balance sheets under “Funds in respect of employee rights upon retirement.” These policies are the Company’s assets.
In the years ended December 31, 2021, 2020 and 2019 the Company deposited $
Limco-Piedmont sponsors a 401(K) safe harbor profit sharing plan covering substantially all of its employees. The plan requires the employer to contribute a match which is currently done on a payroll period basis, matching
The Group expects to contribute approximately $
The amounts of severance payments, actually paid to retired employees, by TAT were $
F - 36
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 14 -LONG-TERM EMPLOYEE-RELATED OBLIGATIONS (CONT)
TAT expects to pay $1,504 in future benefits to their employees during 2022 through 2031 upon their normal retirement age. The amount was determined based on the employee’s current salary rates and the number of service years that will be accumulated upon the retirement date. These amounts do not include amounts that might be paid to employees that will cease working for the Israeli company before their normal retirement age.
|
Year |
Amount | |||
|
2022 |
$ |
| ||
|
2023 |
| |||
|
2024 |
| |||
|
2025 |
| |||
|
2026 |
| |||
|
Thereafter (through 2030) |
| |||
|
Total |
$ |
| ||
NOTE 15 -COMMITMENTS AND CONTINGENCIES
a. Commissions arrangements:
The Group is committed to pay marketing commissions ranging
b. Royalty commitments:
(1)TAT is committed to pay royalties to third parties, ranging from
(2)Piedmont is committed to pay royalties to a third party, ranging
In addition, Piedmont is committed to pay another third party royalties of
c. Guarantees:
(1)In order to secure TAT's liability to the Israeli customs, the Company provided bank guarantees in amounts of $
(2)To secure TAT's liability to the lessor of its premises, the Company provided a bank guarantee in the amount of $
F - 37
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 16 -SHAREHOLDERS' EQUITY
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.
TAT's Treasure shares have no rights.
b.Stock option plans:
Following the approval of TAT's Audit Committee and Board of Directors, on June 28, 2012, the Company’s shareholders approved the 2012 stock option plan (the “2012 Plan”) to grant up to
(*)
F - 38
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 16 -SHAREHOLDERS' EQUITY (CONT)
b.Stock option plans (cont.):
On August 30, 2018 the Company's compensation committee, followed by the Board of Directors, approved the amended and restated company's 2012 Plan. On October 4, 2018 the company's amended and restated 2012 stock plan was approved at the annual general meeting of shareholders.
As part of the company's 2012 Plan’s amendments it was determined that if the Company declares a cash dividend to its shareholders, and the distribution date of such dividend will precede the exercise date of an Option, including for the avoidance of doubt, Options that have yet to become vested and Options which have been granted prior to the adoption of such amendment to the plan, the exercise price of the Option shall be reduced in the amount equal to the cash dividend per share distributed by the Company. The result of the modification was an incremental cost of $
During 2018 the option pool was increased by
(1)On August 29, 2019, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(2)On September 22, 2019, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(3)On September 26, 2019, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(4)On October 15, 2020, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(5)On March 30, 2021, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(6)On March 30, 2021, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(7)On March 30, 2021, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(8)On March 30, 2021, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(9)On July 25, 2021, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
(10)On August 30, 2021, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of
F - 39
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 16 -SHAREHOLDERS' EQUITY (CONT)
b.Stock option plans (cont.):
The fair value of the Company’s stock options granted under the 2012 plan for the years ended December 31, 2021, 2020 and 2019 was estimated using the following assumptions:
|
2021 |
2020 |
2019 | ||||
|
| ||||||
|
Expected stock price volatility |
|
|
| |||
|
Expected option life (in years) |
|
|
| |||
|
Risk free interest rate |
|
|
| |||
|
Dividend yield |
|
|
|
The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options. The volatility factor used in the Black-Scholes option pricing model is based on historical stock price fluctuations. The expected term of options is based on the simplified method. The Company is able to use the simplified method as the options qualify as “plain vanilla” options as defined by ASC 718-10-S99 and since the Company does not have sufficient historical exercise data to provide a reasonable basis to estimate expected term. Expected dividend yield is based upon historical and projected dividend activity and the risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock options granted. Following the company's amended and restated 2012 stock plan related to the adjustment of the exercise price in respect of dividend distribution, the dividend yield was amended to 0%.
F - 40
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 16 -SHAREHOLDERS' EQUITY (CONT)
b.Stock option plans (cont.):
The following table is a summary of the activity of TAT's Stock Option plan:
|
Year ended December 31, |
Year ended December 31, |
Year ended December 31, | ||||||||||||||||||||||
|
2021 |
2020 |
2019 | ||||||||||||||||||||||
|
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 |
|
$ |
|
|
$ |
|
|
$ |
| |||||||||||||||
|
Granted |
|
|
|
|
|
| ||||||||||||||||||
|
Forfeited |
( |
) |
|
|
|
( |
) |
| ||||||||||||||||
|
Exercised |
|
|
|
|
|
| ||||||||||||||||||
|
| ||||||||||||||||||||||||
|
Outstanding at the end of the year |
|
|
|
|
|
| ||||||||||||||||||
|
| ||||||||||||||||||||||||
|
Exercisable at the end of the year |
|
$ |
|
|
$ |
|
|
$ |
| |||||||||||||||
The weighted-average grant-date fair value of options granted was $
As of December 31, 2021, total unrecognized compensation cost was $
F - 41
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 17 -EARNINGS PER SHARE (“EPS”)
Basic and diluted earnings per share are based on the weighted average number of ordinary shares outstanding. Diluted EPS is based on those shares used in basic EPS plus shares that would have been outstanding assuming issuance of ordinary shares for all dilutive potential ordinary shares outstanding.
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Numerator for EPS: | ||||||||||||
|
Net income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
Denominator for EPS: | ||||||||||||
|
Weighted average shares outstanding – basic |
|
|
| |||||||||
|
Dilutive shares |
|
|
| |||||||||
|
Weighted average shares outstanding – diluted |
|
|
| |||||||||
|
EPS: | ||||||||||||
|
Basic and diluted |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
Diluted income per share does not include
Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans.
NOTE 18 -DISCONTINUED OPERATION
In June 2020, the company's management decided to discontinue the JT8D engine blades reconditioning activity as part of a strategic change in its business to focus on new capabilities to provide services to newer types of engines. The discontinued operation is related to the JT8D engine blades reconditioning activity in Turbochrome, which constitute a material portion of Turbochrome’s revenues.
|
2021 |
2020 | |||||||||
|
Assets: | ||||||||||
|
Account receivables |
$ |
|
$ |
| ||||||
|
Inventory |
|
| ||||||||
|
Fixed assets, net |
|
| ||||||||
|
Costumers’ relationship |
|
| ||||||||
|
Total Assets |
$ |
|
$ |
| ||||||
|
Liability: | ||||||||||
|
Account payables |
$ |
|
$ |
| ||||||
|
| ||||||||||
|
Total Liabilities |
$ |
|
$ |
| ||||||
F - 42
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 18 -DISCONTINUED OPERATION (CONT)
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
| ||||||||||||
|
Revenue: | ||||||||||||
|
Services |
$ |
|
$ |
|
$ |
| ||||||
|
| ||||||||||||
|
Cost of revenue: | ||||||||||||
|
Services |
|
|
| |||||||||
|
| ||||||||||||
|
Gross profit (loss) |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
Operating expenses: | ||||||||||||
|
Research and development, net |
|
|
( |
) | ||||||||
|
Selling and marketing |
|
|
| |||||||||
|
General and administrative |
|
|
| |||||||||
|
| ||||||||||||
|
|
|
| ||||||||||
|
| ||||||||||||
|
Operating income (loss) |
( |
) |
( |
) |
( |
) | ||||||
|
| ||||||||||||
|
Financial expenses (income) |
|
|
| |||||||||
|
Income (loss) on disposal of discontinued operation (1) |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
Net Income (loss) |
$ |
|
$ |
( |
) |
$ |
( |
) | ||||
|
(1) |
|
F - 43
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 19 -TAXES ON INCOME
a.Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law"):
Until December 31, 2010, TAT and Turbochrome has elected to participate in the alternative package of tax benefits for its approved and benefited enterprise under the law.
Pursuant to such Law, the income derived from those enterprises will be exempt from Israeli corporate tax for a specified benefit period (except to the extent that dividends are distributed during the tax-exemption period other than upon liquidation) and subject to reduced corporate tax rates for an additional period.
In addition pursuant to a recent amendment of the Law, any distribution of dividend as of August 15, 2021 will be prorated between exempt income and taxable income. As such, upon dividend distribution, in case the company has accumulated exempt income, the company will be obligated to pay the corporate income tax it was exempted from with respect to the exempt profits portion.
Preferred Enterprises
Additional amendments to the Law became effective in January 2011 (the “2011 Amendment”). Under the 2011 Amendment, income derived by ‘Preferred Companies’ from ‘Preferred Enterprises’ (both as defined in the 2011 Amendment) would be subject to a uniform rate of corporate tax as opposed to the incentives that are limited to income from Approved or Benefiting Enterprises during their benefits period. According to the 2011 Amendment, the uniform tax rate on such income, referred to as ‘Preferred Income’, would be
Under the transitional provisions of the 2011 Amendment, the Company elected to irrevocably implement the 2011 Amendment, commencing 2011 and thereafter, and be regarded as a "Preferred Enterprise" with respect to its existing Approved and Benefited Enterprises while waiving benefits provided under the legislation prior to the 2011 Amendment.
F - 44
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 19 -TAXES ON INCOME (CONT)
a.Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law") (cont.):
Under a recent amendment, announced in August 2013, beginning in 2014, dividends paid out of income attributed to a Preferred Enterprise will be subject to a withholding tax rate of
The uniform tax rate for Development Zone A, as of January 1, 2017, is
TAT is located in an area in Israel that is designated as elsewhere and as such entitled to reduce tax rates of
Turbochrome is in an area in Israel that is designated as Zone A and as such entitled to reduce tax rates of
b.Corporate tax rate in Israel
The taxable income of TAT, not subject to benefits as detailed above, is taxed at the standard Israeli corporate tax rate, which was 23% for all years included in these financial statements.
Capital gain is subject to capital gain tax according to corporate tax rate in the year which the assets are sold
c.U.S. subsidiaries
U.S. subsidiaries are taxed based on federal and state tax laws. The Federal statutory tax rate for 2021, 2020 and 2019 was
F - 45
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 19 -TAXES ON INCOME (CONT)
d.Tax assessments
TAT’s income tax assessments are considered final through 2016.
Turbochrome income tax assessments are considered final through 2016.
Limco-Piedmont income tax assessments are considered final through 2017.
e.Income tax reconciliation:
A reconciliation of the theoretical tax expense assuming all income is taxed at the statutory rate to taxes on income (tax benefit) as reported in the statements of income:
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Income (loss) before taxes on income (tax benefit) from continued operationas reported in the statements of income |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
| ||||||||||||
|
Statutory tax rate in Israel |
|
% |
|
% |
|
% | ||||||
|
| ||||||||||||
|
Theoretical taxes on income (tax benefit) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
|
| ||||||||||||
|
Increase (decrease) in taxes on income resulting from: | ||||||||||||
|
Tax adjustment for foreign subsidiaries subject to a different tax rate |
|
|
( |
) | ||||||||
|
Reduced tax rate on income derived from "Preferred Enterprises" plans |
|
|
| |||||||||
|
Earnings from foreign subsidiaries (1) |
|
( |
) |
| ||||||||
|
Valuation allowance for exchange rates differences on deferred taxes not recorded on capital losses |
|
|
( |
) | ||||||||
|
Deferred tax assets from discontinued operation profit (loss) |
|
( |
) |
( |
) | |||||||
|
Reduced deferred tax asset from expecting utilization of carryforward losses |
|
|
| |||||||||
|
Tax in respect of prior years |
|
( |
) |
| ||||||||
|
Temporary differences for which no deferred taxes were recorded |
|
( |
) |
( |
) | |||||||
|
Permanent differences |
|
|
| |||||||||
|
Other adjustments |
( |
) |
|
( |
) | |||||||
|
Taxes on income (tax benefit) as reported in the statements of income |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
(1)
During 2020 and 2021, the Company received loans from commercial banks in the US and Israel in total amount of $
F - 46
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 19 -TAXES ON INCOME (CONT)
f.Income (loss) before taxes on income (tax benefit) is comprised as follows:
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
| ||||||||||||
|
Domestic (Israel) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||
|
Foreign (United States) |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
|
$ |
( |
) |
$ |
( |
) |
$ |
| ||||
g.Taxes on income (tax benefit) included in the statements of income:
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Current: | ||||||||||||
|
Domestic (Israel) |
$ |
|
$ |
|
$ |
| ||||||
|
Foreign (United States) |
|
|
| |||||||||
|
| ||||||||||||
|
|
|
| ||||||||||
|
Deferred: | ||||||||||||
|
Domestic (Israel) |
( |
) |
( |
) |
( |
) | ||||||
|
Foreign (United States) |
( |
) |
( |
) |
| |||||||
|
| ||||||||||||
|
( |
) |
( |
) |
| ||||||||
|
Previous years: | ||||||||||||
|
Domestic (Israel) |
|
( |
) | |||||||||
|
Foreign (United States) |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
- |
( |
) |
| |||||||||
|
| ||||||||||||
|
$ |
( |
) |
$ |
( |
) |
$ |
| |||||
F - 47
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 19 -TAXES ON INCOME (CONT)
h.Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of TAT's deferred tax liabilities and assets are as follows:
|
December 31, | ||||||||
|
2021 |
2020 | |||||||
|
Deferred tax assets: | ||||||||
|
Provision for current expected credit losses |
$ |
|
$ |
| ||||
|
Provisions for employee benefits |
|
| ||||||
|
Inventory |
|
| ||||||
|
Capital tax losses carryforward |
|
| ||||||
|
Net operating losses carryforward |
|
| ||||||
|
Other |
|
| ||||||
|
Deferred tax assets, before valuation allowance |
$ |
|
$ |
| ||||
|
Valuation allowance |
( |
) |
( |
) | ||||
|
Deferred tax assets, net |
$ |
|
$ |
| ||||
|
| ||||||||
|
Deferred tax liabilities: | ||||||||
|
Property, plant and equipment |
( |
) |
( |
) | ||||
|
Intangible assets |
( |
) |
( |
) | ||||
|
Other temporary differences deferred tax liabilities |
|
( |
) | |||||
|
Deferred tax liabilities |
$ |
( |
) |
$ |
( |
) | ||
|
| ||||||||
|
Net |
$ |
|
$ |
| ||||
F - 48
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 19 -TAXES ON INCOME (CONT)
h.Deferred income taxes (cont.):
The following table summarizes the changes in the valuation allowance for deferred tax assets:
|
Balance, December 31, 2018 |
$ |
| ||
|
Additions during the year |
| |||
|
Balance, December 31,2019 |
$ |
| ||
|
Additions during the year |
| |||
|
Balance, December 31,2020 |
$ |
| ||
|
Additions during the year |
| |||
|
Balance, December 31,2021 |
$ |
|
Valuation allowances are mainly related to (i) U.S. subsidiary for which valuation allowance was provided in respect of deferred tax assets resulting from carryforward of State tax losses in the amount of $
F - 49
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 20 -SEGMENT INFORMATION
a.Segment Activities Disclosure:
TAT operates under four segments: (i) Original equipment manufacturing (“OEM”) of heat transfer solutions and aviation accessories mainly through our Gedera facility and our Limco subsidiary; (ii) MRO services for heat transfer components and OEM of heat transfer solutions through its Limco subsidiary; (iii) MRO services for aviation components (mainly APU and LG) through its Piedmont subsidiary; and (iv) Overhaul and coating of jet engine components through its Turbochrome subsidiary.
-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 of 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, as well as APU lease activity. 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 reclassified due to discontinued operation for the year 2019.
The Group’s chief operating decision-maker (CEO of the Company) evaluates performance, makes operating decisions and allocates resources based on financial data, consistent with the presentation in the accompanying financial statements. CODM reviews revenue, gross profit, operating income and the following assets: cash and cash equivalents, accounts receivable and inventory.
During 2021 TAT executed and continue to work on the company's plan to consolidate the Company’s operations from four to three production sites by consolidating its production sites in Israel “OEM of heat transfer solutions and aviation accessories” with the “overhaul and coating of jet engine activity” and transferring the heat exchanges cores production operations from Israel to the Company’s production site in Tulsa, Oklahoma.
F - 50
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 20 -SEGMENT INFORMATION (CONT)
b.Segments statement operations disclosure:
The following financial information is the information that CODM uses for analyzing the segment results. The figures are presented in consolidated method as presented to CODM.
The following financial information is a summary of the operating income of each operational segment:
|
Year ended December 31, 2021 | ||||||||||||||||||||||||
|
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 and Lease |
Overhaul and coating of jet engine components |
Elimination of inter-company sales |
Consolidated | |||||||||||||||||||
|
Revenues | ||||||||||||||||||||||||
|
Sale of products and services |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||||
|
Intersegment revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Total revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
| ||||||||||||||||||||||||
|
Cost of revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Gross profit |
|
|
|
|
( |
) |
| |||||||||||||||||
|
| ||||||||||||||||||||||||
|
Research and development |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Selling and marketing |
|
|
|
|
( |
) |
| |||||||||||||||||
|
General and administrative |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Other expenses (income) |
( |
) |
|
( |
) |
( |
) |
|
( |
) | ||||||||||||||
|
Restructuring expenses, net |
|
|
|
|
|
| ||||||||||||||||||
|
| ||||||||||||||||||||||||
|
Operating income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||||||
|
Financial expenses, net |
| |||||||||||||||||||||||
|
Loss before tax benefits |
( |
) | ||||||||||||||||||||||
F - 51
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 20 -SEGMENT INFORMATION (CONT)
b.Segments statement operations disclosure (cont.)
|
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 and lease |
Overhaul and coating of jet engine components |
Elimination of inter-company sales |
Consolidated | |||||||||||||||||||
|
Revenues | ||||||||||||||||||||||||
|
Sale of products and services |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||||
|
Intersegment revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Total revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
| ||||||||||||||||||||||||
|
Cost of revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Gross profit (loss) |
|
|
|
|
( |
) |
| |||||||||||||||||
|
| ||||||||||||||||||||||||
|
Research and development |
( |
) |
( |
) |
|
|
|
| ||||||||||||||||
|
Selling and marketing |
|
|
|
|
|
| ||||||||||||||||||
|
General and administrative |
|
|
|
|
|
| ||||||||||||||||||
|
Other expenses (income) |
|
|
|
|
|
| ||||||||||||||||||
|
Operating income (loss) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||||
|
Financial expenses, net |
| |||||||||||||||||||||||
|
Loss before taxes on income |
( |
) | ||||||||||||||||||||||
F - 52
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 20 -SEGMENT INFORMATION (CONT)
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 and lease |
Overhaul and coating of jet engine components |
Elimination of inter-company sales |
Consolidated | |||||||||||||||||||
|
Revenues | ||||||||||||||||||||||||
|
Sale of products and services |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||||
|
Intersegment revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Total revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
| ||||||||||||||||||||||||
|
Cost of revenues |
|
|
|
|
( |
) |
| |||||||||||||||||
|
Gross profit |
|
|
|
|
|
| ||||||||||||||||||
|
| ||||||||||||||||||||||||
|
Research and development |
|
|
|
( |
) |
|
| |||||||||||||||||
|
Selling and marketing |
|
|
|
|
|
| ||||||||||||||||||
|
General and administrative |
|
|
|
|
|
| ||||||||||||||||||
|
Operating income (loss) |
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
| ||||||||||
|
| ||||||||||||||||||||||||
|
Financial expenses, net |
| |||||||||||||||||||||||
|
Income before taxes on income |
| |||||||||||||||||||||||
F - 53
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 20 -SEGMENT INFORMATION (CONT)
c.The following financial information identifies the assets, depreciation and amortization, and capital expenditures to segments:
|
Year ended December 31, 2021 | ||||||||||||||||||||||||||||
|
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 and Lease |
Discontinued operation |
Overhaul and coating of jet engine components |
Amounts not allocated to segments |
Consolidated | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Total assets |
|
|
|
|
|
|
| |||||||||||||||||||||
|
Depreciation and amortization |
|
|
|
|
|
|
| |||||||||||||||||||||
|
Asset’s impairment |
|
- |
- |
|
- |
- |
1,800 | |||||||||||||||||||||
|
Expenditure for segment assets |
|
|
|
- |
|
|
| |||||||||||||||||||||
|
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 and Lease |
Discontinued operation |
Overhaul and coating of jet engine components |
Amounts not allocated to segments |
Consolidated | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Total assets |
|
|
|
|
|
|
| |||||||||||||||||||||
|
Depreciation and amortization |
|
|
|
|
|
|
| |||||||||||||||||||||
|
Expenditure for segment assets |
|
|
|
|
|
|
| |||||||||||||||||||||
F - 54
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 21 -ENTITY-WIDE DISCLOSURE
a.Total revenues - by geographical location were attributed according to customer residential country as follows:
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Total revenues |
Total revenues |
Total revenues | ||||||||||
|
| ||||||||||||
|
Sale of products | ||||||||||||
|
Israel |
$ |
|
$ |
|
$ |
| ||||||
|
United States |
|
|
| |||||||||
|
Other |
|
|
| |||||||||
|
$ |
|
$ |
|
$ |
| |||||||
|
Year ended December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
Total revenues |
Total revenues |
Total revenues | ||||||||||
|
| ||||||||||||
|
Sale of Services | ||||||||||||
|
Israel |
$ |
|
$ |
|
$ |
| ||||||
|
United States |
|
|
| |||||||||
|
Other |
|
|
| |||||||||
|
$ |
|
$ |
|
$ |
| |||||||
b.Total long-lived assets - by geographical location were as follows:
|
December 31, | ||||||||||||
|
2021 |
2020 |
2019 | ||||||||||
|
| ||||||||||||
|
Israel |
$ |
|
$ |
|
$ |
| ||||||
|
United States |
|
|
| |||||||||
|
Total |
$ |
|
$ |
|
$ |
| ||||||
c.Major Customers
The company has a single costumer which his annual sales in 2021 constitute
F - 55
|
TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES |
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
U.S. dollars in thousands |
NOTE 22 -SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION
|
Warranty provision |
Provision for current expected credit losses | |||||||
|
| ||||||||
|
Balance, as of December 31, 2018 |
$ |
|
$ |
| ||||
|
Additions |
|
| ||||||
|
Deductions |
( |
) |
( |
) | ||||
|
| ||||||||
|
Balance, as of December 31, 2019 |
$ |
|
$ |
| ||||
|
Additions |
|
| ||||||
|
Deductions |
( |
) |
( |
) | ||||
|
| ||||||||
|
Balance, as of December 31, 2020 |
$ |
|
$ |
| ||||
|
Additions |
|
| ||||||
|
Deductions |
( |
) |
( |
) | ||||
|
| ||||||||
|
Balance, as of December 31, 2021 |
$ |
|
$ |
| ||||
NOTE 23 -SUBSEQUENT EVENTS
Following the Company's announcement in 2021 regarding to the intention to transfer Company's activity from our leased facility in Gedera to a facility in Tulsa, Oklahoma and to a facility in Kiryat Gat as part of the company restructuring plan, in December 2021 the TAT and the landlord agreed on the settlement conditions which signed on January 10, 2022. TAT will vacate the property on March 31, 2022 and pay the rent fees until this termination date without any exit penalty or additional evacuation cost, see note 7.
F - 56