The Transaction Positions TAT Technologies as a Leading MRO
"One-Stop-Shop" for General Aviation 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 DATASOURCE:
TAT Technologies Ltd CONTACT: Yaron Shalem - CFO, TAT Technologies
Ltd., Tel: +972-8-862-8500,
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