TAT Technologies to Invest in First Aviation Services Holdings, INC.
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Mon, 09 Nov 2009 13:17:12 GMT |
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TAT Technologies Ltd |
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GEDERA, Israel, November 9 /PRNewswire-FirstCall/ -- TAT Technologies
Ltd. (Nasdaq: TATTF) today announced that its Piedmont Aviation Component
Services subsidiary ("Piedmont") has entered into a Stock Purchase Agreement
with First Aviation Services Holdings, Inc. ("FAvS") pursuant to which
Piedmont will acquire 5,766,667 newly issued shares of Class B Common Stock
of FAvS representing 37% of the post-closing Common Equity of FAvS and
$750,000 of newly issued shares of Class A Preferred Stock of FAvS (with
quarterly dividends at the rate of 12% per annum if paid in cash and 15% per
annum if paid in additional shares of Series A Preferred Stock) in exchange
for Piedmont's wholly-owned subsidiary, Piedmont Propulsion Systems ("PPS"),
which is engaged in the business of providing maintenance, repair and
overhaul services for propellers for fixed wing aircraft as well as aircraft
parts distribution and trading.
FAvS is a leading supplier of products and services to the aerospace
industry worldwide, including the provisioning of aircraft parts and
components, and supply chain management services. FAvS also performs overhaul
and repair services for wheels, brakes and starter/generators, and builds
custom hose assemblies. FAvS has its headquarters in Westport, Connecticut.
The shares of FAvS Class B Common Stock to be acquired by Piedmont will
be non-voting. While Piedmont will have the option, at any time, to convert
such shares into shares of Class A Common Stock of FAvS (which have full
voting rights), Piedmont has granted to First Equity Group, Inc. ("FEG"), a
proxy to act for Piedmont in connection with all votes to be taken by the
stockholders of FAvS. Mr. Aaron Hollander, who is the Chief Executive Officer
of FAvS, controls FAvS through his ownership of FEG. The proxy is for a
period of five years (subject to earlier termination upon the occurrence of
certain events (including an IPO meeting certain criteria, a material default
by FAvS under its loan agreement or Mr. Hollander ceasing to serve as Chief
Executive Officer of FAvS). In addition, Piedmont and FEG have each agreed
not to sell any shares of stock of FAvS for a two-year period commencing on
the third anniversary of the closing unless the selling party obtains from
the purchaser a proxy (terminating on the fifth anniversary of the closing)
in favor of the non-selling party.
Mr. Hollander, FEG, and Piedmont have entered into a Stockholders
Agreement which, among other things, restricts each party's ability to
dispose of its shares in FAvS and provides for reciprocal rights of first
offer, tag along rights and drag along rights. The Stockholders Agreement
also provides that, so long as Piedmont owns at least 10% of the equity of
FAvS, it shall have the right to have two designees serve on the six member
Board of Directors of FAvS. Piedmont and FAvS have additionally entered into
a Rights Agreement pursuant to which, among other things, FAvS granted to
Piedmont pre-emptive rights, information and access rights and the right to
approve certain material corporate actions.
Consummation of the transaction is subject to customary closing
conditions, to the approval by the stockholders of FAvS of an amendment to
the Certificate of Incorporation of FAvS authorizing the new classes of
equity to be issued in connection with the transaction, and to the
consummation by FAvS of the acquisition of the business of Kelly Aerospace
Turbine Rotables ("KATR") which is a provider of overhaul and repair services
for landing gear, safety equipment, hydraulic and electrical components,
brakes and hose assemblies for corporate, regional and military aircraft.
Stockholders representing a majority of the shares of FAvS have agreed to
vote in favor of the amendment to the Certificate of Incorporation and,
accordingly, approval is assured.
Piedmont has agreed to guaranty $7 million of the debt being incurred by
FAvS in connection with the KATR acquisition by providing a letter of credit
to the lender for FAvS. The guaranty is for a period of up to two years and
reduces as such debt amortizes. Piedmont will be granted a second lien on the
assets of FAvS to secure the repayment obligations of FAvS in the event the
letter of credit is drawn upon. Piedmont will also enter into an
Intercreditor Agreement with the lender to FAvS which will subordinate
Piedmont's claims if the letter of credit is drawn upon to the obligations of
FAvS to the lender.
Pursuant to the Stock Purchase Agreement, Piedmont is making certain
representations and warranties to FAvS relating to the business of Piedmont
Propulsion Systems and FAvS is making certain representations and warranties
to Piedmont relating to the business of FAvS. All such representations and
warranties terminate at closing. However, following closing, Piedmont will be
required to indemnify FAvS against any claims or losses arising from
pre-closing environmental, tax or products liabilities of Piedmont and FAvS
will be required to indemnify Piedmont against any claims or losses arising
from pre-closing tax or products liabilities of FAvS.
FAvS and Piedmont will also enter into a one-year services agreement
pursuant to which Piedmont will provide certain finance, human resources, IT
and quality control services to FAvS and a multi-year services agreement
pursuant to which a subsidiary of Piedmont will provide certain plating,
machining and grinding services to FAvS. In addition, TAT will enter into a
non-exclusive marketing agreement with FAvS pursuant to which each party will
promote and market the other party's products and services.
Attached to this Press Release are Unaudited Pro Forma Condensed
Consolidated Financial Statements for FAvS which assume that FAvS acquired
PPS and KATR on July 1, 2008 and which reflect pro forma EBITDA of $3,991,000
for the twelve-month period ended June 30, 2009. The pro forma balance sheet
as of June 30, 2009 also reflects total assets of $70,366,000, debt of
$28,489,000 and stockholders' equity of $24,612,000. Based on discussions
with the managements of FAvS and KATR, and assuming that FAvS acquired PPS
and KATR on February 1, 2009, TAT anticipates that for the fiscal year of
FAvS ending January 31, 2010, FAvS will have pro forma EBITDA of between $6
million and $7 million (without giving effect to the costs of the
transactions described above).
Dr Shmuel Fledel, President and CEO, TAT Technologies stated: "We are
excited to announce the FAvS transaction as a milestone in our strategy to
grow the Company and enhance shareholders' value. This transaction positions
the group as a leading MRO "One- Stop -Shop" for ground and aviation markets
and enables us to focus on our core businesses: landing gear, APU, heat
exchange and regional markets.
"We believe that FAvS' product and service platform to the aerospace
industry worldwide combined with our MRO business will enable TAT to
significantly grow its business as well as expand its global outreach."
Closing of the transaction is anticipated prior to the end of year end.
About the Company
TAT Technologies Ltd. provides a variety of services and products to the
commercial and military aerospace and ground defense industries through its
Gedera facility in Israel, as well as through its subsidiaries, Bental
Industries Ltd., in Israel and Limco - Piedmont, Inc., in the U.S.
After closing the transaction, TAT will operate under three operational
segments: (i) OEM of Heat Transfer products (ii) OEM of Electric Motion
Systems; and (iii) MRO services, each with the following characteristics.
TAT's activities in the area of OEM of Heat Transfer products primarily
relate to the (i) design, development, manufacture and sale of a broad range
of heat transfer components (such as heat exchangers, pre-coolers and
oil/fuel hydraulic coolers) used in mechanical and electronic systems
on-board commercial, military and business aircraft; and (ii) manufacture and
sale of environmental control and cooling systems and (iii) a variety of
other electronic and mechanical aircraft accessories and systems such as
pumps, valves, power systems and turbines.
TAT's activities in the area of OEM of Electric Motion Systems primarily
relate to the design, development, manufacture and sale of a broad range of
electrical motor applications for airborne and ground systems. TAT activities
in this segment commenced with the acquisition of Bental in August 2008 and
accordingly, the results in this segment for fiscal year 2008 are not
compared with the previous years.
TAT's MRO services include the remanufacture, overhaul and repair of Heat
Transfer equipment and other aircraft components, APUs, and Landing Gear.
TAT's subsidiaries Limco Airepair Inc. ("Limco") and Piedmont Aviation
Component Services Inc. ("Piedmont") operate FAA certified repair stations,
which provide aircraft component MRO services for airlines, air cargo
carriers, maintenance service centers and the military.
Safe Harbor for Forward-Looking Statements
This press release contains forward-looking statements which include,
without limitation, statements regarding possible or assumed future operation
results, synergies, customer benefits, growth opportunities, financial
improvements, expected expense savings and other benefits anticipated from
the merger. These statements are hereby identified as "forward-looking
statements" for purposes of the safe harbor provided by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
involve risks and uncertainties that could cause our results to differ
materially from management's current expectations. Actual results and
performance can also be influenced by other risks that we face in running our
operations including, but are not limited to, general business conditions in
the airline industry, changes in demand for our services and products, the
timing and amount or cancellation of orders, the price and continuity of
supply of component parts used in our operations, and other risks detailed
from time to time in the company's filings with the Securities Exchange
Commission, including its registration statement on form F-4, its annual
report on form 20-F and its periodic reports on form 6-K. These documents
contain and identify other important factors that could cause actual results
to differ materially from those contained in our projections or
forward-looking statements. Stockholders and other readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only
as of the date on which they are made. We undertake no obligation to update
publicly or revise any forward-looking statement.
TAT's executive offices are located in the Re'em Industrial Park, Neta
Boulevard, Bnei Ayish, Gedera 70750, Israel, and TAT's telephone number is
972-8-862-8500.
For more information of TAT Technologies, please visit our web-site:
http://www.tat.co.il
Unaudited Pro Forma Condensed Consolidated Financial Data
The unaudited pro forma condensed consolidated financial data set forth
below are based on historical consolidated financial statements of FAvS, the
historical financial statements of Aerospace Turbine Rotables, Inc. ("AeTR"),
the historical financial statements of Piedmont Propulsion Systems, LLC
("PPS"), and adjustments described in the accompanying notes to the unaudited
pro forma financial data. The unaudited pro forma condensed financial data is
presented to give effect to FAvS's acquisitions of AeTR and PPS
(collectively, the "acquisition").
The unaudited pro forma condensed balance sheet combines the historical
consolidated balance sheet of FAvS as of July 31, 2009, and the historical
balance sheets of AeTR and PPS as of June 30, 2009, giving effect to the
acquisition as if it occurred on July 31, 2009. The unaudited pro forma
condensed consolidated statements of operations combine the historical
consolidated statements of operations of FAvS for the twelve months ended
July 31, 2009 with the historical financial statements of AeTR and PPS for
the twelve months ended June 30, 2009, giving effect to the acquisition as if
it occurred at the beginning of the twelve month period ended July 31, 2009.
The pro forma condensed consolidated statements of operations reflect
only the pro forma adjustments expected to have a continuing impact on the
combined results beyond 12 months from the consummation of the acquisition,
and do not reflect any changes in operations that may occur.
The unaudited pro forma condensed consolidated financial data are for
illustrative purposes only, are hypothetical in nature and do not purport to
represent what our results of operations, balance sheet or other financial
information would have been if the acquisition had occurred as of the dates
indicated or what such results will be for any future periods. The unaudited
pro forma adjustments are based upon available information and certain
assumptions that we believe are reasonable, including an allocation of the
purchase price based on an estimate of fair value, and exclude certain
non-recurring charges as disclosed. These estimates are preliminary and are
based on information currently available and could change significantly.
The successor will acquire substantially all of the assets and certain
liabilities of PPS and AeTR. The acquisitions will be accounted for under the
purchase method of accounting with the assets and liabilities acquired
recorded at their fair values at the date of acquisition. The results of
operations of the acquired business will be included in the Condensed
Consolidated Statements of Operations beginning as of the effective date of
the acquisition. The purchase price will be allocated to the assets and
liabilities acquired. The excess value of the purchase price over the fair
value of the assets and liabilities acquired will be allocated to goodwill
and other intangible assets. FAvS will finalize the purchase accounting after
acquisitions and expects to do so by the end of the first quarter of the next
fiscal year. The pro forma information reflects the fair values as currently
estimated based on preliminary information available.
First Aviations Services Inc. and Subsidiaries Unaudited Pro Forma
Consensed Consolidated Balance Sheet (amounts in thousands)
July 31, June 30, June 30,
2009 2009 2009
FAvS PPS AeRT Pro Forma
------- ------- ------- ----------------------
Adjustments Total
------- -------
Assets
Current assets
Cash and cash
equivalents.... $ 1,827 $ 10 $ (10) f $ 1,827
Trade
receivables-net...13,214 $ 3,454 906 (1,100) i 16,474
Inventories, net...33,360 2,767 2,136 (1,680) i 36,583
Prepaid expenses
and other.... 1,369 103 482 1,954
------------------------------------------- -------
Total current
assets............49,770 6,324 3,534 (2,790) 56,838
Property and
equipment, net... 2,677 131 150 2,958
Goodwill........... 1,311 1,222 (1,222) e
(1,311) j
4,208 g
6,362 l 10,570
Intangible assets............ 1,147 (1,147) k
------------------------------------------- -------
Total assets.....$ 52,447 $ 8,913 $ 4,906 $ 4,100 $ 70,366
=========================================== =======
Liabilities and
Stockholders'
Equity
Current liabilities
Accounts
payable... $ 14,188 $ 818 $ 516 $ (44) b $ 15,478
Accrued
compensation........ 160 150 231 (231) b 310
Other accrued
liabilities....... 1,305 1,071 (1,041) b 1,477
449 k
(307) m
Revolving line
of credit.........21,025 (3,028) 3,028 c 28,025
7,000 h
Notes payable -
current maturities...464 26 (26) c 464
------------------------------------------- -------
Total current
liabilities.......37,142 968 (1,184) 8,828 45,754
Related party
sub-debt...........2,000 335 (335) c
(2,000) m
Long-term debt.............. 12 (12) c
Intercompany debt....................... 796 (796) c
Other non-current
liabilities.......... 146 (146) d
------------------------------------------- -------
Total liabilities. 39,142 968 105 5,539 45,754
Stockholders' equity
Common stock......... 91 91
Preferred stock...................... 1,350 o,m 1,350
Net assets................ 7,945 (7,945) n
Additional paid
in capital....... 39,028 55 (55) a 48,985
1,707 m
8,250 o
Retained earnings
(deficit)...... (17,112) 4,746 (4,746) a (17,112)
Accumulated other
comprehensive
income........ 348 348
------------------------------------------- -------
22,355 7,945 4,801 (1,439) 33,662
Less: treasury
stock............ (9,050) (9,050)
------------------------------------------- -------
Total stockholders'
equity........ 13,305 7,945 4,801 (1,439) 24,612
Total liabilities
and stockholders'
equity......... $ 52,447 $ 8,913 $ 4,906 $ 4,100 $ 70,366
=========================================== =======
First Aviation Services Inc. and Subsidiaries Unaudited Pro Forma
Condensed Statement of Operation with EBIT and EBITDA presented (amount in
thousands)
Twelve months ended
-------------------------
July 31, June 30, June 30,
2009 2009 2009 Pro Forma
FavS PPS AeRT ----------------------------
------- ------- ------- Adjustments Total
----------- ---------
Revenue..... $ 105,782 $ 10,013 $ 9,486 $ 125,281
COGS.......... 87,236 7,531 6,798 101,565
----------------------------- ----------
Gross profit
excluding
freight....... 18,546 2,482 2,688 23,716
Net freight
expense......... 1,090 1,090
----------------------------- ----------
Gross profit.... 17,456 2,482 2,688 22,626
Selling, general and
administrative
expenses.... 16,667 474 1,311 $ (125) q 18,327
Corporate
expense. 1,581 329 600 (765) p 1,745
----------------------------- ---------- ----------
Income (loss)
from operations.. (792) 1,679 777 890 2,554
320 t
Interest
expense, net.... 1,187 58 (58) s 1,507
Other
income (expense)... 10 3 13
----------------------------- ---------- ----------
Income (loss)
before taxes.. (1,969) 1,679 722 628 1,060
360 u
Income taxes (w).... 672 290 (962) r 360
----------------------------- ---------- ----------
Net
income (loss). $(1,969) $ 1,007 $ 432 $ 1,230 $ 700
============================= ========== ==========
EBIT....... $ (782) $ 1,679 $ 780 $ 2,567
EBITDA............ 468 1,810 852 3,991
See Notes to Unaudited Pro Forma Condensed Financial Statements
First Aviation Services Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Financial Statements
1. The acquisitions of AeTR and PPS will be accounted for as a business
combination. FAvS will finance the acquisitions with a $7.0 million borrowing
under its existing $32.0 million revolving credit facility and issuance of
its common and preferred stock currently valued at $9.0 million. The purchase
price is subject to a working capital adjustment. Under the acquisition
method of accounting, the assets and liabilities of AeTR and PPS will be
recorded at their fair values as of the acquisition date.
The purchase price is determined as follows (amounts in thousands):
Cash consideration paid $ 7,000
Issuance of FAVS stock 9,000
--------
Purchase price $ 16,000
========
For purposes of the pro forma presentation, the purchase price has been
allocated on a preliminary basis to the acquired tangible and intangible
assets and liabilities based on their estimated fair values as of July 31,
2009 as follows (amounts in thousands);
Current assets $ 7,068
Property and equipment 281
Current liabilities (1,919)
Goodwill 10,570
--------
Net purchase price $ 16,000
========
Subsequent to acquisition, goodwill will be adjusted as other intangible
assets are valued at fair value. Intangible assets with indefinite lives
(once determined), including goodwill, will not be amortized.
The purchase price allocation above, including amounts allocated to
goodwill, is presented for pro forma information only. The actual purchase
price allocation will be based on the fair values of the assets acquired and
liabilities assumed as of the respective acquisition dates, which may be
materially different than the estimated fair values at July 31, 2009.
2. The following describes the pro forma adjustments related to the
acquisitions made in the accompanying unaudited pro forma condensed
consolidated balance sheet as of July 31, 2009 and the unaudited pro forma
condensed consolidated statement of operations for the twelve months ended
July 31, 2009.
a To eliminate AeTR historical stockholders' equity
b To eliminate non-acquired current liabilities of AeTR
c To eliminate non-acquired debt of AeTR
d To eliminate deferred tax liability of AeTR
e To eliminate pre-acquisition goodwill on AeTR
f To eliminate non-acquired assets of AeTR
g To record goodwill on AeTR acquisition
h To record debt for AeTR acquisition-interest at prime rate (as defined)
plus 4.5%
i To adjust acquired assets to estimated fair value
j To eliminate pre-acquisition goodwill and intangibles assets on PPS
k To record additional current liabilities for PPS
l To record goodwill on PPS acquisition
m Convert FAVS sub-debt to equity
n To eliminate net assets (equity) on PPS
o To record estimated value of FAvS common and preferred stock to be
issued
p Eliminate corporate allocation
q Eliminate estimated non-ongoing SG&A expenses on AeTR
r Eliminate Income tax on AeTR
s Eliminate historical interest on AeTR
t Estimated additional interest on additional debt
u Estimated income taxes at the statutory rate
v Transaction expenses associated with the acquisitions are not presented
in the accompanying Pro Forma Statement of Operations
w The acquired companies were part of a consolidated group and do not pay
income tax as individual companies. Income taxes presented represent
income tax at an estimated tax rate as if they reported separately
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
TAT TECHNOLOGIES LTD.
(Registrant)
By: /s/Yaron Shalem
-------------------
Yaron Shalem
Chief Financial Officer
Yaron Shalem - CFO
TAT Technologies Ltd.
Tel: +972-8-862-8500
yarons@tat.co.il
SOURCE TAT Technologies Ltd
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