20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 20-F

o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934  

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _____________

o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ………………..

Commission file number: 0-16050

TAT TECHNOLOGIES LTD.

(Exact name of Registrant as specified in its charter

and translation of Registrant’s name into English)

Israel

(Jurisdiction of incorporation or organization)

P.O. Box 80, Gedera 70750, Israel

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Ordinary Shares, NIS 0.90 Par Value	NASDAQ Global Market

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…………… 8,805,236

(as of December 31, 2013)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes oNo x

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 oNo x

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.

Yes xNo o

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):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP x International Financial Reporting Standards as issued by the International Accounting Standards Board o Other o

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 o Item 18 o

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 oNo x

TABLE OF CONTENTS

Page

INTRODUCTION		1
PART I		4
Item 1.	Identity of Directors, Senior Management and Advisers	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
	A. Selected Financial Data	4
	B.  Capitalization and Indebtedness	6
	C.  Reasons for the Offer and Use of Proceeds	6
	D.  Risk Factors	7
Item 4.	Information on the Company	22
	A.  Business Overview of Gedera, Bental, Limco and Piedmont	29
	B.  Government Regulations	57
	C.  Property, Plants and Equipment	59
Item 4A.	Unresolved Staff Comments	60
Item 5	Operating and Financial Review and Prospects	60
	A.  Research and Development, Patents and Licenses	98
	B.  Trend Information	98
	C.  Off-Balance Sheet Arrangements	98
	D.  Tabular Disclosure of Contractual Obligations	99
Item 6.	Directors, Senior Management and Employees	100
	A.  Directors and Senior Management	100
	B.  Board Practices	104
	C.  Employees	120
	D.  Share Ownership	121
Item 7.	Major Shareholders and Related Party Transactions	121
	A.  Major Shareholders	121
	B.  Related Party Transactions	124
	C.  Interests of Experts and Counsel	127
Item 8.	Financial Information	128
	A.  Consolidated Statements and Other Financial Information	128
	B.  Significant Changes	128
Item 9.	The Offer and Listing	129
	A.  Offer and Listing Details	129
	B.  Plan of Distribution	130
	C.  Markets	131
	D.  Selling Shareholders	131
	E.  Dilution	131
	F.  Expense of the Issue	131
Item 10.	Additional Information	131
	A.  Share Capital	131
	B.  Memorandum and Articles of Association	131
	C.  Material Contracts	136
	D.  Exchange Controls	140
	E.  Taxation	141
	F.  Dividends and Paying Agents	154
	G.  Statement by Experts	155
	H.  Documents on Display	155
	I.  Subsidiary Information	156

Item 11.	Quantitative and Qualitative Disclosures about Market Risk	156
Item 12.	Description of Securities Other than Equity Securities	156
PART II		157
Item 13.	Defaults, Dividend Arrearages and Delinquencies	157
Item 14.	Material Modifications to the Rights of Security Holders	157
Item 15.	Controls and Procedures	157
Item 15T.	Controls and Procedures	157
Item 16.	[Reserved]	159
Item 16A.	Audit Committee Financial Expert	159
Item 16B.	Code of Ethics	159
Item 16C.	Principal Accountants Fees and Services	159
Item 16D.	Exemptions from the Listing Standards for Audit Committee	160
Item 16E.	Purchase of Equity Securities By Issuer and Affiliated Purchases	160
Item 16F.	Change in Registrant’s Certifying Accountant.	160
Item 16G.	Corporate Governance.	160
PART III		160
Item 17.	Financial Statements	162
Item 18.	Financial Statements	162
Item 19.	Exhibits	162

INTRODUCTION

TAT Technologies Ltd. (the Company or TAT) is a provider of a variety of services and products to the commercial and military aerospace and ground defense industries through our Gedera facility in Israel or Gedera, as well as through our subsidiaries, Bental Industries Ltd., or Bental, in Israel and Limco-Piedmont Inc., or Limco-Piedmont in the U.S. Limco-Piedmont operates through Limco Airepair Inc., or Limco and Piedmont Aviation Component Services LLC or Piedmont.

As of December 31, 2013, we operated under four segments:  (i) Original Equipment Manufacturing or “OEM” of Heat Management Solutions through our Gedera facility; (ii) OEM of Electric Motion Systems through our Bental subsidiary; (iii) Heat Transfer Services and Products through our Limco subsidiary; and (iv) Maintenance, Repair and Overhaul or “MRO” services for Aviation Components through our Piedmont subsidiary.

Through our Gedera facility, we are an OEM of a broad range of heat transfer components, air conditioning systems and other cooling systems used in mechanical and electronic systems on board military and commercial aircraft as well as on ground systems. The Gedera facility is also an OEM of a wide range of aviation accessories and provides limited MRO services for military and commercial customers, mainly for aviation accessories as well as for certain heat transfer components.

Through our Bental subsidiary, we are an OEM of a broad range of electric motion systems. Bental is engaged in the design, manufacture and sale of motors, generators, and other electro-mechanical motion systems primarily for the defense and aerospace markets (with respect to the sale of our entire interest in Bental see further below).

Through our Limco subsidiary, we provide Heat Transfer services and products to the aerospace industry. Limco is an FAA (Federal Aviation Administration) certified repair station  and provides aircraft MRO services and products for airlines, air cargo carriers, maintenance service centers and the military, primarily for heat transfer components. In addition to Limco’s MRO services, Limco is an OEM of heat transfer equipment for airplane manufacturers and other related products.

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Through our Piedmont subsidiary, we provide MRO services to the aerospace industry. Piedmont’s FAA certified repair station provides MRO services for airlines, air cargo carriers, maintenance service centers and to a lesser extent the military, primarily for landing gear and auxiliary power units (APU).

In addition, TAT, through its Piedmont subsidiary, holds approximately 29.36% of the equity securities ofFirst Aviation Services Inc., or FAvS (See Item 4 – “Information on the Company; History and development of TAT”). FAvS, together with its subsidiaries, offers certain MRO services through two FAA authorized facilities.

Our Ordinary shares are publicly traded on the NASDAQ Global Market under the symbol “TATT” (from year 1987) and on the Tel Aviv Stock Exchange under the symbol “TAT Tech” (from year 2005).  As used in this annual report, the terms “TAT”, “we”, “us” and “our” mean TAT Technologies Ltd. and its subsidiaries, unless otherwise indicated.

Our consolidated financial statements appearing in this annual report are prepared in U.S. dollars and in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.  All references in this annual report to “dollars” or “$” are to U.S. dollars and all references in this annual report to “NIS” are to New Israeli Shekels.

Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms.  If we filed any of these documents as an exhibit to this annual report or to any previous filing with the Securities and Exchange Commission, you may read the document itself for a complete recitation of its terms.

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Except for the historical information contained in this annual report, the statements contained in this annual report are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations.  Such forward-looking statements reflect our current view with respect to future events and financial results.  Statements which use the terms “believe”, “expect”, “plan”, “intend”, “estimate”, and similar expressions are intended to identify forward-looking statements.  We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof.  We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in Item 3D. “Key Information - Risk Factors”.

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PART I

Item 1.     Identity of Directors, Senior Management and Advisers

                 Not applicable.

Item 2.    Offer Statistics and Expected Timetable

Not applicable.

Item 3.    Key Information

A.              Selected Financial Data

TAT’s selected historical information is derived from the audited consolidated financial statements of TAT as of December 31, 2013 and 2012 and for each of its fiscal years ended December 31, 2013, 2012 and 2011, which are included elsewhere in this annual statement, and have been prepared in accordance with U.S. GAAP. The selected financial data as of December 31, 2010 and 2009 and for the years ended December 31, 2010 and December 31, 2009 is derived from audited consolidated financial statements of TAT not included in the annual statements, which have been prepared in accordance with U.S. GAAP.

The selected consolidated financial data set forth below should be read in conjunction with and are qualified by reference to Item 5, “Operating and Financial Review and Prospects”, and our consolidated financial statements and notes thereto included elsewhere in this annual report.

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Income Statement Data:

	Year Ended December 31,
	2013			2012			2011			2010			2009
	(in thousands, except share and per share data)
Revenues:
Products	$	34,364		$	36,263		$	36,837		$	25,908		$	23,430
Services		45,187			41,652			36,902			40,801			48,340
Total revenues		79,551			77,915			73,739			66,709			71,770
Cost of revenues:
Products		24,892			25,177			24,914			21,859			15,095
Services		35,987			33,362			31,794			29,136			43,780
Write down of inventory and impairment charges of  long lived assets		-			-			5,465			3,500			-
Total cost of revenues		60,879			58,539			62,173			54,495			58,875
Gross profit		18,672			19,376			11,566			12,214			12,895
Operating expenses:
Research and development, net		713			995			455			274			408
Selling and marketing		3,150			2,899			2,819			2,948			3,089
General and administrative		9,512			10,110			9,450			11,262			13,686
Impairment of goodwill and intangible assets		-			-			-			4,704			-
Other income		(20	)		(13	)		(190	)		-			-
Gain from sale of the propellers & parts businesses		-			-			-			-			(4,400	)
Operating income (loss) from continuing operations		5,317			5,385			(968	)		(6,974	)		112
Financial income (expenses), net		(50	)		(106	)		(420	)		(33	)		41
Other expenses, net		-			-			-			(200	)		-
Gain from dilution of interests in affiliated company		-			-			240			-			-
Income (loss) from continuing operations before taxes on income		5,267			5,267			(1,148	)		(7,207	)		153
Taxes on income (tax benefit)		1,041			2,090			(335	)		(4,262	)		486
Net income (loss) from continuing operations after taxes on income		4,226			3,189			(813	)		(2,945	)		(333	)
Share in results of affiliated company and impairment of share in affiliated company		1,025			(3,756	)		331			(4,510	)		(32	)
Net income (loss) from continuing operations		5,251			(567	)		(482	)		(7,455	)		(365	)
Net income (loss) from discontinued operations, net of tax		(2,429	)		(1,147	)		(548	)		169			2,118
Net income (loss) attributable to TAT Technologies’ shareholders	$	2,822		$	(1,714	)	$	(1,030	)	$	(7,286	)	$	1,753
Basic and diluted net income (loss)  per share
Net income (loss) from continuing operations per share attributable to controlling interest		0.60			(0.06	)		(0.05	)		(0.84	)		(0.05	)
Discontinued operations attributable to controlling interest		(0.28	)		(0.13	)		(0.07	)		0.02			0.27
	$	0.32		$	(0.19	)	$	(0.12	)	$	(0.82	)	$	0.22
Weighted average number of shares used in computing
Basic net income (loss) per share		8,799,237			8,808,075			8,815,003			8,815,003			7,893,639
Diluted net income (loss) per share		8,808,920			8,808,075			8,815,003			8,815,003			7,893,639
Cash dividend per share	$	-		$	0.28		$	-		$	-		$	0.85

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Balance Sheet Data:

	As of December 31,
	2013		2012		2011		2010		2009
	(in thousands)
Working capital	$	73,834	$	71,430	$	70,665	$	70,462	$	76,748
Total assets		108,880		108,942		115,318		121,427		124,491
Long-term liabilities, excluding current maturities		4,256		6,421		9,333		5,294		13,556
Shareholders’ equity	$	85,569	$	82,233	$	86,370	$	88,059	$	94,866

B.              Capitalization and Indebtedness

Not applicable.

C.              Reasons for the Offer and Use of Proceeds

Not applicable.

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D.           Risk Factors

Investing in our Ordinary shares involves certain risks and uncertainties. You should carefully consider the risks and uncertainties described below before investing in our Ordinary shares. Our business, prospects, financial condition and results of operations could be adversely affected due to any of the following risks. In that case, the value of our Ordinary shares could decline, and you could lose all or part of your investment.

Risks Related to Our Business and Our Industry

The aerospace industry is subject to significant government regulation and oversight, and TAT and its subsidiaries may incur significant additional costs to comply with these regulations.

The aerospace industry is highly regulated in the United States and in other countries. TAT and its subsidiaries must be certified or accepted by the FAA, the United States Department of Defense, the European Aviation Safety Agency, or EASA, and similar agencies in foreign countries and by individual original equipment manufacturers, or OEMs, in order to manufacture, sell and service parts used in aircraft. If any of the material certifications, authorizations or approvals of TAT or its subsidiaries are revoked or suspended, then the operations of TAT or its subsidiaries, as the case may be, will be significantly curtailed and TAT and its subsidiaries could be subjected to significant fines and penalties. In the future, new and more demanding government regulations may be adopted or industry oversight may be increased. TAT and its subsidiaries may have to incur significant additional costs to achieve compliance with new regulations or to reacquire a revoked or suspended license or approval, which could materially reduce profitability.

TAT competes with a number of established companies in all aspects of TAT’s business, many of which have significantly greater resources or capabilities than TAT.

For the OEM of heat management solutions, TAT’s major competitors are other OEMs who manufacture heat transfer components, including manufacturers based in the U.S. such as the Hughes-Treitler division of Ametek Inc., Lytron Inc., Niagara Thermal, Hamilton Sundstrand, Honeywell International, Liebherr-Aerospace Toulouse S.A., Stewart Werner South Wind Corp., United Aircraft Products and Triumph Thermal Systems, manufacturers based in Europe such as I.M.I. Marston Ltd., Meggitt (including Serck Aviation) and manufacturers based in Asia such as Sumitomo Precision Products from Japan. Many of TAT’s competitors are far larger, have substantially greater resources, including technical, financial, research and development, marketing and distribution capabilities than TAT, and enjoy greater market recognition. These competitors may be able to achieve greater economies of scale and may be less vulnerable to price competition than TAT.  TAT may not be able to offer its products as part of integrated systems to the same extent as its competitors or successfully develop or introduce new products that are more cost effective or offer better performance than those of its competitors. Failure to do so could adversely affect TAT’s business, financial condition and results of operations.

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For the OEM of electric motion systems, TAT’s major competitors are mainly large companies that provide standard products and companies that provide special customized solutions. As the providers of the systems in which TAT’s products are integrated usually tend to prefer local manufacturers for the purchase of the components, penetrating markets outside of Israel requires either high levels of product innovation or lower prices compared to the prices offered by such competitors or a local marketing and engineering presence in these countries.

For the Heat Transfer Services and Products, TAT’s major competitors are the service divisions of OEMs, the in-house maintenance services of a number of commercial airlines and other independent service providers, including Triumph Accessories (Triumph Corporation), LORI Heat Transfer Center of Honeywell (Tulsa, Oklahoma), SECAN-Honeywell (France),Drake Air – Ametek (Tulsa, Oklahoma), American Cooler Service, Hamilton Malaysia, Lufthansa Technik, Elite.

For the MRO services for Aviation Components, TAT’s major competitors are the service divisions of OEMs, the in-house maintenance services of a number of commercial airlines and other independent service providers, including Standard Aero Group Inc., Aerotech International Inc., Honeywell International, AAR Corp., Messier- Bugatti-Dowty, Hawker Pacific and APRO.

Competition in the MRO market is based on price, quality, engineered solutions, ability to provide a broad range of services, and the ability to perform repairs and overhauls rapidly. A number of our competitors have inherent competitive advantages. For example, we compete with the service divisions of large OEMs which are able to derive significant brand recognition from their OEM manufacturing activities. We also compete with the in-house service divisions of large commercial airlines and there is a strong incentive for an airline to fully-utilize the services of its maintenance employees and facilities.

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Further, TAT’s competitors may have additional competitive advantages, such as:

·       The ability to adapt more quickly to changes in customer requirements and industry conditions or trends;

·       Greater access to capital;

·       Stronger relationships with customers and suppliers;

·       Greater name recognition; and

·       Access to superior technology and marketing resources.

If TAT is unable to overcome these competitive disadvantages, then TAT’s business, financial condition and results of operations would be adversely affected.

TAT derives a material part of its revenues from several major customers. If TAT loses any of these customers or they reduce the amount of business they do with TAT, TAT’s revenues may be seriously affected.

Five customers accounted for approximately 22.2%, 23.1% and 22.2% of TAT’s revenues for the years ended December 31, 2013, 2012 and 2011, respectively. TAT’s major customers may not maintain the same volume of business with TAT in the future. If TAT loses any of these customers or they reduce the amount of business they do with TAT, TAT’s revenues may be seriously affected.

A part of the revenues of TAT and its subsidiaries are from contracts with the U.S. and Israeli governments and are subject to special risks. A loss of all, or a major portion, of the revenues of TAT or any of its subsidiaries from government contracts could have a material adverse effect on TAT’s operations.

A portion of the revenues of TAT and its subsidiaries are from contracts with the U.S. and Israeli governments. Sales to the U.S. and Israeli governments accounted for approximately 4.2%, 4.6% and 6.6% of TAT’s revenues on a consolidated basis for the years ended December 31, 2013, 2012 and 2011, respectively.

Business with the U.S. and Israeli governments, as well as with the governments of other countries, is subject to risks which are not as relevant in business with private parties. These risks include the ability of the governmental authorities to unilaterally:

· 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;

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·       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 the products of TAT and its subsidiaries.

A decision by a governmental authority to take any or all of the actions listed above could materially reduce the sales and profitability of TAT and its subsidiaries. Most of the U.S. Government contracts of TAT and its subsidiaries can be terminated by the U.S. Government either for its convenience or if TAT or any of its subsidiaries defaults by failing to perform under the contract. Termination for convenience provisions generally provide only for the recovery of costs incurred or committed, settlement expenses and profit on the work completed by TAT and its subsidiaries prior to termination.

Declines in military/defense budgets may result in reduced demand for the products and manufacturing services of TAT and its subsidiaries. Any decline could result in reduction in the business revenues of TAT and its subsidiaries and adversely affect their business, results of operations and financial condition.

If TAT does not receive the governmental approvals necessary for the export of its products, TAT’s revenues may decrease. Similarly if TAT’s suppliers and partners do not receive their government approvals necessary to export their products or designs to TAT, TAT’s revenues may decrease.

Under Israeli law, the export of certain of the products and know-how of TAT is subject to approval by the Israeli Ministry of Defense. To initiate sales proposals with regard to exports of the products and know-how of TAT and to export such products or know-how, TAT must obtain permits from the Ministry of Defense. TAT may not be able to receive in a timely manner, or at all, all the required permits for which it may apply in the future.

Similarly, under foreign laws the export of certain military products, technical designs and spare parts require the prior approval of, or export license from, such foreign governments. In order to maintain the third party production, certain co-development activities and procurements required for the performance of certain contracts, TAT must receive detailed technical designs, products or product parts’ samples from its strategic partners or suppliers. TAT may not be able to receive all the required permits and/or licenses in a timely manner, or at all. Consequently, TAT’s revenues may decrease.

10

TAT depends on a limited number of suppliers of components for certain of its products and if TAT or any of its subsidiaries is unable to obtain these components when needed, they would experience delays in manufacturing their products and TAT’s financial results could be adversely affected.

TAT relies on a limited number of key suppliers for parts for certain of its OEM and MRO services. Certain of these suppliers are currently the sole source of one or more components upon which TAT is dependent. Suppliers of some of these components require TAT to place orders with significant lead-time to assure supply in accordance with TAT’s requirements. If TAT were to engage in a commercial dispute with or be unable to obtain adequate supplies of parts from these suppliers at commercially reasonable prices or required lead time, TAT’s operations could be interrupted. Increased costs associated with supplied materials or components could increase TAT’s costs and reduce TAT’s profitability if TAT is unable to pass these cost increases on to its customers.

TAT may face increased costs and a reduced supply of raw materials. TAT may not be able to recoup future increases in the cost of raw materials or in electric power costs for its operations through price increases for its products.

In recent years, the cost of raw materials and components used by TAT has fluctuated significantly due to market and industry conditions. The cost of electric power used in TAT’s operations has also fluctuated significantly in the last several years. TAT may not be able to recoup future increases in the cost of raw materials and components or electric power costs through price increases for its products.

TAT may face significant risks in the management of its inventory, and failure to effectively manage its inventory levels may result in supply imbalances that could harm its business

In connection with our OEM and MRO operations, we maintain an inventory of exchangeable units of heat exchangers, APUs landing gears and other spare parts related to our products in various locations, including with third party logistics providers. Due to the long-lead time of our suppliers and manufacturing cycles, we need to make forecasts of demand and commit significant resources towards these inventories. As such, we are subject to significant risks in managing the inventory needs of our business during the year, including estimates of the appropriate demand across our models. Should actual market conditions differ from our estimates, our future results of operations could be materially adversely affected. In the future, we may be required to record write-downs of finished products and materials on-hand as a result of future changes in our sales forecasts.

11

TAT faces special risks from international sales operations which may have a material adverse effect on TAT’s business, operating results and financial condition.

In the years ended December 31, 2013, 2012 and 2011, approximately 91.4%, 87.7% and 88.3% of TAT’s sales, respectively, resulted from TAT’s international operations (out of Israel). This source of revenue is subject to various risks, including:

·       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.

Accordingly, TAT and its subsidiaries may encounter significant difficulties in connection with the sale of its products in international markets.

TAT may engage in future acquisitions that could dilute TAT’s shareholders’ equity and harm TAT’s business, results of operations and financial condition.

TAT has pursued, and will continue to pursue, growth opportunities through internal development and acquisition of complementary businesses, products and technologies. TAT is unable to predict whether or when any prospective acquisition will be completed. The process of integrating an acquired business may be prolonged due to unforeseen difficulties and may require a disproportionate amount of TAT’s resources and management’s attention. TAT may not be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into its operations, or expand into new markets. Further, once integrated, acquisitions may not achieve comparable levels of revenues, profitability or productivity as TAT’s existing business or otherwise perform as expected. The occurrence of any of these events could harm TAT’s business, financial condition or results of operations. Future acquisitions may require substantial capital resources, which may require TAT to seek additional debt or equity financing.

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Future acquisitions by TAT could result in the following, any of which could materially harm TAT’s results of operations or the price of TAT’s Ordinary shares:

·       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 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.

Rapid technological changes may adversely affect the market acceptance of the products of TAT.

The aerospace and defense markets in which TAT competes are subject to technological changes, introduction of new products, change in customer demands and evolving industry standards. The future success of TAT will depend upon its ability to keep pace with technological developments and to timely address the increasingly sophisticated needs of its customers by supporting existing and new technologies and by developing and introducing enhancements to its current products and new products. TAT may not be able to successfully develop and market enhancements to its products that will respond to technological change, evolving industry standards or customer requirements. TAT may experience difficulties that could delay or prevent the successful development, introduction and sale of such enhancements; and such enhancements may not meet the requirements of the market or achieve any significant degrees of market acceptance. If release dates of any new products or enhancements of TAT are delayed, or if when released, they fail to achieve market acceptance, TAT’s business, operating results and financial condition would be materially adversely affected.

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TAT has fixed-price contracts with some of its customers and TAT bears the risk of costs in excess of its estimates. In addition, TAT may not be able to pass on increased costs to its customers.

TAT has entered into multi-year, fixed-price contracts with some of its MRO and OEM customers. Pursuant to these contracts, TAT realizes all the benefits or costs resulting from any increases or decreases in the cost of providing services to these customers. Several of TAT’s contracts do not permit TAT to recover for increases in raw material prices, taxes or labor costs and other contracts may permit, to a limited extent, periodic price adjustments. Any increase in these costs could increase the cost of operating the business of TAT and reduce its profitability. Factors such as inaccurate pricing and increases in the cost of labor, materials or overhead may result in cost over-runs and losses on those agreements. TAT may not succeed in obtaining the agreement of a customer to re-price a particular product, and may not be able to recoup previous losses resulting from incomplete or inaccurate engineering data. In addition, as costs increase, TAT may not be able to pass on such increased costs to its other customers. This could materially Impact TAT’s profitability.

TAT depends on its key executives, and may not be able to hire and retain additional key employees or successfully integrate new members of its team and the loss of key employees could have a material adverse effect on TAT’s business.

TAT’s success will depend largely on its continued reliance on the experience and expertise of its senior management. Any of the senior managers of TAT may terminate his employment with TAT and seek employment with others who may seek his expertise. The loss of the expertise of senior management of TAT through death, disability or termination of employment would have a material and adverse effect on TAT’s business, financial condition and results of operations. TAT is not the beneficiary of life or disability insurance covering any of the executives, key employees or other personnel of TAT.

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TAT depends on its manufacturing and MRO facilities and any material damage to these facilities may adversely impact TAT’s operations.

TAT believes that its results of operations will be dependent in large part upon its ability to manufacture and deliver OEM products and to provide MRO services promptly upon receipt of orders and to provide prompt and efficient service to its customers. As a result, any material disruption of TAT’s day-to-day operations could have a material adverse effect on their business, customer relations and profitability. TAT relies on its Gedera, Israel, Kibbutz Marom-Golan, Israel, Kernersville and Winston-Salem, North Carolina and Tulsa, Oklahoma facilities for the production of its OEM products and provision of its MRO services. A war, fire, flood, earthquake or other disaster or condition that significantly damaged or destroyed any of these facilities would have a material adverse effect on the operations of TAT.

TAT uses equipment that is not easily repaired or replaced, and therefore material equipment failures could cause TAT or its subsidiaries to be unable to meet quality or delivery expectations of its customers.

Many of the service and manufacturing processes of TAT are dependent on equipment that is not easily repaired or replaced. As a result, unexpected equipment failures could result in production delays or the manufacturing of defective products. The ability of TAT to meet the expectations of its customers with respect to on-time delivery of repaired components or quality OEM products is critical. The failure by TAT to meet the quality or delivery expectations of its customers could lead to the loss of one or more of its significant customers.

TAT may fail to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

The Sarbanes-Oxley Act of 2002 imposes certain duties on TAT and TAT’s executives and directors. TAT’s efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 governing internal controls and procedures for financial reporting have resulted in increased general and administrative expense and a diversion of management time and attention, and TAT expects these efforts to require the continued commitment of significant resources. TAT may identify material weaknesses or significant deficiencies in its assessments of its internal controls over financial reporting. Failure to maintain effective internal controls over financial reporting could result in investigation or sanctions by regulatory authorities and could have a material adverse effect on TAT’s operating results, investor confidence in TAT’s reported financial information and the market price of TAT’s Ordinary shares.

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TAT has potential exposure to liabilities arising under environmental laws and regulations.

The business operations and facilities of TAT are subject to a number of federal, state, and local laws and regulations that govern the discharge of pollutants and hazardous substances into the air and water as well as the handling, storage and disposal of such materials and other environmental matters. Compliance with such laws as they relate to the handling, storage and disposal of hazardous substances is a significant obligation for TAT at each of its facilities. TAT would be subject to serious consequences, including fines and other sanctions, and limitations on the operations of TAT due to changes to, or revocations of, the environmental permits applicable to its facilities if it fails to comply. The adoption of new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new cleanup requirements could require TAT to incur costs and become subject to new or increased liabilities that could increase the operating costs of TAT and adversely affect the manner in which TAT conducts its business.

Under certain environmental laws, liability associated with investigation or remediation of hazardous substances can arise at a broad range of properties, including properties currently or formerly operated by TAT or any of its predecessors, as well as properties to which TAT sent hazardous substances or wastes for treatment, storage, or disposal. Costs and other obligations can arise from claims for toxic torts, natural resource and other damages, as well as the investigation and clean-up of contamination at such properties. Under certain environmental laws, such liability may be imposed jointly and severally, so TAT may be responsible for more than its proportionate share and may even be responsible for the entire liability at issue. The extent of any such liability can be difficult to predict.

TAT is exposed to potential liabilities arising from product liability and warranty claims.

TAT’s operations expose TAT to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been designed, manufactured, serviced or supplied by TAT. TAT believes that, in an effort to improve operating margins, some customers have delayed the replacement of parts beyond their recommended lifetime, which may undermine aircraft safety and increase the risk of liability of TAT and its subsidiaries.

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There can be no assurance that TAT will not experience any material product liability losses in the future, that it will not incur significant costs to defend such claims, that its insurance coverage will be adequate if claims were to arise or that it would be able to maintain insurance coverage in the future at an acceptable cost. A successful claim brought against TAT or its subsidiaries in excess of its available insurance coverage may have a material adverse effect on TAT’s business.

In addition, in the ordinary course of business of TAT, contractual disputes over warranties can arise. TAT may be subject to requests for cost sharing or pricing adjustments from its customers as a part of its commercial relationships with them, even though they have agreed to bear these risks.

Risk Factors Related to Our Ordinary Shares

TAT’s share price has been volatile in the past and may decline in the future.

TAT’s Ordinary shares have experienced significant market price and volume fluctuations in the past and may experience significant market price and volume fluctuations in the future, in response to factors such as the following, some of which are beyond TAT’s control:

·       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;

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·       Future sales of TAT’s Ordinary shares;

·       De-listing of TAT’s shares from the NASDAQ Global Market;

·       Stock market price and volume fluctuation; and

·       Legal proceedings against TAT’s controlling shareholders

Domestic and international stock markets often experience extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions, such as a recession or interest rate or currency rate fluctuations or political events or hostilities in or surrounding Israel, could adversely affect the market price of TAT’s Ordinary shares.

In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of its securities. TAT may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management’s attention and resources both of which could have a material adverse effect on TAT’s business and results of operations.

Substantial future sales of TAT’s Ordinary shares by TAT’s principal shareholders may depress TAT’s share price.

TAT’s principal shareholders, FIMI Israel Opportunity FIVE, Limited Partnership and FIMI Opportunity V, L.P., or the FIMI Funds, beneficially own together 53.7% of TAT’s outstanding shares. If FIMI shall sell a substantial number of TAT’s Ordinary shares or if the perception that TAT’s principal shareholders may sell a substantial number of TAT’s Ordinary shares exists, the market price of TAT’s Ordinary shares may fall. Any substantial sales of TAT’s shares in the public market also might make it more difficult for TAT to sell equity or equity-related securities in the future at a time, in a place and on terms TAT deems appropriate.

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Risks Relating to Our Location in Israel

Because TAT has significant operations in Israel, TAT may be subject to political, economic and other conditions affecting Israel that could increase TAT’s operating expenses and disrupt TAT’s business.

TAT is incorporated under the laws of Israel, and TAT’s executive offices, manufacturing plant and research and development facilities are located in the State of Israel. As a result, political, economic and military conditions affecting Israel directly influence TAT. Any major hostilities involving Israel, a full or partial mobilization of the reserve forces of the Israeli army, the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel could have a material adverse effect on TAT’s business, financial condition and results of operations.

Since the establishment of the State of Israel in 1948, Israel and its Arab neighbors have engaged in a number of armed conflicts. A state of hostility, varying from time to time in intensity and degree, has led to security and economic problems for Israel. Major hostilities between Israel and its neighbors may hinder Israel’s international trade and lead to economic downturn. This, in turn, could have a material adverse effect on TAT’s operations and business. Since June 2007, when Hamas effectively took control of the Gaza Strip, there have been extensive hostilities along the Gaza Strip. Ongoing violence between Israel and the Palestinians as well as tension between Israel and its Arab neighbors and Iran may have a material adverse effect on TAT’s business, financial conditions and results of operations.

Furthermore, there are a number of countries, primarily in the Middle East, that restrict business with Israel or Israeli companies, and TAT is precluded from marketing its products to these countries. Restrictive laws or policies directed towards Israel or Israeli businesses may have an adverse impact on TAT’s operations, TAT’s financial results or the expansion of TAT’s business.

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TAT may be adversely affected by a change in the exchange rate of the NIS against the dollar. Because exchange rates between the NIS and the dollar fluctuate continuously, exchange rate fluctuations, particularly larger periodic devaluations, may have an impact on TAT’s profitability and period to period comparisons of TAT’s results.

TAT’s financial statements are stated in dollars, while a portion of TAT’s expenses, primarily labor expenses, are incurred in NIS and a part of TAT’s revenues are quoted in NIS. Additionally, certain assets, as well as a portion of TAT’s liabilities, are denominated in NIS. Because exchange rates between the NIS and the dollar fluctuate continuously, exchange rate fluctuations, particularly larger periodic devaluations, may have an impact on TAT’s profitability and period to period comparisons of TAT’s results. TAT’s results may be adversely affected by the devaluation of the NIS in relation to the dollar (or if such devaluation is on lagging basis), if TAT’s revenues in NIS are higher than TAT’s expenses in NIS and/or the amount of TAT’s assets in NIS are higher than TAT’s liabilities in NIS. Alternatively, TAT’s results may be adversely affected by an appreciation of the NIS in relation to the dollar (or if such appreciation is on a lagging basis), if the amount of TAT’s expenses in NIS are higher than the amount of TAT’s revenues in NIS and/or the amount of TAT’s liabilities in NIS are higher than TAT’s assets in NIS.

TAT’s results of operations may be negatively affected by the obligation of its personnel to perform military service.

Many of TAT’s employees and some of TAT’s directors and officers in Israel are obligated to perform annual reserve duty in the Israel Defense Forces and may be called for active duty under emergency circumstances at any time. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. TAT’s operations could be disrupted by the absence for a significant period of one or more of TAT’s executive officers or key employees or a significant number of other employees due to military service. Any disruption in TAT’s operations could adversely affect TAT’s business.

Your rights and responsibilities as a shareholder will be governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law.

TAT is incorporated under Israeli law. The rights and responsibilities of holders of TAT’s Ordinary shares are governed by TAT’s memorandum of association, articles of association and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, each shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli law provides that these duties are applicable in shareholder votes on, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and interested party transactions requiring shareholder approval. In addition, a controlling shareholder of an Israeli company, or a shareholder who knows that he or she possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the company, has a duty of fairness toward the company. However, Israeli law currently does not define the substance of this duty of fairness. Because Israeli corporate law has undergone extensive revision in recent years, there is relatively little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.

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Israeli law may delay, prevent or make difficult an acquisition of TAT, which could prevent a change of control and, therefore, depresses the price of TAT’s shares.

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. Furthermore, Israeli tax considerations may make potential transactions unappealing to TAT or to some of TAT’s shareholders. These provisions of Israeli law may delay, prevent or make difficult an acquisition of TAT, which could prevent a change of control and therefore depress the price of TAT’s shares.

Investors and TAT’s shareholders generally may have difficulties enforcing a U.S. judgment against TAT, TAT’s executive officers and directors or asserting U.S. securities laws claims in Israel.

TAT is incorporated in Israel and the majority of TAT’s executive officers and directors reside outside the United States. Service of process upon them may be difficult to effect within the United States. Furthermore, many of TAT’s assets and most of the assets of TAT’s executive officers and directors are located outside the United States. Therefore, a judgment obtained against TAT or certain of its executive officers and directors in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to assert U.S. securities law claims in original actions instituted in Israel. However, subject to certain time limitations and other conditions, Israeli courts may enforce final judgments of United States courts for liquidated amounts in civil matters, including judgments based upon the civil liability provisions of those and similar acts.

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As a foreign private issuer whose shares are listed on the NASDAQ Global Market, TAT may follow certain home country corporate governance practices instead of certain NASDAQ requirements.

As a foreign private issuer whose shares are listed on the NASDAQ Global Market, TAT is permitted to follow certain home country corporate governance practices instead of certain requirements of the NASDAQ Marketplace Rules. A foreign private issuer that elects to follow a home country practice instead of such requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the Securities and Exchange Commission or on its website each such requirement that it does not follow and describe the home country practice followed by the issuer instead of any such requirement. As a foreign private issuer listed on The NASDAQ Global Market, TAT may follow TAT’s home country law, instead of the NASDAQ Marketplace Rules, which require that TAT obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of TAT, certain transactions other than a public offering involving issuances of a 20% or more interest in TAT and certain acquisitions of the stock or assets of another company.

Item 4.    Information on the Company

History and Development of TAT

TAT was incorporated under the laws of the State of Israel in April 1985 under the name Galaxy Graphics Ltd. TAT changed its name to Galagraph Ltd. in August 1986 and to TAT Technologies Ltd. in May 1992. TAT is a public limited liability company under the Israeli Companies Law 1999-5759, or the Israeli Companies Law, and operates under this law and associated legislation. TAT’s registered offices and principal place of business are located at Re’em Industrial Park, Neta Boulevard, Bnei Ayish, Gedera 70750, Israel and its telephone number is +972-8-8268-500. TAT’s address on the Internet is www.tat-technologies.com. The information on TAT’S website is not incorporated by reference into this annual report.

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TAT was founded in 1985 to develop the computerized systems business of its then parent company, TAT Industries Ltd. (or TAT Industries), a publicly held Israeli corporation then engaged in the manufacture and sale of aeronautical equipment. In December 1991, TAT acquired the heat exchange operations of TAT Industries and in 2000, TAT purchased the remaining operations of TAT Industries relating to the manufacture and maintenance of aviation accessories and leased certain of its properties.

In March 1987, TAT completed the initial public offering of its securities in the United States. TAT was listed on the NASDAQ Global Market (then known as the NASDAQ National Market) from its initial public offering until July 1998 when the listing of TAT’s Ordinary shares was transferred to the NASDAQ Capital Market. On June 24, 2009 TAT’s Ordinary shares resumed trading on the NASDAQ Global Market. Since August 2005 TAT’s shares have been traded also on the Tel Aviv Stock Exchange (TASE).

TAT is a provider of a variety of services and products to the commercial and military aerospace and defense industries through its Gedera facility, as well as through its subsidiaries, Bental, in Israel, and Limco and Piedmont in the U.S (Limco and Piedmont are held by TAT through Limco-Piedmont Inc. (“Limco-Piedmont”)).

Limco provides Heat Transfer MRO services and products to the aerospace industry. Limco’s Federal Aviation Administration, or FAA, certified repair station (located in Oklahoma) provides aircraft with MRO services for airlines, air cargo carriers, maintenance service centers and the military, especially for heat transfer components. In addition to its MRO services, Limco is an OEM of heat transfer products for airplane manufacturers and other selected related products.

In July 2005, Limco acquired Piedmont Aviation Component Services, LLC (“Piedmont”), a company certified by the FAA to perform maintenance, repair and overhaul services of APUs and landing gears. Piedmont’s  FAA, certified repair station (located in North Carolina) provides MRO services for airlines, air cargo carriers, maintenance service centers and the military, especially for landing gear and auxiliary power units (APU).

In July 2007, Limco-Piedmont completed an initial public offering of its shares of Common stock and Limco-Piedmont’s shares were listed on the NASDAQ Global Market (symbol: LIMC) until July 2, 2009, when TAT acquired all of the publicly held shares of Limco-Piedmont (approximately 32% of Limco-Piedmont’s total shares) in a stock for stock merger.  As a result of such merger, Limco-Piedmont again became a wholly-owned subsidiary of TAT.

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On January 1, 2008, TAT established a wholly-owned subsidiary under the laws of the State of California, TAT-GAL Inc., which acts as purchasing agent for TAT’s operations.

Following a series of transactions occurring between March 2008 and March 2009, TAT acquired 70% control of Bental. The acquisition of Bental shares (for an aggregate price of $9.2 million) was financed by loans in a total amount of $6.25 million received from Bank Mizrahi and TAT’s internal resources.

On December 19 2007, Isal Amlat Industries (1993) Ltd., an Israeli company publicly traded on the Tel Aviv Stock Exchange (“Isal Amlat”), through KMN Industries Ltd. in which Isal Amlat holds 94% of the issued share capital ("KMN Industries"), purchased the controlling interests in TAT and in TAT Industries, TAT’s then controlling shareholder, by purchasing from Mr. Shlomo Ostersetzer, the former Chairman of TAT’s Board of Directors and TAT’s former President, Mr. Dov Zeelim, the former Vice Chairman of TAT’s Board of Directors and TAT’s former Chief Executive Officer, and entities controlled by FIMI 2001 Ltd., or FIMI 2001, 10% of TAT's then outstanding Ordinary shares for consideration of NIS 50.4M, and 54% of TAT Industries' then outstanding Ordinary shares for consideration of NIS 105.3M.

The agreement between KMN Industries and Mr. Zeelim, as amended on January 31, 2008, provided KMN Industries with additional shares in TAT Industries purchased from Mr. Zeelim.

Pursuant to an agreement between KMN Industries and Mr. Zeelim entered into in May 2008, in connection with Mr. Zeelim’s resignation from the office of Chief Executive Officer of TAT, Mr. Zeelim exercised his put option on June 12, 2008 and 4.17% of TAT Industries' then outstanding Ordinary shares were purchased by KMN Industries.

On July 17, 2008 KMN Industries and FIMI 2001 amended the terms of their agreement. Accordingly, 141,443 of TAT’s Ordinary shares constituting then 2% of TAT's outstanding shares were purchased by KMN Industries in December 2008 at a price per share of $19.343 and the remaining 100,000 of TAT’s Ordinary shares constituting then 1.1% of TAT's outstanding shares were purchased by KMN Industries in November 2009 for a total consideration of $2.0 million.

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On March 11, 2009 and on August 13, 2009, TAT’s board of directors authorized its management to enter into engagements with Oppenheimer Israel Investment House for the blind trust purchase of TAT’s shares under rule 10b5-1 of the Securities Exchange Act of 1934. The first purchase plan was terminated on March 26, 2009, with TAT having purchased 4,650 Ordinary shares for an aggregate price of $26,000. The second purchase plan authorized Oppenheimer Israel to purchase shares of TAT in the aggregate amount of up to $2 million (approximately NIS 7.8 million) over a period of six months and at a price not exceeding $9 per share. A total of 253,390 Ordinary shares were purchased, representing about 2.8% of the Company's share capital in consideration of approximately $2 million (an average of $7.90 per share). Both plans ended and the purchased shares became dormant as defined in the Israeli Companies Law.

In September, 2011 Isal Amlat purchased an aggregate of 18,600 Ordinary shares of TAT at an average price of 20.39 NIS per share (approximately $5.54 per share). Such purchases were made on the Tel Aviv Stock Exchange. Following such purchases, Isal beneficially owned 4,750,951 Ordinary shares, representing 54.00% of TAT’s Ordinary shares.

On May 21, 2012, TAT’s Board of Directors approved a stock repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934.  The plan was for a period of 6 months (subject to extension) and provided for the purchase of shares in an aggregate amount of up to $0.5 million U.S. dollars and for a price not exceeding $7.5 per share. Such plan replaced and superseded a prior repurchase plan approved by TAT’s Board of Directors’ on February 21, 2012. On November 21, the term of such stock repurchase plan ended. As of such date, the Company had purchased 16,433 shares for approximately $71,000 (average of $4.32 per share) constituting less than 0.1% of TAT’s issued shares. The purchased shares became dormant as defined in the Israeli Companies Law.

On December 4, 2009, TAT’s indirect subsidiary, Piedmont, acquired 288,334 shares of Class B Common stock of First Aviation Services Inc., or FAvS, representing 37% of FAvS's then share capital and $750,000 of FAvS Preferred Shares (entitling Piedmont to cash dividends at an annual rate of 12% payable quarterly or at the discretion of FAvS to PIK dividends payable in additional Preferred Shares at an annual rate of 15%).  In consideration for such shares, Piedmont transferred to FAvS its propellers and parts businesses and guaranteed for a period of up to two years up to $7 million of the bank debt incurred by FAvS to fund the transaction described in the next paragraph. FAvS is a provider of maintenance and repair services for various wheels, brakes and starter/generators.

As part of the transaction described above, FAvS also acquired all the assets and liabilities of Aerospace Turbine Rotables ("AeTR") for a cash consideration of $7 million (guaranteed by Piedmont). AeTR specializes in renovation and repair of landing gear, safety equipment and hydraulic and electrical components for corporate, regional and military aircraft.

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TAT believes that FAvS' share market value (FAvS' shares are quoted over the counter - OTC) does not reflect the actual fair value of FAvS' shares, because the extremely low trading volume in FAvS' shares does not reflect an active market. Therefore the fair value of FAvS, at the transaction date, was based on an appraisal performed by management, which included a number of factors, including the assistance of independent appraisers. According to the appraisal, FAvS' fair value amounted to $22.549 million as of November 30, 2009. As a result of the sale of Piedmont’s propellers and spare parts businesses, TAT recorded a capital gain in the amount of approximately $4.4 million in its statement of income for the year ended December 31, 2009.

On October 1, 2010, Piedmont agreed to secure the guarantee mentioned above for $6.6 million, by providing a letter of credit to the lender for FAvS. Such guaranty was for a period of 15 months ending December 31, 2011 and its amount was to be reduced as such debt amortized in increments of $0.1 million per month. Piedmont was also granted a second lien on the assets of FAvS to secure the repayment obligations of FAvS in the event that the letter of credit is drawn upon. Piedmont also entered into an intercreditor agreement with the lender to FAvS which subordinated Piedmont’s claims if the letter of credit is drawn upon to the obligations of FAvS to the lender. This guarantee was later terminated on March 2013 (see below).

As of December 31, 2010, TAT recognized an impairment charge of $1.8 million of its then 37% interest in FAvS that was based on an independent appraisal. The impairment was due to a decline in FAvS’ profitability margins and future forecasted sales levels.

A commercial dispute between Piedmont and FAvS relating to the propeller maintenance business which had been contributed to FAvS by Piedmont as part of the transaction discussed above arose in April 2010 when a customer of the propeller maintenance business requested reimbursement from FAvS for damages to certain propellers.  FAvS then sought reimbursement from Piedmont for such amounts.  Although Piedmont rejected all of FAvS’ claims with regards to Piedmont’s responsibility for the claimed damages, in July 2010, the parties reached an agreement pursuant to which Piedmont loaned $700,000 to FAvS and agreed to bear a portion of the additional cost of the replacement of propeller blades that FAvS would be responsible for. In exchange FAvS agreed to waive all claims against Piedmont with respect to such customer. Such loan was subsequently forgiven.

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Notwithstanding such waiver, in the last quarter of 2010, FAvS again asserted claims against Piedmont relating to the propeller maintenance business including claims not previously asserted.  After reviewing this issue during the 2010 fourth quarter and thereafter, Piedmont estimated the additional liability it may bear and accordingly wrote off the loan and recorded an accrual, which it believed, covered its potential cost in connection with this matter.

In order to finally settle all disputes between them, on June 30, 2011 Piedmont and FAvS entered into a Settlement Agreement and Release (the “Settlement Agreement”).  Pursuant to the Settlement Agreement, each party fully released the other party and acknowledged that the settlement was a compromise of disputed claims and was not to be construed as an admission of liability or wrongdoing.  In addition, each party agreed not to disparage the other and Piedmont paid an aggregate of $700,000 to FAvS.

Simultaneously with the execution of the Settlement Agreement, Mr. Hollander, the Chief Executive Officer and controlling stockholder of FAvS, purchased 166,113 shares of Class A Common Stock of FAvS at a price of $18.06 per share (for an aggregate price of $3 million) (share price and share amount adjusted as result of a 1 for 20 reverse stock split) following which Piedmont’s interest in FAvS was diluted to 30.6% (29.36% as of December 31, 2013).  In addition, Piedmont agreed to extend its guarantee of the bank debt incurred by FAvS to fund the AeTR transaction through June 30, 2013 and to continue to provide a letter of credit to secure such guarantee.  The amortization schedule for such debt was revised so that no amortization would occur until June 30, 2012.  Thereafter the debt amortized at the rate of $200,000 per month. Such guaranty was terminated in March 2013 (see below).

The Stockholders Agreement entered into in 2009 between Piedmont and Mr. Hollander was also amended to delete the reciprocal drag along rights and to provide that Piedmont may designate one member to the Board of Directors of FAvS (rather than the two provided in the original agreement).  Finally, the Rights Agreement entered into in 2009 between Piedmont and FAvS was amended so that Piedmont’s right to approve certain material corporate actions by FAvS has been limited to the right to approve contracts or agreements with affiliates of FAvS.  The amendment also provides that the approval of Piedmont will not be required if FAvS seeks to raise additional capital from Mr. Hollander so long as the consideration being paid by Mr. Hollander is not less than the consideration that would be paid by a third-party in an arms-length transaction and is fair, equitable and reasonable under the circumstances.

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In connection with the Settlement Agreement and the dilution in Piedmont’s interest in FAvS, Piedmont recorded, at June 30, 2011, a gain in the amount of $0.24 million related to the $3 million capital investment in FAvS.

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

Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT’s investment in FAvS. Accordingly, TAT performed an impairment test of its investment in FAvS, with the assistance of a third party valuation. Based on the results of this test TAT determined that its investment in FAvS was impaired by $3.3 million. The impairment was due to a decline in FAvS’ profitability margins and future forecasted sales levels which related to the business of API, one of FAvS subsidiaries, and approximates TAT’s share in the loss resulting from the API transaction described below.

On March 18, 2013 FAvS sold 97% of the stock of API for a total purchase price of $16.5 million, of which $15.9 million was used to repay debt. The sale resulted in FAvS retaining a 3% equity interest in the API business. The API transaction resulted in a loss from discontinued operations and write-down of the API business of $11.5 million which is included in the FAvS loss for the year ended December 31, 2012. Simultaneously with the transaction FAvS paid-off its term loan in the amount of $4 million thereby terminating the guaranty and releasing the letter of credit provided by TAT to secure such guaranty. Accordingly the restricted deposit associated with the above letter of credit, was released as well.

In October 2012 two lenders to TAT’s then controlling shareholders, KMN Industries and TAT Industries (herein “Controlling Shareholders”), filed separate petitions to the court to enforce certain liens granted to such lenders by each of the Controlling Shareholders. Such liens consisted of KMN Industries’ holdings of an approximately 80% ownership interest in TAT Industries (which in turn owned approximately 43% of the issued share capital of TAT) and KMN Industries’ direct holdings in TAT (which represented approximately 10% of the issued share capital of TAT).

On December 18, 2012 the court appointed permanent receivers on behalf of the two lenders mentioned above for the purpose of jointly realizing the liens granted to such lenders. On March 15, 2013 the receivers of TAT’s shares initiated a bid process for the sale of such shares. On August 7, 2013 the receivers informed TAT that a transaction for the sale of 4,732,351 Ordinary shares of TAT, constituting 53.8% of TAT’s outstanding Ordinary shares as of the date of the transaction, closed after receiving all required approvals and transfer of the agreed consideration by the FIMI Funds.

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On February 18, 2014, we entered into an agreement to sell our entire interest in Bental, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5 million. Following such transaction, Bental Investments will hold 100% of Bental’s outstanding share capital. Closing of the transaction is expected to take place within the next several weeks.

A.           Business Overview

Overview

TAT provides a variety of services and products to the commercial and military aerospace and defense industries and operates under four segments: (i) Original Equipment Manufacturing or “OEM” of Heat Management Solutions (ii) OEM of Electric Motion Systems (iii) Heat Transfer Services and Products, and (iv) Maintenance, Repair and Overhaul or “MRO” services for Aviation Components, each with the following characteristics.

TAT’s activities in the field of OEM of Heat Management Solutions primarily relate to its Gedera facility and include (i) the 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; (ii) the 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 field of OEM of Electric Motion Systems primarily relate to its subsidiary, Bental, and include the design, development, manufacture and sale of a broad range of electrical motors, alternators, blowers' drivers and actuators for different applications for airborne and ground systems.

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TAT’s activities in the field of Heat Transfer services and products primarily relate to its subsidiary, Limco, and include the maintenance, repair and overhaul of heat transfer equipment and to a lesser extent, the manufacturing of certain heat transfer products. TAT’s Limco subsidiary operates an FAA certified repair station, which provides heat transfer MRO services and products for airlines, air cargo carriers, maintenance service centers and the military. Limco is also certified by the European Aviation Safety Agency, or EASA, the Civil Aviation Administration of Thailand (Thai), the Civil Aviation Administration of Indonesia and the Civil Aviation Administration of Brazil.

TAT’s activities in the field of MRO services for aviation components primarily relate to its subsidiary, Piedmont, and includes the maintenance, repair and overhaul of APUs, landing gear and other aircraft components. TAT’s Piedmont subsidiary operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

As mentioned above under ‘History and Development of TAT’, Piedmont’s Parts services division, was operated until December 4, 2009, when it was sold to FAvS, in which TAT now holds an equity interest of approximately 29.36%.

FAvS, together with its subsidiaries, offers maintenance, repair and overhaul services through two Federal Aviation Administration authorized facilities. Customers of FAvS include passenger and cargo airlines, general aviation, and military operators.

OEM of Heat Management Solutions

TAT is an OEM of Heat management solutions, primarily through its Gedera facility, to the aerospace and defense industries. The main OEM activity of Gedera is the design and manufacture of a complete line of heat transfer products, including heat exchangers, pre-coolers, oil coolers and cold plates, or heat transfer products. Heat transfer products facilitate the necessary removal and dissipation of heat generated during the operation of mechanical and electronic systems. Gedera’s heat transfer products are generally integrated into a complete cooling systems. Using Gedera’s technological expertise, Gedera designs each of its heat transfer products to meet the specific space, power, performance and other needs of its customers. Gedera’s heat transfer products are marketed worldwide for applications in commercial and military aircraft and electronic systems, the primary users of such equipment. Gedera’s customers include Liebherr-Aerospace Toulouse S.A., or Liebherr, Boeing Aircraft Company, or Boeing, Israel Aerospace Industries, or IAI, Cessna Aircraft Company, or Cessna, Cirrus Aircraft Inc., or Cirrus, Pilatus Aircraft Ltd, or Pilatus, Embraer Empresa Brasileira de Aeronáutica S.A., or Embraer, Eaton Aerospace LLC, or Eaton, Parker Hannifin Corporation, or Parker,as well as the United States Air Force, United States Army, and Navy. Such customers typically enter into supply contracts with Gedera pursuant to which Gedera manufactures specified heat transfer products in connection with the customers’ production or retrofitting of particular aircraft equipment. Such supply contracts are generally long term engagements that may have terms of ten years or more.

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As part of its OEM activities, Gedera is also engaged in the design, development and manufacture of complete environmental control systems and complete cooling systems. This product line principally includes cooling systems for electronic systems (used in airborne military platforms), ground cooling systems (used in military facilities, tents, vehicles and other military applications) and Vapor Cycle air conditioning systems (or ECS — Environmental Cooling Systems) used in light aircraft.

In addition, Gedera designs, develops and manufactures aviation and flow control accessories. These accessories include fuel components, such as valves and pumps, secondary power systems, and various instrumentation and electronic assemblies. Customers for Gedera’s aviation accessories include Lockheed-Martin Corp, Teledyne Continental Motors, the Israeli Air Force, IAI, Elbit Systems, or Elbit, as well as the United States Air Force and Navy.

Gedera also provides limited MRO services for military customers, mainly for aviation accessories as well as for certain heat transfer products. Gedera currently overhauls emergency power systems, hydrazine tanks, jet fuel starters, and cooling turbines and valves for F-16s. In addition, Gedera overhauls anti-icing valves and starters for the Apache helicopter. Customers for Gedera’s MRO services include the Israeli Air Force, IAI, NATO, as well as the United States Air Force, United States Army and Navy.

Gedera relies on highly qualified personnel and strong engineering, development and manufacturing capabilities that enable it to support its customers from the early stages of development of their product and system specifications.

TAT estimates the size of the markets in which Gedera operates to be significant based on the scope of development projects and purchasing processes of its customers. Many of the projects Gedera is engaged in are lengthy and complex, which account for its long term supplier relationships and the customer loyalty it enjoys. TAT plans to expand its Gedera operations in the OEM segment, among other things, by transitioning from the manufacture of standalone components to the development and manufacture of complete systems/sub systems, and by targeting strategic territories with high commercial potential.

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OEM of Electric Motion Systems

Through its subsidiary, Bental, TAT is an OEM of a wide range of innovative electric motion components and systems for the defense, aerospace and industrial markets. Bental designs and manufactures high performance, high precision motion systems and sub-systems that operate under challenging conditions. Bental specializes in innovative motion technologies such as brush and brushless motors, permanent magnet generators, electronic drivers and controllers, servo actuators, stabilized payload systems and more.

On February 18, 2014, we entered into an agreement to sell our entire interest in Bental, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5 million. Following such transaction, Bental Investments will hold 100% of Bental’s outstanding share capital. Closing of the transaction is expected to take place within the next several weeks.

Heat Transfer Services and Products

Through its subsidiary, Limco, TAT provides Heat Transfer services and products to the aerospace industry. Limco’s FAA certified repair station provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military. Limco is also certified by EASA, the Civil Aviation Administration of Thailand (Thai), the Civil Aviation Administration of Indonesia and the Civil Aviation Administration of Brazil. Limco specializes in MRO services for components of aircraft, such as heat transfer products and Ozone Converters. Generally, manufacturer specifications, government regulations and military maintenance regimens require that aircraft components undergo MRO servicing at regular intervals or as necessary. Aircraft Heat Exchangers typically require MRO services, including repairs and installation of replacement units, after three to five years of service or sooner if required. Aircraft manufacturers typically provide warranties on new aircraft and their components and subsystems, which may range from one to five years depending on the bargaining power of the purchaser. Warranty claims are generally the responsibility of the OEM during the warranty period. Limco’s business opportunity usually begins upon the conclusion of the warranty period for these components and subsystems. Limco’s customers include major US domestic and international airlines, air cargo carriers, maintenance service centers, OEMs such as commercial and military aircraft manufacturers and defense contractors, and the U.S. government (Army, Air Force and Coast Guard). Such customers typically enter into MRO contracts with Limco which are generally long term engagements that may have terms of one to five years or more.

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Limco is recognized by leading OEMs of aerospace products to provide MRO services for their systems. For example, Limco is a well-recognized Hamilton Sundstrand repair center, providing MRO services for many of its air-to-air heat transfer products. Limco’s repair station is certified by the FAA and EASA.

In addition to its MRO services, Limco also manufactures heat transfer products used in commercial, regional, business and military aircraft, complete environmental control systems and cooling systems for electronics. Customers for Limco’s heat transfer products include the U.S. Army, Air Force and Navy, Raytheon, Boeing, Bell Helicopter, Vought Aircraft, Enstrom Helicopter, Cobham and Gulfstream.

Limco relies on highly qualified personnel with strong manufacturing, engineering and development capabilities that enable it to provide excellent MRO services while supporting customers’ specifications in the development of their new products and systems.

TAT estimates the size of the markets in which Limco operates to be significant based on the number of aircraft requiring MRO services provided by Limco along with the customer loyalty Limco enjoys. TAT plans to expand its Limco operations in the MRO segment, among other things, by developing MRO capabilities for additional types of heat transfer products with significant commercial potential.

MRO services for Aviation Components

Through its subsidiary, Piedmont, TAT provides MRO services for aviation components to the aerospace industry. Piedmont’s FAA and EASA certified repair station provides aircraft component MRO services mainly for airlines, air cargo carriers and maintenance service centers. Piedmont specializes in MRO services for components of aircraft, such as APUs and landing gears. Generally, manufacturer specifications, government regulations and military maintenance regimens require that aircraft components undergo MRO servicing at regular intervals or as necessary. Aircraft components typically require MRO services, including repairs and installation of replacement units, after three to ten years of service or sooner if required. Aircraft manufacturers typically provide warranties on new aircraft and their components and subsystems, which may range from one to five years depending on the bargaining power of the purchaser. Warranty claims are generally the responsibility of the OEM during the warranty period.  Piedmont’s business opportunity usually begins upon the conclusion of the warranty period for these components and subsystems. Piedmont’s customers include domestic and international airlines, air cargo carriers and maintenance service centers. Such customers typically enter into MRO contracts with Piedmont which are generally long term engagements that may have terms of one to ten years or more.

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Piedmont is licensed by Honeywell as an authorized repair center, to provide MRO services for several of its APU models. Piedmont’s repair station is certified by the FAA and EASA.

Piedmont relies on highly qualified personnel with strong manufacturing, engineering and development capabilities that enable it to provide excellent MRO services.

TAT estimates the size of the markets in which Piedmont operates to be significant based on the number of aircraft requiring MRO services provided by Piedmont. TAT plans to expand its Piedmont operations in the MRO segment, by using Piedmont’s experience and reputation to develop MRO capabilities for additional types of APU and landing gear with significant commercial potential and by offering additional supplementary services such as machining, plating and grinding, or MPG.

Business Strategy

TAT’s principal strategy is as follows:

·   Enhancing OEM Capabilities — TAT’s goal through Gedera and Limco is to capitalize on its technical expertise, experience and reputation in the markets of heat management solutions, to expand the scope of its OEM offerings both in the airborne and ground segments, for the commercial and defense industries. TAT also intends to continue the transition from the development and manufacture of single components to the development and manufacture of complete systems.

·   Expand the scope of MRO services - TAT’s goal is to use its technical expertise, engineering resources and facilities to provide MRO services for additional types of aircraft and additional aircraft systems, subsystems and components and intends to develop the required technical expertise to provide these additional MRO services.

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·   Increasing Market Share — TAT plans to continue its aggressive marketing efforts for new customers as well as to expand its activities with its flagship customers. As part of TAT’s efforts to achieve greater penetration in the international markets, TAT intends to expand its marketing presence in Western Europe, which is TAT’s second largest market, and to substantially increase its presence in Asia,  South America, East Europe and Africa, which are fast growing markets where TAT has had limited sales to date.

·   Effective synergy among group members — TAT plans to enhance the synergies between its various businesses by, among other things, using Gedera’s OEM design capabilities to provide Limco enhanced capabilities to repair heat transfer systems and products, enabling Limco to compete more effectively in the industry and by supplying to Limco heat transfer components which should enable Limco to reduce prices on its MRO services.

·   Organic growth and M&A — In addition to growing the existing businesses of Gedera and Limco, TAT also believes that additional acquisition opportunities exist that will complement its OEM and MRO businesses. TAT will continue to pursue targeted complementary business acquisitions which will broaden the scope and depth of its OEM and MRO operations and increase its market share.

Products and Services

OEM of Heat Management Solutions

Through its Gedera facility, TAT manufactures a wide range of heat transfer products used on board aircraft, air conditioning systems, environmental control systems and cooling systems for electronics for military use. These products/systems are manufactured in compliance with all of the stringent quality assurance standards that apply to the manufacture of aircraft parts. Gedera’s quality systems comply with ISO 9001, AS9100, Boeing quality systems approval D6-82479 and FAR 21.303 (the FAA standard for Parts Manufacturer Approval).

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Heat Transfer Products

Gedera manufactures a wide range of heat transfer products. Gedera specializes in the design and manufacturing of highly efficient, compact and reliable heat transfer products that are designed to meet stringent constraints such as size, weight and applicable environmental conditions. Heat transfer products, such as heat exchangers, pre-coolers, evaporators, oil coolers and cold plates, are integral components of a wide variety of environmental control systems and mechanical and engine systems, as well as a wide range of electronic systems. These systems generate heat during operation that must be removed and dissipated. Heat transfer products facilitate the exchange of the heat created through the operation of these systems by transmitting the heat from a hot medium (air, oil or other fluids) to a cold medium for disposal.

In the aerospace industry, there is a constant need for improvements in performance, weight, cost and reliability. In addition, as electronic systems become smaller and more densely packed, the need for sophisticated and efficient heat transfer components to provide the cooling functions becomes more critical. Using Gedera’s technological expertise, TAT believes it is well positioned to respond to these industry demands through continued new product development and product improvements.

Gedera’s principal heat transfer products include air-to-air heat exchangers and pre-coolers and liquid-to-air heat exchangers. Typically, the air-to-air heat exchangers and pre-coolers cool a jet engine’s hot “bleed air” which, when cooled, is then used in the aircraft’s air conditioning, pressurization and pneumatic systems. The liquid-to-air heat exchangers cool liquids such as engine oil, hydraulic oil and other liquid coolants used in other systems.

Gedera provides one stop shop to all of the different types of heat transfer products in certain aircraft. Wide body planes generally require seven different types of heat transfer components, while regional aircraft and helicopters contain approximately three types. Gedera’s heat exchangers and pre-coolers are generally sold for between $2,000 and $20,000 per unit. A significant portion of Gedera’s heat transfer products are sold to customers in connection with the original manufacture or retrofitting of particular aircraft equipment. Gedera generally enters into long-term supply contracts with its customers, which require Gedera to supply heat transfer products as part of a larger project.

Gedera also manufactures heat dissipation equipment, such as evaporators, cold plates, cooling chests, heat sinks and cold walls (which may be air-to-air, liquid-to-air or liquid-to-liquid), which control and dispose of heat emitted by the operation of various electronic systems. These heat dissipation products are currently utilized mainly in radar systems, avionics, electronic warfare systems and various pods for targeting, navigation and night vision.

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Gedera’s customers for heat transfer products/systems include: Liebherr, Boeing, IAI, Cessna, Bell Helicopter, Raytheon Aircraft Company, as well as the United States Air Force and Navy. As a result of the specialized nature of the systems in which Gedera’s parts are included, spare and replacement parts for the original heat transfer products/systems are usually provided by Gedera.

Aviation And Flow Control Accessories

Gedera is also engaged in the design, development and manufacture of aviation and flow control accessories. These accessories include fuel component systems, such as valves and pumps, secondary power systems, various instrumentation and electronic assemblies. Gedera’s customers for the design, development and manufacture of aviation and flow control accessories include Lockheed-Martin, Boeing, Teledyne, the Israeli Air Force, IAI, as well as the U.S. Air Force and Navy.

Cooling And Air-Conditioning Systems

Gedera is also engaged in the design, development and manufacture of complete environmental control systems and cooling systems. This product line includes ground cooling systems used in military facilities, tents, vehicles and other military applications. It also includes Vapor Cycle air conditioning systems (or ECS — Environmental Cooling Systems) used in light aircraft. Gedera offers mobile cooling and air conditioning solutions for military applications such as mobile command and control units, command and control vehicles, armored vehicles, mobile broadcast units, mobile hospitals, etc. In addition, Gedera offers a generic complete cooling systems for aircraft systems such as environmental control systems, engine starter systems and hydraulic systems  and also offers air conditioning systems for light airplanes and helicopters, either as part of the development process of new aircraft or as an upgrade for existing aircraft. Gedera designs, develops and manufactures the air conditioning systems based on customer specifications, while providing a complete engineering solution in compliance with strict military and civil standards. Gedera’s systems are used for military applications in Israel and abroad and are tested under strict standards and in battle field proven conditions.

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Heat Transfer Services and Products

MRO Services For Heat Transfer Products

Through its Limco subsidiary in the U.S., TAT provides MRO services for Heat Transfer products. The demand for MRO services is driven by the size and age of the aircraft fleet, aircraft utilization and regulations by the FAA and other governmental authorities.

Due to the increased maintenance costs of their aging fleets many carriers are seeking ways to reduce costs, minimize down-time, increase aircraft reliability and extend time between overhauls. One of the ways they are accomplishing these goals is through the outsourcing of more of their maintenance and support functions to reliable third parties. Limco also believes that commercial carriers who have made the decision to outsource their MRO requirements are searching for MRO service providers with a wide-range of service capabilities. These MRO service providers allow the carriers to concentrate their outsourcing of MRO services to a select group of third party providers. The global military aircraft fleet also presents similar opportunities for MRO service providers. Recent military operations around the world have significantly increased usage of the global military aircraft fleet and resulted in a higher rate of maintenance activity. Limco believes that an aging military fleet and the increased use of upgrade programs aimed at extending the useful life of aircraft will provide continued MRO growth opportunities.

Limco specializes in the repair and overhaul of heat transfer products. Heat transfer products are devices that efficiently transfer heat from one fluid to another or from hot air to colder air in various cooling systems and are essential components of an aircraft. These products include heat exchangers, oil coolers, pre-coolers, re-heaters, condensers, water separators, fuel heaters and evaporators.

Limco is continually increasing its MRO capabilities based upon market need or customer request. Limco’s capabilities include heat transfer components used in aircraft and systems manufactured by Airbus, Boeing, Bombardier, Cessna, Embraer, Lockheed Martin, Fokker, Liebherr-Aerospace, Gulfstream, British Aerospace and others.

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One of Limco’s operational strengths and competitive advantages is the close cooperation with TAT’s Gedera facility. Through Gedera’s core manufacturing capabilities and engineering expertise, Limco enjoys a constant supply source of cores of the highest quality necessary in order to perform its MRO services for Heat Transfer products. In addition, Limco benefits from Gedera’s varying engineering and development capabilities relevant to Limco’s Heat Transfer services.

Limco performs MRO services at its repair station in Tulsa, Oklahoma which is ISO9000 and AS9100 certified and licensed by the FAA and EASA, as well as by the Civil Aviation Administration of Thailand (Thai), the Civil Aviation Administration of Indonesia and the Civil Aviation Administration of Brazil, to provide MRO services. Limco’s Oklahoma facilities provided MRO services for heat transfer products.

Limco offers MRO services for heat transfer components to its customers on multiple levels. If the damage is significant, Limco will remanufacture the unit, which generally entails replacing the core matrix of the damaged or old heat transfer product in lieu of replacing the entire unit with a new one. Limco designs and develops these customized remanufactured units as a cost effective alternative to new part replacement. In the event of less severe damage, Limco will either overhaul or repair the unit as necessary. Re-manufactured units carry warranties similar to those provided to new units.

OEM Authorizations And Licenses

Limco believes that establishing and maintaining relationships with OEMs of aircraft systems and components, is an important factor in achieving sustainable success as an independent MRO service provider. OEMs grant participants in the overhaul and repair services market authorizations or licenses to perform repair and overhaul services on the equipment they manufacture. OEMs maintain tight controls over their authorized and licensed MRO service providers, in order to maintain high quality of service to their customers, and generally grant very few authorizations or licenses. Obtaining OEM authorizations requires sophisticated technological capabilities, experience-based industry knowledge and substantial capital investment. Limco believes that service providers that have received OEM authorizations and licenses gain a competitive advantage because they typically receive discounts on parts, technical information, OEM warranty support and use of the OEM name in marketing. Limco is an independent MRO service provider that is a well-recognized repair center of Hamilton Sundstrand, the largest heat transfer equipment manufacturer, for its air-to-air heat transfer equipment in North America.

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OEM Capabilities

In addition to its MRO services, Limco also acts as an OEM manufacturer of heat transfer products used mainly in military aircraft and also in commercial, regional and business aircraft. Limco specializes in the design and manufacturing of highly efficient heat transfer components, which are designed to meet stringent constraints such as size, weight and applicable environmental conditions. These units include heat exchangers, oil coolers, pre-coolers, re-heaters, condensers, fuel heaters and evaporators.

Limco also manufactures air conditioning systems, complete environmental control systems and cooling systems for electronics. Limco currently offers approximately 80 OEM parts to the aerospace industry. These parts are manufactured in compliance with the stringent quality assurance standards that apply to the manufacture of aircraft parts.

Limco’s quality systems are ISO9000 and AS9100 certified and Limco has both Boeing quality systems approval D6-82479 and FAR 21.303 (the FAA standard for Parts Manufacturer Approval).

MRO Services for Aviation Components

Through its Piedmont subsidiary in the U.S., TAT provides MRO services for aviation components, APUs and Landing Gear. As previously mentioned, the demand for MRO services is driven by the size and age of the aircraft fleet, aircraft utilization and regulations by the FAA and other governmental authorities.

Due to the increased maintenance costs of their aging fleets many carriers are seeking ways to reduce costs, minimize down-time, increase aircraft reliability and extend time between overhauls. One of the ways they are accomplishing these goals is through the outsourcing of more of their maintenance and support functions to reliable third parties. Piedmont also believes that commercial carriers who have made the decision to outsource their MRO requirements are searching for MRO service providers with a wide-range of service capabilities. These MRO service providers allow the carriers to concentrate their outsourcing of MRO services to a select group of third party providers. The global military aircraft fleet also presents similar opportunities for MRO service providers. Piedmont believes that an aging military fleet and the increased use of upgrade programs aimed at extending the useful life of aircraft will provide continued MRO growth opportunities.

Piedmont specializes in the repair and overhaul of APUs and landing gear. APUs are relatively small, self-contained generators used to start jet engines, usually with compressed air, and to provide electricity, hydraulic pressure and air conditioning while an aircraft is on the ground. In many aircraft, an APU can also provide electrical power during in-flight emergency situations. Landing gear are the structure that support an aircraft on the ground and allow it to taxi, takeoff and land.

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 Piedmont performs MRO services at its repair station in North Carolina, which is AS9001 certified and licensed by the FAA and EASA to provide MRO services.

Piedmont specializes in providing MRO services for APU models manufactured primarily by Honeywell, and in providing MRO services for landing gear for regional aircraft manufactured by Bombardier Canadair Regional Jet, ATR, British Aerospace Jet Stream and Bombardier Dash 8.

OEM Authorizations and Licenses

Piedmont believes that establishing and maintaining relationships with OEMs of aircraft systems and components is an important factor in achieving sustainable success as an independent MRO service provider. OEMs grant participants in the overhaul and repair services market authorizations or licenses to perform repair and overhaul services on the equipment they manufacture. OEMs maintain tight controls over their authorized and licensed MRO service providers, in order to maintain high quality of service to their customers, and generally grant few authorizations or licenses. Obtaining OEM authorizations requires sophisticated technological capabilities, experience-based industry knowledge and substantial capital investment. Piedmont believes that service providers that have received OEM authorizations and licenses gain a competitive advantage because they typically receive discounts on parts, technical information, OEM warranty support and use of the OEM name in marketing. Piedmont is an authorized repair station licensed by Honeywell, the largest manufacturer of APUs, for several of its APU models.

Machining, Plating and Grinding, or MPG Services

Piedmont extended the provision of MPG services, either as supplementary to its traditional MRO services or as stand-alone services. Piedmont believes that establishing and maintaining relationships with customers to its MPG shop is an important factor in achieving sustainable success as an independent MRO service provider and creates a competitive advantage.

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Customers

General

TAT targets both the commercial and defense markets for aviation and ground applications. Our customers include commercial manufacturers of military equipment, commercial airlines, aircraft manufacturers, military forces, defense industries, and other manufacturers of electronic systems, aviation units and machinery in the U.S., Europe, Asia, South America and Israel.

Major Customers

OEM Customers

TAT provides, primarily through Gedera and Bental, OEM services worldwide to customers in the commercial, defense and industrial markets. TAT currently sells its OEM products and systems to approximately 200 commercial and military aircraft manufacturers and defense contractors, and the U.S. and Israeli governments.

TAT’s leading OEM customers are set in the following table:

Aircraft manufacturers	Boeing Aircraft Company, Airbus, Cessna Aircraft Company, Bombardier, Cirrus Aircraft Inc., Pilatus Aircraft Ltd., Embraer, Bell Helicopter, Lockheed Martin.
System manufacturers/integrators and Defense Contractors	Liebherr-Aerospace, Thales Electron Devices, Honeywell International, Rafael, Elbit, IAI, Lockheed, Aeronautics, Schiebel, Martin, Fairchild, British Aerospace, EADS, Eaton Aerospace, Parker Hannifin Corporation.
Industry players	Kodak (Creo), IBM

The development projects and purchasing processes of many of TAT’s OEM customers are lengthy and complex and accordingly, involve long term supply contracts with several of its material customers. These agreements provide for delivery schedules that are customized for the relevant product or service. With some of its customers, TAT enters into master purchase orders in which the anticipated supply quantities as well as the prices for the supplied products are determined for a certain period, and the actual purchase orders are fulfilled based on customer demands from time to time. In addition, TAT also enters into master agreements that determine supply quantities and prices for a set period, but under which the customer is not obligated to purchase any quantity of products.

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MRO Customers

TAT services approximately 200 MRO customers, primarily through Limco and Piedmont, including major U.S. domestic and international airlines, air cargo carriers, maintenance service centers, the U.S. military and navy and other military air forces.  TAT is not a party to any OEM manufacturing contracts, and acts solely upon orders received from its MRO services’ customers.

TAT’s leading MRO customers are set in the following table:

Domestic and International Airlines and Air Cargo carriers	Singapore Airlines, Air France-KLM, SAS, Swiss, EL AL, Delta, United, US Airways, Air Canada Jazz, Air Wisconsin, Austrian Airlines, TAM, Saudia, Interjet, Thai, Korean Air, Air India, FedEx and Cargolux.
Maintenance Service Centers	Fokker, Honeywell International, Kellstrom Commercial, Aerokool, Lufthansa Technik, UTAS-Hamilton, SR Technics, Evergreen Aviation Component Services.
Government and Air forces	U.S. Army, Air Force and Navy; Israeli Air force; NATO Air-forces

Due to the long term relationships of TAT with many of its customers, their relative financial stability and their loyalty to TAT, TAT anticipates that the risk of major customer terminations is low. TAT also makes significant efforts to penetrate new markets and to broaden its customer base in order, among other things, to reduce the risk of relying on a small number of customers.

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Military Contracts

Sales to the U.S. and Israeli governments accounted for approximately 3.6% and 0.6% of TAT’s revenues for the year ended December 31, 2013, approximately 4.1% and 0.5% of its revenues for the year ended December 31, 2012 and approximately 5.4% and 1.2% of its revenues for the year ended December 31, 2011, respectively.

Many of TAT’s contracts are competitively bid and awarded on the basis of technical merit, personnel qualifications, experience and price. TAT also receives some contract awards involving special technical capabilities on a negotiated, noncompetitive basis due to TAT’s technical capabilities.

TAT provides products under government contracts that usually require performance over a period of several months to several years. Long-term contracts for the U.S. military may be conditioned upon continued availability of congressional appropriations. Variances between anticipated budget and congressional appropriations may result in a delay, reduction or termination of these contracts.

The vast majority of the governmental contracts to which TAT is party to are fixed-price contracts, some of which contain fixed price escalation mechanism. Under these contracts TAT agrees to perform specific work for a fixed price and, accordingly, realizes the benefit or detriment to the extent that the actual cost of performing the work differs from the contract price. The allowable government contract costs and fees of TAT are subject to audit and may result in non-reimbursement of some contract costs and fees. While governments reserve the right to conduct further audits, audits conducted for periods through fiscal year 2013 have resulted in no material cost recovery disallowances for TAT.

The eligibility of TAT to perform under its government contracts requires TAT to maintain adequate security measures. TAT has implemented security procedures that it believes adequately satisfies the requirements of its current government contracts.

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Sales and Marketing

Gedera

Gedera derives its revenues mainly from sales to customers in the United States, Israel and Europe. The below tables detail Gedera’s (i) geographic revenues; and (ii) revenues derived from commercial and defense customers, for the years ended December 31, 2013 and 2012, before elimination of intercompany sales of $4.0 million and $3.0 million, respectively.

	Year Ended December 31,
	2013					2012
Geographic Region	Revenues In Thousands		Percentage			Revenues In Thousands		Percentage
North America	$	14,679		47.1	%	$	11,064		35.7	%
Europe		2,302		7.4			1,966		6.3
France		5,482		17.6			4,604		14.8
Israel		6,359		20.4			9,326		30.1
Other		2,316		7.4			4,072		13.1
Total	$	31,138		100	%	$	31,032		100	%

	Year Ended December 31,
	2013					2012
	Revenues In Thousands		Percentage			Revenues In Thousands		Percentage
Commercial Customers	$	13,478		43.3	%	$	14,019		45.2	%
Defense Customers		17,660		56.7			17,013		54.8
Total	$	31,138		100	%	$	31,032		100	%

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Limco

Limco derives its revenues mainly from sales to customers in the US and Europe. The below tables details Limco’s (i) geographic revenues and (ii) revenues derived from commercial and defense customers, for the years ended December 31, 2013 and 2012, respectively.

	Year Ended December 31,
	2013					2012
Sources of Revenues	Revenues in Thousands		Percentage			Revenues  In Thousands		Percentage
North America	$	20,145		67.4	%	$	20,175		72.8	%
Europe		3,945		13.2			3,210		11.6
Israel		612		2.0			468		1.7
Other		5,205		17.4			3,856		13.9
Total	$	29,907		100	%	$	27,709		100	%

	Year Ended December 31,
	2013					2012
	Revenues In Thousands		Percentage			Revenues In Thousands		Percentage
Commercial Customers	$	18,561		62.1	%	$	15,240		55.0	%
Defense Customers		11,346		37.9			12,469		45.0
Total	$	29,907		100	%	$	27,709		100	%

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Piedmont

Piedmont derives its revenues mainly from sales to customers in the US and Europe. The below tables details Piedmont’s geographic revenues and (ii) revenues derived from commercial and defense customers, for the years ended December 31, 2013 and 2012, respectively.

	Year Ended December 31,
	2013					2012
Sources of Revenues	Revenues in Thousands		Percentage			Revenues  In Thousands		Percentage
North America	$	14,643		65.3	%	$	16,442		73.3	%
Europe		3,713		16.6			93		-
Netherland		1,553		6.9			4,624		21.0
Israel		-		-			-		-
Other		2,521		11.2			1,283		5.7
Total	$	22,430		100	%	$	22,442		100	%

	Year Ended December 31,
	2013					2012
	Revenues In Thousands		Percentage			Revenues In Thousands		Percentage
Commercial Customers	$	22,430		100	%	$	22,442		100	%
Defense Customers		-		-			-		-
Total	$	22,430		100	%	$	22,442		100	%

Gedera, Limco and Piedmont market their products and services through their respective marketing staffs and a worldwide network of independent representatives. Gedera’s, Limco’s and Piedmont’s representatives are strategically located near key customer sites in offices throughout the United States, Europe, the Middle East, Asia and South America. Their staff is in regular contact with engineering and procurement personnel and program managers of existing and target customers to identify new programs and needs for their products, obtain requests for quotations and identify new product opportunities. Gedera’s, Limco’s and Piedmont’s marketing activities also include advertising in technical publications which target heat transfer components and related markets, attending exhibitions, trade shows and professional conferences, organizing seminars and direct mailing of advertisements and technical brochures to current and potential customers and advertising in technical publications which target relevant products and related markets.

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We did not include Bental’s sales and marketing since its operating results are disclosed as discontinued operation as of December 31, 2013.

Backlog

At December 31, 2013, TAT had a backlog of approximately $43.3 million for products and services (excluding discontinued operations). TAT anticipates that approximately $27.9 million of such backlog will be delivered by December 31, 2014 and approximately $15.4 million will be delivered by December 31, 2015 and thereafter. At December 31, 2012, TAT had a backlog of approximately $52.7 million for products and services.

Product and Service Warranties

TAT 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. To date, TAT’s warranty costs have not been substantial. As of December 31, 2013, the combined warranty reserve for TAT was $228 thousand.

Competitive Environment

OEM of Heat Management Solutions

The aerospace and defense OEM industries in general and specifically, the commercial and military aviation markets, are characterized by intense competition and the need to constantly be in the forefront of technological innovations in order to be able to offer advanced and attractive products. Competition in these OEM markets is also based on price, quality and turn-around time. TAT estimates the market size of heat management solutions to be significant based on the scope of development projects and purchasing processes of the potential customers. TAT estimates that due to the high barriers to enter the aerospace and defense OEM industries, which include the need for highly qualified and trained personnel, technologically advanced facilities and the need to obtain appropriate governmental approvals, there are a small number of competing suppliers in the markets in which it operates. The nature of the projects in the OEM industry, which are often time consuming and complex also require long term supplier relationships and customer loyalty in order to succeed.

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TAT’s competitors in the global OEM aerospace and defense industries can be divided into two main groups:

·   Complete system manufacturersthat either independently or through subcontractors, design, develop  and manufacture complete systems (such as a manufacturer of a cooling system for aircraft hydraulic systems) directly for the platform manufacturer (i.e. hydraulic system; business jet). Although these companies have the capabilities to design and manufacture each standalone component in a complete system (i.e. a heat exchanger integrated in the cooling system for hydraulic systems) it is unlikely that such companies will compete with TAT in projects where there is a specific requirement for a stand-alone component. These companies will compete on 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.

·   Component manufacturers for which the design and manufacture of components (such as heat exchangers) is the main business (and which are normally placed in the “value chain” one level below the system manufacturers, such as a manufacturer of a cooling system for aircraft’s Hydraulic system and two levels below the platform manufacturer such as manufacturer of a new aircraft). For certain platform, although some of the component manufacturers have the capabilities to design, develop and manufacture a complete system (i.e. environmental cooling system for business jet), these companies will usually not compete on projects for complete systems in which their manufactured component constitutes a small part of the complete system, mainly due to the extreme competitive barriers to entry and to their inability to move up the “value chain” from a component supplier to a whole system manufacturer. These companies are likely to compete in projects where there is a specific requirement for a standalone aviation component (such as a heat exchanger) and in tenders by manufacturers of complete systems or products for sub-contractors.

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The major competitors of TAT in the area of OEM of Heat Management Solutions include manufacturers in the U.S. such as Honeywell International, Hughes-Treitler division of Ametek Inc., Lytron Inc., Kintex, Niagra Thermal, Hamilton Sundstrand, Stewart Werner South Wind Corp., United Aircraft Products and Triumph Thermal Systems, manufacturers based in Europe such as I.M.I. Marston Ltd., Meggitt (including Serck Aviation), Liebherr-Aerospace Toulouse S.A and manufacturers based in Asia such as Sumitomo Precision Products from Japan. Such competitors may enjoy competitive advantages over Gedera, such as:

·   The ability to independently offer systems in addition to components;

·   Greater access to capital;

·   Stronger relationships with customers and suppliers;

·   Better name recognition;

·   Access to superior technology and marketing resources; and

·   The ability to adapt more quickly to changes in customer requirements and industry conditions or trends.

OEM of Electric Motion Systems

The market in which Bental operates is highly competitive and is characterized by large customers that are related to the defense and/or aerospace governmental agencies in their countries. Bental’s market is also subject to strict import and export regulations and to the budgetary constraints imposed by the governments of such countries. Bental is required to constantly be at the forefront of technological innovations in order to be able to offer advanced innovative products to its customers. Bental’s operations require highly qualified and trained engineering, manufacturing, information and quality assurance personnel.

The OEM of Electric Motion Systems operating results aggregated into discontinued operations for each of the three years ended on December 31, 2013, following the sale of our entire interest in this segment.

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Heat Transfer Services

The market for Heat Transfer services and products is highly competitive. Competition in this market is based on quality, price, and the ability to provide a broad range of services and to perform repairs and overhauls rapidly. TAT’s competitors in the global Heat Transfer Services can be divided into two main groups:

·   Service Divisions of OEMs –generally, each OEM of products in the heat management solutions segment has the necessary capabilities to provide MRO services for products it designs and manufactures throughout their lifetime – commencing on the initial production period and through the after-market period (service divisions of OEMs). These service divisions of OEMs may also acquire capabilities to service other OEM’s products and to become a provider of MRO services.

·   Service Centers –which provide MRO services for broad range of components and systems. These Service Centers can be either the in-house maintenance services of a number of commercial airlines or other independent service providers.

Accordingly, in the areas of OEM operations, manufacturers of components can compete with manufacturers of complete systems, mainly for small systems.  Such OEM manufacturers can also compete for the provision of MRO services with other providers of MRO services.

For heat transfer MRO services, TAT’s major competitors are the Triumph Accessories, Drake Air- Ametek, LORI Heat Transfer Center of Honeywell, American Cooler, Hamilton Malaysia, Lufthansa Technik and SECAN-Honeywell (France).

A number of Limco’s competitors have inherent competitive advantages. For example, Limco competes with the service divisions of large OEMs who in some cases have design authority with respect to their OEM products and are able to derive significant brand recognition from their OEM manufacturing activities. Limco also competes with the in-house service divisions of large commercial airlines and there is a strong incentive for an airline to fully utilize the services of its maintenance employees and facilities. Further, Limco’s competitors may have additional competitive advantages, such as:

·   The availability of  large quantities of expensive spare parts;

·   Greater access to capital;

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·   Stronger relationships with customers and suppliers;

·   Better name recognition;

·   Access to superior technology and marketing resources; and

·   The ability to adapt more quickly to changes in customer requirements and industry conditions or trends.

MRO Services for Aviation Components

The market for MRO services, in which Piedmont operates, is highly competitive. Competition in this market is based on quality, price, and the ability to provide a broad range of services and to perform repairs and overhauls rapidly. Piedmont’s primary MRO services competitors are the service divisions of OEMs, the in-house maintenance services of a number of commercial airlines and other independent service providers. For APU and landing gear MRO services Piedmont’s major competitors are Standard Aero Group Inc., Aerotech International Inc., Honeywell International, Chase Aerospace, Professional, Messier-Dowty Aerospace (MD), AAR Corp., Hawker Pacific and APRO.

A number of Piedmont’s competitors have inherent competitive advantages. For example, Piedmont competes with the service divisions of large OEMs who in some cases have design authority with respect to their OEM products and are able to derive significant brand recognition from their OEM manufacturing activities. Piedmont also competes with the in-house service divisions of large commercial airlines and there is a strong incentive for an airline to fully utilize the services of its maintenance employees and facilities. Further, Piedmont’s competitors may have additional competitive advantages, such as:

·   The ability to adapt more quickly to changes in customer requirements and industry conditions or trends;

·   Greater access to capital;

·   Stronger relationships with customers and suppliers;

·   Better name recognition; and

·   Access to superior technology and marketing resources.

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Competitive Strengths

We believe that TAT’s success can be attributed to several critical factors, including the following:

·   Active efforts to preserve its customer base in existing projects, while actively making efforts to broaden and increase its engagements with such clients.

·   Conducting marketing activities aiming at penetrating new geographical markets and obtaining new customers, while taking advantage of the unique knowledge and expertise that Gedera, Limcoand Piedmont gained in various areas.

·   Entering into additional related operating segments that will enable Gedera, Limco and Piedmont to fulfill its growth potential.

·   Providing its customers with the best value, including competitive prices, by tailoring service packages that combine the design and planning of an OEM component, the manufacture of such component, andthe 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 Piedmont target.

·   Enhancing its 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 or ESAA. This will allow shortening the long and complex approval process, streamlining the design and certification process, and reducing costs.

·   Constant search for new technologies and manufacturing techniques in the heat management solutions line.

·   Innovations and improvements aiming at enhancing the quality and performance of Gedera’s, Limco’s and Piedmont’s existing products.

·   Cutting delivery times and reducing costs.

·   Entrepreneurship and innovation in the development of new products in an effort to become a market leader and to enter into long term platforms.

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Engineering and Manufacturing

As of December 31, 2013, TAT had 392 employees engaged in manufacturing, repair, testing of products and engineering (out of a total of 478 employees – excluding Bental’s employees). TAT believes that its engineering staff provides it with the ability to support its customers with innovative and efficient products while maintaining short product development cycles, high quality design and competitive pricing.

Gedera’s engineering staff has extensive knowledge and experience related to its heat transfer products. Most of Gedera’s product lines have a designated project manager who is an experienced engineer and is in charge of all the activities in his area. The product manager interfaces with the customer, engineering department, manufacturing department and vendors, and is responsible for all aspects of the program including scheduling, adherence to specifications, customer support and reporting.

In general, Gedera has manufacturing capabilities for most of the components of its heat transfer components. Gedera also manufactures the necessary tools, fixtures, test equipment and special jigs required to manufacture, assemble and test these products. Gedera developed proprietary design techniques which assist in the mechanical design and manufacturing of its products. All of Gedera’s products are inspected and tested by trained inspectors using highly sophisticated test equipment in accordance with customer requirements.

Bental’s engineering staff has extensive knowledge and experience related to its electric motion systems. Most of Bental’s product lines have a designated project manager who is an experienced engineer and is in charge of all the activities in his area. The product manager interfaces with the customer, engineering department, manufacturing department and vendors, and is responsible for all aspects of the program including scheduling, adherence to specifications, customer support and reporting.

Limco’s engineering department enhances its ability to provide its customers with high-end top quality MRO services, supports the provision of MRO services for new products with commercial potential and supports its OEM activity. Limco’s engineering department employs several certified mechanical and aerospace engineers. Limco’s multi-disciplinary team of engineers specializes, among others, in heat transfer components and supports all processes of thermal and structural analysis, mechanical and metallurgical research and development for manufacturing design. All of Limco’s engineers have direct experience with aerospace component repair and have experience with the process of obtaining supplemental type certificates from the FAA and in obtaining FAA product manufacturing authorizations. Limco utilizes onsite Designated Engineering Representative, or DER, at Piedmont facility who is certified by the FAA to approve the repair of engines, mechanical systems and equipment, which enables Limco to respond quickly to its customers’ needs. Having a DER available on staff allows Limco to enter the market for a particular type of service more quickly than those of its competitors who do not have an immediate access to a DER. Limco works directly with the FAA Aircraft Certification Office in obtaining approvals on projects that are outside its DER’s authority.

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Piedmont’s engineering department enhances its ability to provide its customers with high-end top quality MRO services and supports the provision of MRO services for new products with commercial potential. Piedmont’s engineering department employs several certified mechanical and aerospace engineers, including a DER certified by the FAA. Piedmont’s engineers have direct experience with aerospace component repair and have experience with the process of obtaining supplemental type certificates from the FAA and in obtaining FAA product manufacturing authorizations. Piedmont’s onsite DER is certified by the FAA to approve the repair of APUs and equipment, which enables Piedmont to respond quickly to its customers’ needs. Having a DER on staff allows Piedmont to enter the market for a particular type of service more quickly than its competitors who do not employ a DER. Piedmont works directly with the FAA Aircraft Certification Office in obtaining approvals on projects that are outside its DER’s authority.

Research and Development

The technological developments in the markets in which TAT operates, increase the need to constantly examine the use of new materials and technology in an effort to improve both the physical characteristics of the products (size, weight), as well as their performance (optimal heat transfer, higher reliability and increased lifespan). TAT also develops new products and enhanced functionalities to its existing products based on customer demands and by the competitive environment and market potential. TAT invests resources to attain such technological and product improvements in cooperation with its customers.

Source and Availability of Raw Materials and Spare Parts

Gedera, Bental, Limco and Piedmont acquire most of the components for the manufacture of their products from a limited number of suppliers and subcontractors, most of whom are located in Israel and the United States. Certain of these suppliers are currently the sole source of one or more components upon which Gedera, Bental, Limco and Piedmont are dependent. Since many of Gedera’s, Bental’s, Limco’s and Piedmont’s purchases require long lead-times, a delay in the supply of an item can significantly delay the delivery of a product. Generally, Gedera, Bental, Limco and Piedmont have not experienced difficulty in obtaining timely deliveries of necessary components. The raw materials used in Gedera’s, Bental’s, Limco’s and Piedmont’s manufacturing programs are generally readily available metals and alloys. Gedera, Bental, Limco and Piedmont have not had any difficulty in obtaining such materials in the past and if they are unable to obtain these components when needed, Gedera, Bental, Limco and Piedmont would experience delays in manufacturing their products and their financial results could be adversely affected.

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Gedera, Bental, Limco and Piedmont select their suppliers primarily based on their ability to ensure that their parts are serviceable and traceable to OEM-approved sources, their delivery performance and their ability to help reduce their total cost of procuring those parts. For quality control, cost and efficiency reasons, Gedera, Bental, Limco and Piedmont generally purchase supplies only from vendors with whom they have ongoing relationships or who their customers have previously approved.

Authorizations from OEMs often require that TAT purchases component parts that are needed for its MRO services from the OEM or its designated distributors. Gedera and Piedmont have separate agreements with Honeywell under which Honeywell has agreed to sell Gedera and Piedmont certain parts at a discount for a period of five years, ending August 28, 2017 and May 31, 2014, respectively.

When deemed essential, Gedera, Bental, Limco and Piedmont have been and are investing efforts in order to qualify second sources or have identified alternate sources for many of its parts needs.

Israeli Export Policy

Exports of military related products are subject to the military export policy of the State of Israel. Current Israeli Government policy encourages exports to approved customers, provided that such exports do not run counter to Israeli policy or national security considerations. Gedera must obtain a permit to initiate a sales proposal and ultimately an export license for the transaction required. Gedera may not be able to obtain export permits or licenses in the future. In addition, governmental policy with respect to military exports may be altered. However, to date Gedera has not encountered any significant difficulties in obtaining necessary permits or licenses for sale of its products.

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Proprietary Rights

At the present time Gedera, Limco and Piedmont do not own any patents. Gedera, Limco and Piedmont rely on laws protecting trade secrets, and consider such items proprietary, but TAT believes that Gedera, Limco and Piedmont’s success depends less on the ownership of such proprietary rights than on their innovative skills, technical competences, marketing and engineering abilities. Gedera, Limco and Piedmont have no material registered trademarks.

B.           Government Regulations

Aerospace and Safety Regulations

The commercial aerospace industry is highly regulated by the FAA in the United States, EASA in Europe, the Civil Aviation Authority in England and other governmental authorities elsewhere in the world, while the military aerospace industry is governed by military quality specifications established by the U.S. Department of Defense for the manufacturing and repair industries and ISO-9000. TAT is required to be certified by one or more of these entities and, in some cases, by individual OEMs. TAT must also satisfy the requirements of its customers, including OEMs and airlines that are subject to FAA regulations and to evolving industry standards, and provide these customers with products that comply with the government regulations applicable to commercial flight operations. TAT believes it currently satisfies or exceeds these FAA maintenance standards in its repair and overhaul activities. Each of its repair stations is approved by the FAA. TAT also believes it currently satisfies all industry standards in its facilities.

TAT’s operations are also subject to a variety of worker and community safety laws including the Occupational Safety and Health Act of 1970, known as OSHA, which mandates general requirements for safe workplaces for all US employees. In addition, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances. TAT believes that its operations are in material compliance with OSHA’s health and safety requirements.

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TAT believes that it is in material compliance with US, European and other governmental regulations affecting the aerospace and defense industry.

Israeli Regulations

TAT’s operations in Israel are subject to supervision by the Ministry of Defense and Civil Aviation Administration. Gedera and Bental are certified by the Israeli Air Force and the Ministry of Defense for both manufacturing and maintenance. Gedera is also licensed as a repair station for certain components by the Israeli Civil Aviation Administration. In addition, Gedera’s and Bental’s export of certain products and/or know-how is subject to approval by the Department for Control of Defense Export of the Israeli Ministry of Defense, known as API. Permits from API must be obtained for the initiation of sales proposals with regard to such exports, as well as for the actual export of such products.

Environmental Matters

TAT’s operations are subject to a number of federal, state and local environmental laws in the United States and Israel, and to regulation by government agencies, including the U.S. Environmental Protection Agency. Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transportation and disposal of pollutants and hazardous substances. These authorities may require TAT to initiate actions to remediate the effects of hazardous substances which may be or have been released into the environment, and require TAT to obtain and maintain permits in connection with TAT’s operations. This extensive regulatory framework imposes significant compliance burdens and risks.

Although TAT seeks to maintain its operations and facilities in compliance with applicable environmental laws, there can be no assurance that TAT has no violations, or that change in such laws, regulations or interpretations of such laws, will not require TAT to make significant additional expenditures to ensure compliance in the future. Currently, TAT does not believe that it will have to make material capital expenditures for its operations to comply with environmental laws or regulations, or to incur material costs for environmental remediation during the 2014 fiscal year.

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TAT has received no material third party environmental claims relating to its facilities, and TAT believes that it has all material licenses and certifications that are required in the jurisdictions in which it operates.

C.           Property, Plants and Equipment

The Gedera facility is located in Park Re’em near Gedera. The Park Re’em location houses TAT’s executive offices, Gedera’s research and development and manufacturing operations and includes approximately 344,000 square feet facility. The land of this facility is leased by TAT Industries from the Israel Land Authority, or ILA pursuant to a lease that expires in 2016 with respect to one plot (237,000 square feet) and 2020 with respect the other plot (107,000 square feet). The leases term may be extended for a subsequent period of up to 49 years, subject to payment to be calculated according to the ILA's rules. Approximately 43,000 square feet of the facility was sub-leased to TAT in 1991 until 2020 for rental fees which were paid in advance for the whole sub-lease period. TAT sub-leases the remaining 301,000 square feet of the facility from TAT Industries pursuant to an agreement TAT entered into in connection with the purchase of the operations relating to the manufacture of aviation accessories of TAT Industries in February 2000. The agreement is for a period of 24 years and 11 months and the rental fee is subject to revaluation every fifth year. From 2000 to 2004, TAT paid TAT Industries annual rental fees of approximately $300,000 per year, with an additional incremental payment of 2% per year. In 2005 the rental fee was reviewed by a real estate appraiser, and as a result was increased to $310,000 per year with an additional incremental payment of 2% per year. In 2010 the rental fee was reviewed again by a real estate appraiser, and as a result was increased to $400,000 per year with an additional incremental payment of 2% per year. Total rental payment TAT paid to TAT Industries during 2013, 2012 and 2011 were $424,000, $416,000 and $408,000, respectively. See also Item 7.B "Major Shareholders and Related Party Transactions – Related Party Transactions – Management and Services Agreement with TAT Industries."

The operations of Bental are conducted in Kibbutz Marom-Golan. The Marom-Golan facility is located on a 54,000 square feet land, that houses Bental’s offices, research and development and manufacturing operations that include all together approximately 18,500 square feet. The facility is leased from Bental Investments Cooperative Agricultures Society Ltd. and from Kibbutz Marom-Golan pursuant to a lease expired in December 2013 and suppose to be renwed in the same terms in the near future (for a 14,500 square feet plot) and June 2017 (for a 4,000 square feet plot), respectively. Total rental payment Bental paid in 2013 and 2012 was $53,000 and $51,000, respectively.

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Limco owns and operates a 55,000 square feet manufacturing plant in Tulsa, Oklahoma which has historically supported all its business, including its aftermarket heat transfer component repair station. This facility also has housed Limco’s administration, engineering, quality control and support services. Limco also leases an additional 16,000 square feet repair station adjacent to its Tulsa manufacturing plant which has supported its heat transfer component and pneumatic ducting MRO services. In 2013, 2012 and 2011, the annual rental expense for this property was $50,000, $38,000 and $35,000, respectively for each one of these years. The lease expires on October 31, 2016.

Piedmont leases approximately 56,000 square feet space for its facility in Kernersville, North Carolina to support its aftermarket APU, Landing Gear and related component repair station. In 2013, 2012 and 2011, the annual rental expense for this property was $78,000, $78,000 and $70,000, respectively for each one of these years. The lease expires on October 31, 2016. In 2013, 2012 and 2011, Piedmont leased an additional 56,000 square feet space in Kernersville (the majority of the leased space was released in November 2012, out of which 4,400 square feet were leased until July 2013), for which the annual rental expense was $11,000, $69,000 and $86,000, respectively for each one of these years. Piedmont also leases approximately 32,000 square feet for its facility in Winston Salem, North Carolina to support its plating and machining shop as well as related component repairs. In 2013, 2012 and 2011, the annual rental expense for this property was $76,000, $48,000 and $48,000, respectively for each one of these years. The lease expires on December 31, 2017.

Item 4A.              Unresolved Staff Comments

Not applicable.

Item 5.                 Operating and Financial Review and Prospects

Operating Results

The following discussion of our results of operations should be read together with our consolidated financial statements and the related notes, which appear elsewhere in this annual report.  The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties.  Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report.

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Overview

TAT provides a variety of services and products to the aerospace and defense industries under four segments: (i) OEM of Heat Management Solutions; (ii) OEM of Electric Motion Systems; (iii) Heat Transfer Services and Products; and (iv) MRO services for Aviation Components.

TAT’s activities in the field of OEM of Heat Management Solutions primarily relate to its Gedera facility and include the (i) design, development, manufacture and sale of a broad range of heat transfer products (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. It also includes, to a lesser extent, the maintenance services for heat transfer products and flow control accessories.

TAT’s activities in the field of OEM of Electric Motion Systems primarily relate to its subsidiary, Bental, and include the design, development, manufacture and sale of a broad range of electrical motor applications for airborne and ground systems.

TAT’s activities in the field of Heat Transfer Services and Products primarily relate to its subsidiary, Limco, and include the maintenance, repair and overhaul of heat transfer products and other aircraft component. Limco operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military. In addition to its MRO services, Limco also manufactures heat transfer products used in commercial, regional, business and military aircraft.

TAT’s MRO services for Aviation Components primarily relate to its subsidiary, Piedmont, and include the maintenance, repair and overhaul of APUs, and landing gear. Piedmont operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

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TAT is reliant on the commercial and military aviation and defense industries. Any downturn in these industries could decrease demand for its services and products and negatively impact its financial condition. The commercial airline industry is cyclical and has historically been subject to fluctuations due to general economic and political conditions, such as fuel and labor costs, price competition, downturns in the global economy and national and international events.

TAT’s revenues from OEM operations generally have higher gross margins than from MRO services. Respectively, the manufacturing of OEM products require higher level of expertise, associated labor and initial investments than does the provision of MRO services.

TAT’s cost of revenues for OEM operations and MRO services consists of component and material costs, direct labor costs, shipping expenses, royalties, overhead related to manufacturing and depreciation of manufacturing equipment. TAT’s gross margin is affected by the proportion of its revenues generated from each of its operational segments.

The principal factors that affect the operating income of TAT’s four segments in addition to their gross profit, is the amount TAT expends for selling and marketing expenses and general and administrative expenses. While TAT plans to tightly monitor and save on its operating expenses, TAT believes that these operating expenses may increase in the future in accordance with its plans to grow the business of these segments.

TAT’s research and development expenses are related to new products and technologies or significant improvement in existing products and technologies, primarily within the OEM operations in Israel and in the Heat Transfer Services and Products operating segment in the U.S.

TAT’s selling and marketing expenses during the past year increased compared to previous year. While TAT plans to tightly monitor and save on its operating expenses, TAT believes that its selling and marketing expenses may increase in the future in accordance with its plans to grow the business of these segments.

TAT’s general and administrative expenses have decreased during 2013, following an increase in 2012 compared to the previous year. The decrease in 2013 was primarily as result of management fees paid in 2012 to our previously controlling shareholder and provision recorded for a doubtful debt in previous year. The increase in 2012 was primarily as result of a provision recorded for a doubtful debt and a decrease in FAvS participation in certain operating expenses during year 2012 in the MRO services for aviation components operating segment

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Sources of Revenues

TAT, directly and through its subsidiaries, provides a variety of services and products to the commercial and military aerospace and defense industries, such as the manufacture, maintenance and repair 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; other environmental control and cooling systems a variety of other electronic and mechanical aircraft accessories and a wide range of electric motion systems.

TAT specializes in the repair and overhaul of heat transfer products, APUs, landing gear and pneumatic ducting. TAT is a well-recognized repair center for heat transfer products of Hamilton Sundstrand, a leading provider of aerospace products, to provide MRO services for all of its air-to-air heat transfer products, and an authorized repair center by Honeywell, a leading manufacturer of aerospace products and aerospace services provider, to provide MRO services for several of their APU models. TAT’s repair stations are certified by the FAA and the EASA as well as by the Civil Aviation Administration of Vietnam (CAAV) and Thailand (Thai) .

The following table reflects the geographic breakdown of TAT’s revenues for each of the three years ended December 31, 2013:

	Years Ended December 31,
	2013					2012					2011
	Revenues in Thousands		% of Total Revenues			Revenues in Thousands		% of Total Revenues			Revenues in Thousands		% of Total Revenues
Sale of products (*)
North America	$	18,016		52.4	%	$	16,475		45.4	%	$	21,495		58.0	%
Europe		2,292		6.7	%		1,966		5.4	%		2,507		6.9	%
France		5,482		16.0	%		4,604		12.7	%		3,264		8.9	%
Israel		6,248		18.2	%		9,147		25.2	%		8,218		22.5	%
Other		2,326		6.7	%		4,071		11.2	%		1,353		3.7	%
Total	$	34,364		100.0	%	$	36,263		100.0	%	$	36,837		100.0	%

(*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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	Years Ended December 31,
	2013					2012					2011
	Revenues in Thousands		% of Total Revenues			Revenues in Thousands		% of Total Revenues			Revenues in Thousands		% of Total Revenues
Services
North America	$	27,639		61.2	%	$	25,648		61.6	%	$	25,416		68.9	%
Europe		7,658		16.9	%		4,624		11.1	%		3,875		10.5	%
Netherland		1,553		3.4	%		3,303		7.9	%		4,378		11.9	%
Israel		612		1.4	%		468		1.1	%		384		1.0	%
Other		7,725		17.1	%		7,609		18.3	%		2,849		7.7	%
Total	$	45,187		100.0	%	$	41,652		100.0	%	$	36,902		100.0	%

TAT’s revenues from its four operational segments for the three years ended December 31, 2013 were as follows:

	Year Ended December 31,
	2013						2012						2011
	Revenues in Thousands			% of Total Revenues			Revenues in Thousands			% of Total Revenues			Revenues in Thousands			% of Total Revenues
Revenues (*)
OEM of Heat Management Solutions	$	31,138			39.1	%	$	31,032			39.8	%	$	30,020			40.7	%
Heat Transfer Services and Products		29,907			37.6	%		27,709			35.6	%		27,603			37.4	%
MRO services for Aviation Components		22,429			28.2	%		22,442			28.8	%		20,146			27.3	%
Eliminations		(3,923	)		(4.9	) %		(3,268	)		(4.2	)%		(4,030	)		(5.4	)%
Total revenues	$	79,551			100.0	%	$	77,915			100.0	%	$	73,739			100.0	%

(*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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Costs and Expenses

Cost of revenues TAT’s cost of revenues for OEM operations and MRO services consist of component and material costs, direct labor costs, royalties, shipping expenses, overhead related to manufacturing and depreciation of manufacturing equipment. Cost of revenues for 2011 also included non-recurring expenses associated with a write down of inventory and impairment charges of long lived assets.

TAT’s gross margin was affected by the proportion of TAT’s revenues generated from OEM operations and MRO services in each of the reported years, as well as by non-recurring expenses associated with a write down of inventory and impairment charges of long lived assets recorded in 2011.

Research and development expenses, net. Research and development expenses, net are related to new products and technologies or to a significant improvement of products and technologies, net of grants and participations received.

Selling and marketing expenses. Selling and marketing expenses consist primarily of commission payments, compensation and related expenses of TAT’s sales teams, attendance at trade shows, advertising expenses and related costs for facilities and equipment.

General and administrative expenses. General and administrative expenses consist of compensation and related expenses for executive, finance and administrative personnel, professional fees, other general corporate expenses and related costs for facilities and equipment.

Impairment of goodwill and intangible assets.During the second quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System reporting unit, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill, as of June 30, 2012, for this reporting unit, with the assistance of an independent appraisal. Based on the results of this test, the Company determined that the entire balance of goodwill included in this reporting unit was impaired and recorded an impairment charge of $1.0 million.

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Financial income (expense), net. Financial income (expense), net consists of income and interest expense. Interest expense relates to the interest paid to banks and changes in the rate of the NIS against the U.S. dollar.

Other income (expense). Other income (expense) results from capital gain on sale of property and equipment.

Tax expense (income). Tax expense consists of Israeli, U.S. federal, state and local taxes on the income of TAT’s business and changes in deferred tax assets (liabilities).

Net loss from discontinued operations. Consists of a $1.9 million loss from the sale of entire interest in Bental, which assets and liabilities were segregated at the end of 2013 and classified as held for sale assets and liabilities. In addition, the Company recorded a loss from discontinued operations of $0.2 million for the year ended on December 31, 2013.

Impairment of share in associated company.During the quarter ended June 30, 2012, TAT recognized an impairment with respect to its approximately 30% interest in FAvS, which was based on an independent appraisal.

Critical Accounting Policies and Estimates

TAT’s consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require management to make certain estimates, judgments and assumptions based upon information available at the time that they are made, historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. While all the accounting policies impact the financial statements, certain policies may be viewed to be critical. These policies are those that are both most important to the portrayal of TAT’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments and estimates. Actual results could differ from those estimates.

In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles in the United States and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. Management has reviewed these critical accounting policies and related disclosures with TAT’s Audit Committee.

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TAT’s management believes the significant accounting policies which affect management’s more significant judgments and estimates used in the preparation of TAT’s consolidated financial statements and which are the most critical to aid in fully understanding and evaluating the reported financial results include the following:

· Revenue recognition

· Inventory valuation

· Goodwill, Intangible assets and Long-lived assets

· Income taxes

· Doubtful debts

· Fair value estimation of TAT’s investment in FavS, performed by management with the assistance of an independent appraisal.

· Held for sale classification and discontinued operations.

Segments

TAT operates under four segments: (i) Original Equipment Manufacturing or “OEM” of Heat Management Solutions (ii) OEM of Electric Motion Systems (iii) Heat Transfer Services and Products, and (iv) Maintenance, Repair and Overhaul or “MRO” services for Aviation Components.

TAT’s activities in the area of OEM of Heat Management Solutions primarily relate to its Gedera facility and include (i) the design, development, manufacture and sale of a broad range of heat transfer products (such as heat exchangers, pre-coolers and oil/fuel hydraulic coolers) used in mechanical and electronic systems on-board commercial, military and business aircraft; (ii) the 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. It also includes, to a lesser extent, the maintenance services for heat transfer products and flow control accessories.

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TAT’s activities in the area of OEM of Electric Motion Systems primarily relate to its subsidiary, Bental, and include the design, development, manufacture and sale of a broad range of electrical motor applications for airborne and ground systems. On February 18, 2014, we entered into an agreement to sell our entire interest in Bental, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5 million. Following such transaction, Bental Investments will hold 100% of Bental’s outstanding share capital. Closing of the transaction is expected to take place within the next several weeks.

TAT’s activities in the field of Heat Transfer Services and Products primarily relate to its subsidiary, Limco, and include the maintenance, repair and overhaul of heat transfer equipment and in a lesser extent, the manufacturing of certain heat transfer products. TAT’s Limco subsidiary operates an FAA certified repair station, which provides heat transfer MRO services and products for airlines, air cargo carriers, maintenance service centers and the military.

TAT’s activities in the field of MRO services for Aviation Components primarily relate to its subsidiary, Piedmont, and includes the maintenance, repair and overhaul of APUs, landing gear and other aircraft components. TAT’s Piedmont subsidiary operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

Revenue Recognition

TAT generates its revenues from the sale of products and systems (the OEM segments) and from providing MRO Services (remanufacture, repair and overhaul services and long-term service contracts).

Revenues from the sale of products and services are recognized in accordance with ASC 605-10-S99 when persuasive evidence of an arrangement exists, delivery of the product has occurred, provided the collection of the resulting receivable is probable, the price is fixed or determinable and no significant obligation exists. TAT does not grant a right of return.

Revenues from product sales are recognized when product is shipped to the customer and title passes to the customer.

Revenues from multi-year, fixed price contracts for OEM customers are recognized when a product is shipped (and title passes) to the customer. Management provides for losses, if expected for the remaining portion of such contracts. For the years ended December 31, 2013, 2012 and 2011, no losses have been recognized for such fixed price contracts.

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Revenues from MRO services are recognized as services are performed, at the time when the customer-owned material is shipped back to the customer.

Revenue from maintenance contracts are accounted according to ASC 605-10-S99. Accordingly, revenues from maintenance contracts are recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract. TAT estimates the costs that are expected to be incurred based on its experience with the aggregate costs incurred and to be incurred on contracts of this nature. The cost incurred related to the maintenance contracts are not incurred on a straight-line basis, as the timing to provide the maintenance services is dependent on when parts under these contracts require maintenance, therefore TAT accrues revenue based on anticipated costs per contract as costs are incurred. These revenues are then compared to actual results and adjusted to either deferred revenue for results greater than historical estimates or expensed in those cases of performances less than historical estimates. These accounts are reviewed monthly and adjusted as needed based on cost structures.

Revenues from royalties from sales of products developed with TAT’s intellectual property, technology and technical assistance are recognized when the related sales are made.

Valuation of Goodwill, Intangible Assets and Long-Lived Assets

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

In conjunction with acquisitions of assets, we allocate the purchase price based upon the relative fair values of the assets acquired and liabilities assumed. In connection with a business combination, amounts assigned to intangible assets are based upon fair value. We regularly assess whether indefinite life intangibles and goodwill have been impaired and will adjust the carrying values of these assets whenever events or changes in circumstances indicate that some or all of the carrying value of the assets may not be recoverable. Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operating performances of our businesses and products. Future events could cause us to conclude that impairment indicators exist and that the carrying values of our intangible assets or goodwill are impaired. Any resulting impairment loss could have a material adverse impact on our financial position and results of operations.

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We evaluate the recoverability and measure the possible impairment of goodwill. The impairment test is a two-step process that begins with the estimation of the fair value of the reporting unit. The first step screens for potential impairment, and the second step measures the amount of the impairment, if any. Our estimate of fair value considers publicly available information regarding the market capitalization of the company, as well as (1) publicly available information regarding comparable publicly traded companies in the aviation industry, (2) the financial projections and future prospects of our business, including its growth opportunities and likely operational improvements, and (3) comparable sales prices, if available. As part of the first step to assess potential impairment, we compare, on an operating unit level, our estimate of fair value for such operating unit to the book value of the operating unit. If the book value of any of the operating units is greater than the estimate of its fair value, we would then proceed to the second step to measure the impairment, if any. The second step measures the amount of impairment by comparing the implied fair value of goodwill with its carrying value. Such implied fair value is determined by allocating the fair value of the operating unit to all of the assets and liabilities of that unit as if the operating unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the operating unit. The excess of the fair value of the operating unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. If the carrying amount of the operating unit’s goodwill is greater than its implied fair value, an impairment loss will be recognized in the amount of the excess. We have determined September 30 of each year as the date of the annual impairment test for goodwill and other indefinite life intangible assets.

During the second quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System reporting unit, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill, as of June 30, 2012, for this reporting unit, with the assistance of a third party valuation. Based on the results of this test, the Company determined that the entire balance of goodwill included in this reporting unit was impaired and recorded an impairment charge of $1.0 million.

During the quarter ended September 30, 2011, although revenues in the MRO for Aviation Components operating segment have increased in 2011 compared to 2010, profit margins for this operating segment were lower than anticipated. Accordingly, the Company reviewed certain of its long lived assets for impairment by estimating their fair value based on their net selling price and comparing those values to the carrying value of the assets. The Company concluded, based on this valuation, that certain fixed assets and intangible assets amounting to $1.9 million and $1.1 million, respectively at its MRO for Aviation Components operating segment were impaired.

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Due to management estimates of a continuing decline in sales levels in the OEM of Electric Motion Systems operating segment resulting from the weakness in the Israeli defense market, the Company reviewed indications for impairment of certain identifiable assets in this segment. Accordingly, the Company reviewed these assets for impairment by estimating their fair value based on their net selling price and comparing those values to the carrying value of the assets.  As a result the Company concluded that the intangible asset ‘Customer Relations’ at its OEM of Electric Motion Systems operating segment in the amount of $0.3 million was impaired.

Accordingly, the Company recorded a $3.3 million impairment charges during the quarter ended September 30, 2011 to reflect the fair value of the long lived assets mentioned above.

As of December 31, 2013 and 2012, there are no goodwill or other remaining identifiable intangible assets included on the balance sheet.

Investment in Company Accounted for using the Equity Method

Investment in which the Company exercises significant influence, which is not considered subsidiary ("associate"), is accounted for the equity method, whereby the Company recognizes its proportionate share of the company's net income or loss after the date of investment. The Company reviews this investment for impairment whenever events indicate the carrying amount may not be recoverable.

On December 4, 2009, the Company, through its subsidiary Piedmont, signed an investment agreement with FAvS. According to the agreement, Piedmont was issued 288,334 shares of Class B Common stock of First Aviation Services Inc., or FAvS, representing 37% of FAvS' then share capital (total number of shares acquired is adjusted as result of a 1 for 20 reverse stock split) and $ 750 thousand of FAvS Preferred shares (entitlement to cash dividends at an annual rate of 12% payable quarterly or to additional Preferred shares at an annual rate of 15%) in return for Piedmont's propeller and parts businesses. The net assets value  as of December 4, 2009, of the propeller and parts businesses was $4,325 thousand, the fair value of FAvS' Ordinary shares and Preferred shares was $8,931 thousand (including businesses' acquisition expenses of $200 thousand).  Accordingly, the Company recorded $4.4 million of capital gain.

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As of December 31, 2010, the Company recorded a $4.5 million loss from its share in the loss and impairment of its 37% interest in FAvS.

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

Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT’s investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of an independent appraisal. Based on the results of this test the Company determined that its investment in FAvS was impaired by $3.3 million. The impairment was due to a decline in FAvS’ profitability margins and future forecasted sales levels which related to the business of API, one of FAvS subsidiaries, and approximates TAT’s share in the loss resulting from the API Transaction discussed below.

On March 18, 2013 FAvS sold 97% of the stock of API for a total purchase price of $16.5 million, of which $15.9 million was used to repay debt(the “API Transaction”). The sale resulted in FAvS retaining a 3% equity interest in the API business.The APITransaction resulted in a loss from discontinued operations and write-down of the API business of $11.5 million which is included in the FAvS loss for the year ended December 31, 2012. Simultaneously with the transaction FAvS paid-off its term loan in the amount of $4 million thereby terminating the guaranty and releasing the letter of credit provided by TAT to secure such guaranty. Accordingly the restricted deposit associated with the above letter of credit, was released as well.

FAvS audited consolidated financial statements for the year ended December 31, 2012, which were signed on March 20, 2013, included a restatement of 2011 consolidated results to correct errors in previously reported amounts. TAT's management reviewed the restatement and its effect on the consolidated financial statements of TAT and found it to be immaterial. Accordingly, no restatement was recorded in TAT's consolidated financial statements.

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Income Taxes

TAT operates within multiple taxing jurisdictions and is subject to audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. In management’s opinion, adequate provisions for income taxes have been made for all years. Although management believes that its estimates are reasonable, no assurance can be given that the final tax outcome of these issues will not be different than those that are reflected in its historical income tax provisions.

TAT accounts for income taxes in accordance with ASC 740-10. TAT uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax bases of assets and liabilities and net operating loss and credit carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some portion of the deferred tax assets will not be realized. To the extent that TAT’s decisions and assumptions and historical reporting are determined not to be compliant with applicable tax laws TAT may be subject to adjustments in its reported income for tax purposes as well as interest and penalties.

Interpretation ASC 740-10 prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740-10 also provides guidance on derecognition of tax positions, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. In addition, ASC 740-10 requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect our operating results.

Allowances for Doubtful Accounts

TAT performs ongoing credit evaluations of its customers’ financial condition and requires collateral as deemed necessary. Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of TAT’s customers to make payments. In judging the adequacy of the allowance for doubtful accounts, TAT considers multiple factors including the aging of receivables, historical bad debt experience and the general economic environment. Management applies considerable judgment in assessing the realization of receivables, including assessing the probability of collection and the current credit worthiness of each customer. If the financial condition of TAT’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

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Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the basis of actual cost or by the average cost method. TAT’s policy for valuation of inventory and commitments to purchase inventory, including the determination of obsolete or excess inventory, requires it to perform a detailed assessment of inventory at each balance sheet date which includes a review of, among other factors, an estimate of future demand for products within specific time frames, valuation of existing inventory, as well as product lifecycle and product development plans. The business environment in which TAT operates, the wide range of products that TAT offers and the relatively short sales-cycles TAT experiences, all contribute to the exercise of judgment relating to maintaining and writing-off of inventory levels. The estimates of future demand that TAT uses in the valuation of inventory are the basis for its revenue forecast, which is also consistent with its short-term manufacturing plan. Inventory reserves are also provided to cover risks arising from non-moving items. Inventory management remains an area of management focus as TAT balances the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of changing technology and customer requirements. TAT writes down obsolete or slow moving inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, market conditions and sale forecasts.

During the quarter ended September 30, 2011, we recorded a write down of inventory in the amount of $2.5 million under cost of revenues, attributable to inventory of the MRO services for Aviation Components operating segment. Although revenues in the MRO for Aviation Components operating segment increased in the three and nine month periods of year 2011 compared to year 2010, profit margins were lower than anticipated. Accordingly, the write down was due to management’s estimation of the continued decline in future forecasted sales levels and profitability margins in certain product lines in this operating segment resulting from the weakness in these areas of business.

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If actual market conditions are less favorable than TAT anticipates, additional inventory write-downs may be required.

Held for sale classification and discontinued operations

At December 31, 2013, held for sale assets and liabilities consisted of Bental, the OEM of Electric Motion Systems operating segment, and its results of operations are presented as discontinued operations in the consolidated statement of operations.

Key Indicators

TAT’s management evaluates its performance by focusing on key performance indicators, which are revenues, sources of revenues, gross profit and operating income. These key performance indicators are primarily affected by the competitive landscape in which TAT operates and its ability to meet the challenges posed.

The following table presents, for the periods indicated, information concerning TAT’s results of operations:

	Year Ended December 31
		2013(*)			2012(*)			2011(*)
	(in thousands)
Revenues
OEM of Heat Management Solutions	$	31,138		$	31,032		$	30,020
Heat Transfer Services and Products		29,907			27,709			27,603
MRO services for Aviation Components		22,429			22,442			20,146
Eliminations		(3,923	)		(3,268	)		(4,030	)
Total revenues		79,551			77,915			73,739
Cost of revenues
OEM of Heat Management Solutions		24,141			23,105			22,662
Heat Transfer Services and Products		21,600			19,671			20,173
MRO services for Aviation Components		19,224			19,044			17,882
Write down of inventory and impairment charges of  long lived assets		-			-			5,465
Eliminations		(4,086	)		(3,281	)		(4,009	)
Total cost of revenues		60,879			58,539			62,173
Research and development costs, net		713			995			455
Selling and marketing		3,150			2,899			2,819
General and administrative		9,512			10,110			9,450
Other income		(20	)		(13	)		(190	)
Operating income (loss) from continuing operations		5,317			5,385			(968	)
Financial expense, net		(50	)		(106	)		(420	)
Gain from dilution of interests in affiliated company		-			-			240
Income (loss) from continuing operations before taxes on income		5,267			5,279			(1,148	)
Taxes on income (tax benefit)		1,041			2,090			(335	)
Net income (loss) from continuing operations after taxes on income		4,226			3,189			(813	)
Share in results of affiliated company and impairment of share in affiliated company		1,025			(3,756	)		331
Net income (loss) from continuing operations		5,251			(567	)		(482	)
Net loss from discontinued operations, net of tax		(2,429	)		(1,147	)		(548	)
Net income (loss) attributable to TAT Technologies Ltd. shareholders	$	2,822		$	(1,714	)	$	(1,030	)

(*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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The following table presents, for the periods indicated, information concerning TAT’s results of operations as a percentage of revenues:

	Year Ended December 31,
		2013(**)		2012(**)		2011(**)
Revenues
OEM of Heat Management Solutions		39.1	%	39.8	%	40.7	%
Heat Transfer Services and Products		37.6		35.6		37.4
MRO services for Aviation Components		28.2		28.8		27.3
Eliminations		(4.9	)	(4.2	)	(5.4	)
Total revenues		100.0		100.0		100.0
Cost of revenues
OEM of Heat Management Solutions		30.3		29.7		30.7
Heat Transfer Services and Products		27.2		25.2		27.4
MRO services for Aviation Components		24.2		24.4		24.3
Write down of inventory and impairment charges of  long lived assets		*		*		7.3
Eliminations		(5.1	)	(4.2	)	(5.3	)
Cost of revenues		76.5		75.1		84.4
Research and development costs, net		0.9		1.3		0.6
Selling and marketing		4.0		3.7		3.8
General and administrative		12.0		13.0		12.8
Other income		-		-		(0.3	)
Operating income (loss) from continuing operations		6.7		6.9		(1.3	)
Financial expense, net		(0.1	)	(0.1	)	(0.6	)
Gain from dilution of interests in affiliated company		-		-		0.3
Income (loss) from continuing operations before taxes on income		6.6		6.8		(1.6	)
Taxes on income (tax benefit)		1.4		2.7		0.5
Net income (loss) from continuing operations after taxes on income		5.2		4.1		(1.1	)
Share in results of affiliated company and impairment of share in affiliated company		1.3		(4.8	)	0.5
Net income (loss) from continuing operations		6.5		*		*
Net loss from discontinued operations, net of tax		(3.0	)	(1.5	)	(0.7	)
Net income (loss) attributable to TAT Technologies’ Shareholders		3.5	%	(2.2	)%	(1.4	)%

________________________

* Less than one percent.

(**) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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Year ended December 31, 2013 compared with Year ended December 31, 2012

Revenues. Total revenues were $79.6 million for the twelve months ended December 31, 2013, compared to $77.9 million for the twelve months ended December 31, 2012, an increase of 2.1%. This reflects (i) the increase in revenues in the OEM of Heat Management Solutions segment; (ii) the increase in revenues in the Heat Transfer Services and Products segment; and (iii) similar revenues in the MRO Services for Aviation Components segment.

Revenues from OEM of Heat Management Solutions. Revenues from OEM of Heat Management Solutions operating segment increased to $31.1 million for the year ended December 31, 2013 from $31.0 million for the year ended December 31, 2012, an increase of 0.3%.

Revenues from Heat Transfer Services and Products. Revenues from Heat Transfer Services and Products operating segment increased to $29.9 million for the year ended December 31, 2013, from $27.7 million for the year ended December 31, 2012, an increase of 7.9%.

Revenues from MRO services for Aviation Components. Revenues from MRO services for Aviation Components operating segment were $22.4 million for the year ended December 31, 2013, similar to $22.4 million for the year ended December 31, 2012.

The increase was attributable to increased sales both to existing and new customers.

Cost of revenues. Cost of revenues was $60.9 million for the twelve months ended December 31, 2013, compared to the $58.5 million for the twelve months ended December 31, 2012, an increase of 4.0%. This reflects the increase in cost of revenues in all our operating segments - the OEM of Heat Management Solutions, the Heat Transfer Services and Products and in the MRO Services for Aviation Components operating segments, which is primarily attributable to the increase in material cost associated with the increase in revenues.

Cost of revenues as a percentage of revenues was 76.5% for the twelve months ended December 31, 2013, compared to 75.1% for the twelve months ended December 31, 2012. This is primarily attributable to product mix with lower margin products sold during 2013 in the OEM of Heat Management Solutions, in the Heat Transfer Services and Products and in the MRO Services for Aviation operating segments.

Cost of revenues for OEM of Heat Management Solutions. Cost of revenues for OEM of Heat Management Solutions operating segment increased to $24.1 million for the year ended December 31, 2013, from $23.1 million for the year ended December 31, 2012, an increase of 4.5%. This increase in primarily attributable to the increase in material cost associated with the increase in revenues in 2013.

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Cost of revenues as a percentage of revenues in this segment increased to 77.5% in the year ended December 31, 2013, from 74.5% for the year ended December 31, 2012. Primarily as a result of product mix with lower margin products sold during year 2013 along with higher rate of fixed production costs in 2013 compared with 2012.

Cost of revenues for Heat Transfer Services and Products. Cost of revenues for Heat Transfer Services and Products operating segment increased to $21.6 million for the year ended December 31, 2013 from $19.7 million for the year ended December 31, 2012, an increase of 9.8%. This increase in primarily attributable to the increase in material cost associated with the increase in revenues in 2013.

Cost of revenues as a percentage of revenues in this segment increased to 72.2% in the year ended December 31, 2013 from 71.0% for the year ended December 31, 2012, primarily as a result of product mix with lower margins sold during year 2013.

Cost of revenues for MRO services for Aviation Components. Cost of revenues for MRO services for Aviation Components operating segment increased to $19.2 million for the year ended December 31, 2013 from $19.0 million for the year ended December 31, 2012, an increase of 0.9%.

Cost of revenues as a percentage of revenues in this segment increased to 85.7% in the year ended December 31, 2013 from 84.9% for the year ended December 31, 2012, primarily as a result of product mix with lower margin products sold during year 2013.

Research and development, net. Research and Development expenses were $0.7 million for the twelve months ended December 31, 2013, compared to $1.0 million for the twelve months ended December 31, 2012, a decrease of 28.3%, and are related to new products and technologies within the OEM of Heat Management Solutions and the Heat Transfer Services and Products operating segments.

Research and Development expenses as a percentage of revenues were 0.9% for the twelve months ended December 31, 2013 compared to 1.3% for the twelve months ended December 31, 2012. TAT expects to invest additional resources in research and development activities, and accordingly will continue to incur and record additional research and development expenses in coming years.

Selling and marketing. Selling and marketing expenses were $3.1 million for the twelve months ended December 31, 2013, compared to $2.9 million for the twelve months ended December 31, 2012, an increase of 8.7%. This was impacted by (i) the increased expenses in the OEM of Heat Management Solutions operating segment, primarily attributable to increased agents’ commissions; and (ii) the increased expenses in the Heat Transfer Services and Products and in the MRO Services for Aviation Components operating segments, primarily attributable to increased payroll costs.

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Selling and marketing expenses as a percentage of revenues were 4.0% for the twelve months ended December 31, 2013, similar to 3.7% for the twelve months ended December 31, 2012. TAT expects to continue to invest additional resources in selling and marketing activities in coming years.

General and administrative. General and administrative expenses were $9.5 million for the twelve months ended December 31, 2013, compared to $10.1 million for the twelve months ended December 31, 2012, a decrease of 5.9%. The decrease in general and administrative expenses was impacted by (i) the decrease in general and administrative expenses in the OEM of Heat Management Solutions operating segment, primarily attributable to the decrease in management fees to our previously controlling shareholder and professional services expenses; (ii) the decrease in general and administrative expenses in the Heat Transfer Services and the Products operating segment, primarily attributable to the decrease in payroll costs; and (iii) the decrease in general and administrative expenses in the MRO Services for Aviation Components operating segments, primarily attributable to the decrease in payroll costs and a provision recorded for doubtful debt in the first quarter of 2012.

General and administrative expenses as a percentage of revenues were 12.0% for the twelve months ended December 31, 2013, compared to 13.0% for the twelve months ended December 31, 2012.

Operating income from continuing operations. For the twelve months ended December 31, 2013, TAT reported operating income of $5.3 million compared to operating income of $5.4 million for the twelve months ended December 31, 2012, a decrease of 1.3%. The decrease in operating income is attributable to (i) the decrease in operating income in the OEM of Heat Management Solutions operating segment; (ii) the increase in operating loss in the MRO Services for Aviation Components operating segment; partially offset by (iii) the increase in operating income in the Heat Transfer Services and the Products operating segment.

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Financial expenses. Financial expenses for the twelve months ended December 31, 2013 were $0.9 million, compared to $2.1 for the twelve months ended December 31, 2012. Financial expenses during the twelve months ended December 31, 2013 primarily resulted from changes in exchange rates between the U.S. dollar and the Israeli Shekel, bank fees and interest payments on long-term loans.

Financial income. Financial income for the twelve months ended December 31, 2013 was $0.9 million, compared to $2.0 million for the twelve months ended December 31, 2012. Financial income during the twelve month period ended on December 31, 2013 primarily resulted from changes in exchange rates between the U.S. dollar and the Israeli Shekel, interest received from the Israeli tax authorities for excess payments made in previous years and from interest received on short-term investments.

Taxes on income. Taxes on income for the twelve months ended December 31, 2013, amounted to $1.0 million, compared to $2.1 million for the twelve months ended December 31, 2012. Taxes on income for the twelve months ended December 31, 2013, were impacted by (i) tax benefit recorded in the OEM of Heat Management solutions operating segment, primarily attributable to previous years assessment; (ii) the increase in pre-tax loss in the MRO Services for Aviation Components operating segment; and (iii) similar taxes on income in the Heat Transfer Services and Products operating segment.

Share in Results of affiliated company. TAT recognized income of $1.1 million from its approximately 30% interest in FAvS’ results for the twelve months ended December 31, 2013 compared to a loss of $0.45 million for the twelve months ended December 31, 2012.

Impairment of share in affiliated company. During the twelve months ended December 31, 2012 TAT recognized an impairment of $3.3 million with respect to its approximately 30% interest in FAvS. This was based on an impairment test performed by the Company, with the assistance of an independent appraisal.

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Net income from continuing operations. TAT recognized net income from continuing operations of $5.2 million for the twelve months ended December 31, 2013 compared to net income of $2.7 million for the twelve months ended December 31, 2012 (excluding $3.3 million impairment charge recorded in the second quarter of 2012, with respect to TAT’s investment in FAvS), which reflects an increase of 92% in 2013.

Net loss from discontinued operations. For the twelve months ended December 31, 2013, TAT recognized an impairment of $3.3 million attributable to the sale of our entire interest in Bental, the OEM of Electric Motion Systems (out of which $2.3 million attributed to controlling interest), as mentioned above. In addition, we recognized a net loss from discontinued operations of $0.1 million (after tax), compared to a net loss from discontinued operations of $1.1 million (after tax) for the twelve months ended December 31, 2012, attributable to our 70% held Bental subsidiary.

Net income (loss) from continuing operations attributable to controlling interest. TAT recognized net income of $2.8 million for the twelve months ended December 31, 2013 compared to net loss of $1.7 million for the twelve months ended December 31, 2012.

Year ended December 31, 2012 compared with Year ended December 31, 2011

Revenues. Total revenues were $77.9 million for the twelve months ended December 31, 2012, compared to $73.7 million for the twelve months ended December 31, 2011, an increase of 5.7%. This reflects the increase in revenues in all our operating segments - the OEM of Heat Management Solutions segment, the Heat Transfer Services and Products segment and the MRO Services for Aviation Components segment

Revenues from OEM of Heat Management Solutions. Revenues from OEM of Heat Management Solutions operating segment increased to $31.0 million for the year ended December 31, 2012 from $30.0 million for the year ended December 31, 2011, an increase of 3.4%.

Revenues from Heat Transfer Services and Products. Revenues from Heat Transfer Services and Products operating segment increased to $27.7 million for the year ended December 31, 2012, from $27.6 million for the year ended December 31, 2011, an increase of 0.4%.

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Revenues from MRO services for Aviation Components. Revenues from MRO services for Aviation Components operating segment increased to $22.4 million for the year ended December 31, 2012, from $20.1 million for the year ended December 31, 2011, an increase of 11.4%. The increase was attributable to increased sales both to existing and new customers.

Cost of revenues. Cost of revenues was $58.5 million for the twelve months ended December 31, 2012, compared to $56.8 million for the twelve months ended December 31, 2011 (excluding  a $5.46 million write down of inventories and impairment charges of long lived assets recorded in the 2011 third quarter), an increase of 3.2%. This reflects (i) the increase in cost of revenues in the OEM of Heat Management Solutions operating segment and in the MRO Services for Aviation Components operating segment, which is primarily attributable to the increase in revenues in these operating segments; partially offset by (ii) the decrease in cost of revenues in the Heat Transfer Services and Products operating segment which is primarily attributable to decreased material costs.

Cost of revenues as a percentage of revenues was 75.1% for the twelve months ended December 31, 2012, compared to 76.9% for the twelve months ended December 31, 2011 (excluding  a $5.46 million write down of inventories and impairment charges of long lived assets recorded in the 2011 third quarter). This decrease is primarily attributable to (i) product mix with higher margin products sold during this period along with lower rate of fixed production costs in the MRO Services for Aviation Components operating segment (partially affected by the sale of inventory items that were impaired of approximately $0.6 million in previous years) and in the OEM of Heat Management Solutions operating segments; and (ii) product mix with higher margin products in the Heat Transfer Services and Products operating segment.

Cost of revenues for OEM of Heat Management Solutions. Cost of revenues for OEM of Heat Management Solutions operating segment increased to $23.1 million for the year ended December 31, 2012, from $22.6 million for the year ended December 31, 2011, an increase of 2.0%. This increase in mainly attributable to the increase in revenues in 2012.

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Cost of revenues as a percentage of revenues in this segment decreased to 74.5% in the year ended December 31, 2012, from 75.5% for the year ended December 31, 2011. Primarily as a result of product mix with higher margin products sold during year 2012 along with lower rate of fixed production costs in 2012 compared with 2011.

Cost of revenues for Heat Transfer Services and Products. Cost of revenues for Heat Transfer Services and Products operating segment decreased to $19.7 million for the year ended December 31, 2012 from $20.2 million for the year ended December 31, 2011, a decrease of 2.5%. This decrease is mainly attributable to the decrease in material costs in 2012 compared with 2011.

Cost of revenues as a percentage of revenues in this segment decreased to 71.0% in the year ended December 31, 2012 from 73.1% for the year ended December 31, 2011, primarily as a result of product mix with higher margins sold during year 2012.

Cost of revenues for MRO services for Aviation Components. Cost of revenues for MRO services for Aviation Components operating segment increased to $19.0 million for the year ended December 31, 2012 from $17.9 million for the year ended December 31, 2011, an increase of 6.5%.  This increase in mainly attributable to the increase in revenues in 2012.

Cost of revenues as a percentage of revenues in this segment decreased to 84.9% in the year ended December 31, 2012 from 88.8% for the year ended December 31, 2011, Primarily as a result of product mix with higher margin products sold during year 2012 along with lower rate of fixed production costs in 2012 compared with 2011.

Write down of inventory and impairment of long lived assets. For the twelve months ended December 31, 2011, charges under this item were $5.46 million attributable to a write down of inventory and impairment charges of intangible assets and fixed assets in the MRO Services for Aviation Components operation.

Research and development, net. Research and Development expenses were $1.0 million for the twelve months ended December 31, 2012, compared to $0.5 million for the twelve months ended December 31, 2011, an increase of 119%, and are related to new products and technologies within the OEM of Heat Management Solutions and the Heat Transfer Services and Products operating segments.

Research and Development expenses as a percentage of revenues were 1.3% for the twelve months ended December 31, 2012 compared to 0.6% for the twelve months ended December 31, 2011. TAT expects to invest additional resources in research and development activities, and accordingly will continue to incur and record additional research and development expenses in coming years.

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Selling and marketing. Selling and marketing expenses were $2.9 million for the twelve months ended December 31, 2012, similar to $2.8 million for the twelve months ended December 31, 2011. This was impacted by (i) the increased expenses in the OEM of Heat Management Solutions operating segment, primarily attributable to increased payroll costs, commissions and exhibition expenses; (ii) similar expenses in the Heat Transfer Services and Products operating segment; offset by (iii) the decreased expenses in the MRO Services for Aviation Components operating segment, attributable to decreased payroll costs, commissions and exhibition expenses.

Selling and marketing expenses as a percentage of revenues were 3.7 % for the twelve months ended December 31, 2012, similar to 3.8% for the twelve months ended December 31, 2011. TAT expects to continue to invest additional resources in selling and marketing activities in coming years.

General and administrative expenses. General and administrative expenses were $10.1 million for the twelve months ended December 31, 2012, compared to $9.45 million for the twelve months ended December 31, 2011, an increase of 7.0%. The increase in general and administrative expenses was impacted by (i) the increased expenses in the MRO Services for Aviation Components operating segment primarily attributable to a provision recorded for doubtful debt in the first quarter and to a decrease in FAvS’ participation in certain operating expenses; (ii) the increased expenses in the Heat Transfer Services and Products operating segment, primarily attributable to the increase in payroll costs and employee related expenses; partially offset by (iii) the decreased expenses in the OEM of Heat Management Solutions operating segment primarily attributable to decreased payroll costs.

General and administrative expenses as a percentage of revenues were 13.0% for the twelve months ended December 31, 2012, compared to 12.8% for the twelve months ended December 31, 2011.

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Operating income (loss) from continuing operations. For the twelve months ended December 31, 2012, TAT reported operating income of $5.4 million compared to operating income of $4.5 million for the twelve months ended December 31, 2011 (excluding the above mentioned non-recurring write down of inventories and impairment charges of long lived assets recorded in 2011 third quarter), an increase of 19.7%. The increase in operating income is attributable to (i) the increase in operating income in the OEM of Heat Management Solutions operating segment; (ii) the decrease in operating loss in the MRO Services for Aviation Components operating segment; partially offset by (iii) the moderate decrease in operating income in the Heat Transfer Services and Products operating segment.

Financial expenses. Financial expenses for the twelve months ended December 31, 2012 were $2.0 million, similar to $2.1 for the twelve months ended December 31, 2011. Financial expenses during the twelve months ended December 31, 2012 primarily resulted from changes in exchange rates between the U.S. dollar and the Israeli Shekel, realized losses from hedging transactions, bank fees and interest payments on short-term credit and long-term loans.

Financial income. Financial income for the twelve months ended December 31, 2012 was $2.0 million, compared to $1.7 million for the twelve months ended December 31, 2011. Financial income during the twelve month period ended on December 31, 2012 primarily resulted from changes in exchange rates between the U.S. dollar and the Israeli Shekel and between the U.S. dollar and the Euro, change in fair value of unrealized hedging transactions profits, interest received from the Israeli tax authorities for excess payments made in previous years and from interest received on short-term investments.

Taxes on income (tax benefit). Taxes on income for the twelve months ended December 31, 2012, amounted to $2.1 million, compared to a tax benefit of $0.3 million for the twelve months ended December 31, 2011. Taxes on income for the twelve months ended December 31, 2012, were impacted by (i) the decrease in pre-tax loss incurred in 2012 compared to the pre-tax loss incurred in 2011 in the MRO Services for Aviation Components operating segment; partially offset by (ii) the decrease in tax expenses in the OEM of Heat Management Solutions operating segment, mainly due to the  adoption of a new tax regulation under the Law for the Encouragement of Capital Investments in 2011; and (iii) the decrease in pre-tax income in the Heat Transfer Services and Products operating segment.

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Share in Results of affiliated company. TAT recognized a loss of $0.45 million from its approximately 30% interest in FAvS’ results for the twelve months ended December 31, 2012 compared to income of $0.3 million for the twelve months ended December 31, 2011.

Impairment of share in affiliated company. During the twelve months ended December 31, 2012 TAT recognized an impairment of $3.3 million with respect to its approximately 30% interest in FAvS. This was based on an impairment test performed by the Company, with the assistance of an independent appraisal.

Net income (loss) from continuing operations. TAT recognized net loss from continuing operations of $0.6 million for the twelve months ended December 31, 2012 compared to net loss from continuing operations of $0.5 million for the twelve months ended December 31, 2011. The net loss reported for the twelve months ended December 31, 2012 is the result of a $3.3 million impairment charge recorded in the second quarter of 2012, with respect to TAT’s investment in FAvS. The net loss reported for the twelve months ended December 31, 2011 was the result of a $5.46 million (before taxes) write down of inventories and impairment charges of long lived assets ($3.6 million, net of taxes). Excluding these impairment charges net income from continuing operations for the twelve month period ended December 31, 2012, was $2.7 million compared to net income from continuing operations of $3.1 million for twelve month period ended December 31, 2011, a decrease of 13% in net income.

Net loss from discontinued operations. For the twelve months ended December 31, 2012, TAT recognized a net loss from discontinued operations of $1.1 million (after tax), compared to a net loss from discontinued operations of $0.5 million (after tax) for the twelve months ended December 31, 2011, attributable to our 70% held Bental subsidiary.

Net loss from continuing operations attributable to controlling interest. TAT recognized net loss of $1.7 million for the twelve months ended December 31, 2012 compared to net loss of $1.0 million for the twelve months ended December 31, 2011.

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Quarterly Results of Operations

The following table presents the unaudited consolidated statements of operations data for each of the eight fiscal quarters ended December 31, 2013, in dollars and as a percentage of revenues. In the opinion of TAT’s management, this unaudited information has been prepared on the same basis as TAT’s audited consolidated financial statements and includes all adjustments, consisting only of normal recurring adjustments, necessary for fair statement of the unaudited information for the quarters presented. The results of operations for any quarter are not necessarily indicative of results that TAT might achieve for any subsequent periods.

	Three months ended
	2013												2012
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,			Mar. 31,
	($ in thousands)
Revenues	$	21,197		$	18,957		$	19,819		$	19,578		$	19,947		$	19,643		$	19,449		$	18,874
Cost of revenues		16,406			14,887			14,983			14,603			15,315			14,699			14,132			14,392
Gross profit (loss)		4,791			4,070			4,836			4,975			4,632			4,944			5,317			4,482
Research and Development, net		107			177			205			224			250			136			480			129
Selling and marketing		816			768			800			766			695			663			781			760
General and administrative		2,554			2,206			2,439			2,313			2,905			2,165			2,416			2,624
Other income		(7	)		-			(6	)		(7	)		(9	)		-			(4	)		-
Operating income from continuing operations		1,321			919			1,398			1,679			791			1,980			1,644			969
Financial income (expenses), net		(56	)		(27	)		17			16			54			(31	)		(404	)		275
Income from continuing operations before taxes on income		1,265			892			1,415			1,695			845			1,949			1,240			1,244
Taxes on income (tax benefit)		(139	)		245			452			483			194			572			1,008			316
Share in results of affiliated company and impairment of share in affiliated company		(91	)		18			187			911			(540	)		136			(3,312	)		(40	)
Net income (loss) from continuing operations		1,313			665			1,150			2,123			110			1,513			(3,080	)		888
Net income (loss)from discontinued operations, net of tax		(2,005	)		118			(126	)		(416	)		19			257			(1,119	)		(304	)
Net income (loss) attributable to TAT Technologies’    Shareholders	$	(692	)	$	783		$	1,024		$	1,707		$	129		$	1,770		$	(4,199	)	$	584
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		77.4			78.5			75.6			74.6			76.8			74.8			72.7			76.2
Gross profit (loss)		22.6			21.5			24.4			25.4			23.2			25.2			27.3			23.8
Research and Development, net		0.5			0.9			1.0			1.1			1.3			0.7			2.5			0.7
Selling and marketing		3.8			4.1			4.0			3.9			3.5			3.4			4.0			4.0
General and administrative		12.1			11.6			12.4			11.8			14.4			11.0			12.4			13.9
Other income		-			*			*			*			-			*			*			0.1
Operating income (loss) from continuing operations		6.2			4.9			7.0			8.6			4.0			10.1			8.4			5.1
Financial income (expenses), net		(0.2	)		(0.1	)		0.1			0.1			0.2			(0.2	)		(2.0	)		1.5
Income (loss) from continuing operations before taxes on income		6.0			4.8			7.1			8.7			4.2			9.9			6.4			6.6
Taxes on income (tax benefit)		(0.2	)		1.3			2.2			2.5			1.0			2.9			5.2			1.7
Share in results of affiliated company and impairment of share in affiliated company		(0.4	)		0.1			0.9			4.6			(2.7	)		0.7			(17.0	)		(0.2	)
Net income (loss) from continuing operations		6.2			3.5			5.8			10.8			0.6			7.7			(15.9	)		4.7
Net income (loss)from discontinued operations, net of tax		(9.5	)		0.6			(0.6	)		(2.1	)		*			1.3			(5.7	)		(1.6	)
Net income (loss) attributable to TAT Technologies’    Shareholders		(3.3	)%		4.1	%		5.2	%		8.7	%		0.6	%		9.0	%		(21.6	)%		3.1	%

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TAT expects its operating results may fluctuate in the future as a result of various factors, many of which are outside of TAT’s control, including the timing of orders, the provision of services and deliveries. Consequently, TAT believes that period-to-period comparisons of its operating results may not necessarily be meaningful, and as a result, you should not rely on them as an indication of future performance.

Seasonality

In the OEM industry in general and in TAT’s OEM businesses in particular, the majority of customers operate based on annual budgets and tend to utilize during the fiscal fourth quarter the remaining balance of any un-used budgets. This trend is more typical with customers from the defense industry. Accordingly, TAT is more likely to generate increased revenues in the OEM businesses (such as TAT’s OEM of Heat Management Solutions) during the fiscal fourth quarter. The aviation industry is known for its highest traffic in the third quarter, primarily attributable to summer vacations. As a result, during the fiscal third quarter, airlines tend to postpone, to the extent possible, maintenance and repair of their aircraft to minimize aircraft grounding. Accordingly, TAT is more likely to notice decreased revenues in the MRO businesses (such as TAT’s MRO for Aviation Components and Heat Transfer Services and Products) during the fiscal third quarter with recovery during subsequent quarters.

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Conditions in Israel

TAT is incorporated under the laws of the State of Israel, and its principal executive offices and manufacturing and research and development facilities are located in the State of Israel. See “RISK FACTORS” for a description of governmental, economic, fiscal, monetary or political polices or factors that have materially affected or could materially affect TAT’s operations.

Trade Relations

Israel is a member of the United Nations, the International Monetary Fund, the International Bank for Reconstruction and Development and the International Finance Corporation. Israel is a member of the World Trade Organization and is a signatory to the General Agreement on Tariffs and Trade. In addition, Israel has been granted preferences under the Generalized System of Preferences from the United States, Australia, Canada and Japan. These preferences allow Israel to export the products covered by such programs either duty-free or at reduced tariffs.

Israel and the European Union Community, known now as the “European Union,” concluded a Free Trade Agreement in July 1975 that confers some advantages with respect to Israeli exports to most European countries and obligates Israel to lower its tariffs with respect to imports from these countries over a number of years. In 1985, Israel and the United States entered into an agreement to establish a Free Trade Area. The Free Trade Area has eliminated all tariff and some non-tariff barriers on most trade between the two countries. On January 1, 1993, an agreement between Israel and the European Free Trade Association, known as the “EFTA,” established a free-trade zone between Israel and the EFTA nations. In November 1995, Israel entered into a new agreement with the European Union, which includes a redefinition of rules of origin and other improvements, such as allowing Israel to become a member of the Research and Technology programs of the European Union. In recent years, Israel has established commercial and trade relations with a number of other nations, including Russia, China, India, Turkey and other nations in Eastern Europe and the Asia-Pacific region.

Impact of Currency Fluctuation and of Inflation

TAT reports its financial results in dollars and receives payment primarily in dollars or dollar-linked NIS for all of its sales while it incurs a portion of its expenses, principally salaries and related personnel expenses in Israel, in NIS. Additionally, certain assets, as well as a portion of its liabilities, are denominated in NIS. Therefore, the dollar cost of its operations is influenced by the extent to which any inflation in Israel is offset on a lagging basis, or is not offset by the devaluation of the NIS in relation to the U.S. dollar. When the rate of inflation in Israel exceeds the rate of devaluation of the NIS against the U.S. dollar, the dollar cost of operations in Israel increases. If the dollar cost of operations in Israel increases, its dollar-measured results of operations will be adversely affected. TAT cannot assure you that TAT will not be materially and adversely affected in the future if inflation in Israel exceeds the devaluation of the NIS against the dollar or if the timing of the devaluation lags behind inflation in Israel.

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The following table presents information about the rate of inflation in Israel, the rate of devaluation (appreciation) of the NIS against the U.S. dollar, and the rate of inflation of Israel adjusted for the devaluation:

Year ended December 31,	Israeli inflation rate%	NIS appreciation (devaluation) to the US dollar rate%	Israeli inflation adjusted for appreciation (devaluation) %
2003	(1.9)	7.6	5.7
2004	1.2	1.6	2.8
2005	2.4	(6.8)	(4.4)
2006	(0.1)	8.2	8.1
2007	3.4	9.0	12.4
2008	3.8	1.1	4.9
2009	3.9	0.7	4.6
2010	2.7	6.4	9.1
2011	2.2	(7.7)	(5.5)
2012	1.4	2.3	3.7
2013	2.0	7.5	9.5

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A devaluation of the NIS in relation to the U.S. dollar has the effect of reducing the U.S. dollar amount of any of its expenses or liabilities which are payable in NIS, unless these expenses or payables are linked to the U.S. dollar. This devaluation also has the effect of decreasing the U.S. dollar value of any asset which consists of NIS or receivables payable in NIS, unless the receivables are linked to the U.S. dollar. Conversely, any increase in the value of the NIS in relation to the U.S. dollar has the effect of increasing the U.S. dollar value of any unlinked NIS assets and the U.S. dollar amounts of any unlinked NIS liabilities and expenses. During the 2011 the NIS depreciated against the U.S. dollar by 7.7%. Such trend was continued through the end of September 2012, during which the NIS depreciated by additional 2.4%. By the end of 2012 this trend had reversed and the NIS appreciated by 4.6%. During 2013, the NIS appreciated against the U.S. dollar by 7.0%. Through March 19, 2014 exchange rates between the NIS and the U.S. dollar have not changed materially.

Because exchange rates between the NIS and the dollar fluctuate continuously, exchange rate fluctuations and especially larger periodic devaluations will have an impact on TAT’s profitability and period-to-period comparisons of its results. The effects of foreign currency re-measurements are reported in TAT’s consolidated financial statements in current operations. TAT cannot assure you that in the future its results of operations may not be materially adversely affected by currency fluctuations.

Corporate Tax Rate

Israeli companies are generally subject to income tax on their taxable income. The applicable rate for 2011 was 24% and was due to further gradually reduce to 18% in 2016 and thereafter. Nevertheless, on December 5, 2011, the Knesset (Israel's Parliament) passed a law for changing the tax burden (Legislative Amendments), which canceled, among others, the gradual reduction in the corporate tax rates in Israel. In addition, the corporate tax in Israel increased to 25% starting in 2012. In August 2013, the Israeli Knesset approved an increase in the corporate tax rate to 26.5% for 2014 and thereafter.

However, the rate is effectively reduced for income derived from an approved enterprise and beneficiary enterprise. Until December 31, 2010, TAT and Bental have elected to participate in the alternative package of tax benefits for its current approved enterprise and beneficiary enterprise under the Law for the Encouragement of Capital Investments, 1959, as amended. 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.

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Additional amendments to the Approved Enterprise 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 current 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 10% in areas in Israel that are designated as Development Zone A and 15% elsewhere in Israel during 2011-2012, 7% and 12.5%, respectively, in 2013-2014, and 6% and 12%, respectively, thereafter. Income derived by a Preferred Company from a ‘Special Preferred Enterprise’ (as defined in the Approved Enterprise) would enjoy further reduced tax rates for a period of ten years of 5% in Zone A and 8% elsewhere. As with dividends distributed from taxable income derived from an Approved Enterprise or Benefiting Enterprise during the applicable benefits period, dividends distributed from Preferred Income would be subject to a 15% tax (or lower, if so provided under an applicable tax treaty), which would generally be withheld by the distributing company. While the Company may incur additional tax liability in the event of distribution of dividends from tax exempt income generated from its Approved and Benefiting Enterprises, no additional tax liability will be incurred by the Company in the event of distribution of dividends from income taxed in accordance with the 2011 Amendment.

Under the transitional provisions of the 2011 Amendment, the Company and Bental elected to irrevocably implement the 2011 Amendment with respect to its existing Approved and Benefiting Enterprises while waiving benefits provided under the legislation prior to the 2011 Amendment.

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 20% (instead of 15%). In addition, tax rates under the Preferred Enterprise were also raised effective as of January 1, 2014 to 9% in Zone A and 16% elsewhere (instead of the 6% and 12%, respectively).

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Certain investment income derived by TAT from investments may not be regarded by the Israeli tax authorities as income from TAT’s approved and beneficiary enterprises and consequently may be taxed at the regular statutory rate in Israel.

Certain of TAT’s subsidiaries operate in and are subject to the tax laws of various other jurisdictions, primarily the United States. TAT’s U.S. subsidiaries are taxed based on federal and state tax laws. The statutory tax of TAT’s U.S. subsidiaries was 38% in the years ended December 31, 2013, 2012 and 2011, respectively.

Recently Issued Accounting Standards

In February 2013, the FASB issued accounting standard update ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts  Reclassified Out of Accumulated Other Comprehensive Income. Previously, information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income had been presented in separate places throughout the financial statements. ASU No. 2013-02 requires entities to present this information in one centralized disclosure in the financial statements; however, it emphasized that there is no change in the current requirements for reporting net income or other comprehensive income in financial statements. The adoption by the Company of ASU No. 2013-02 on December 31, 2013 did not have a material effect on Company’s consolidated financial statements.

Liquidity and Capital Resources

     As of December 31, 2013, TAT had cash and cash equivalents and short-term bank deposits of $29.9 million (excluding held for sale assets), compared with cash and cash equivalents $27.8 million and restricted cash of $2.3 million, which equals $30.1 million of financial assets as of December 31, 2012. Financial assets, net of debt were $29.0 million (excluding held for sale assets) in December 31, 2013 compared to $25.8 million in December 31, 2012.

With respect to a loan balance in the total amount of $6.25 million received by TAT from an Israeli bank, in September 2011 TAT reached an agreement with the bank to adjust certain financial covenants related to said loans. Accordingly, as of December 31, 2013 and 2012 the Company met all financial covenants related to such loans. From 2011 to 2012 the Company prepaid a total amount of $3.78 million on account of the principal of such loan. On May 1, 2013, the Company made a payment of additional $1.59 million, in accordance with its payment schedule of the loan, following which its remaining balance is approximately $0.88 million.

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On September 7, 2011 TAT received a loan from its Bental subsidiary for the total amount of NIS 2.5 million (approximately $0.7 million), to be repaid in whole at the end of a 24 month period (the “Term”). The principle amount bears interest of Prime +1% payable on a quarterly basis and may be repaid at any time during the Term upon TAT’s discretion. Simultaneously with such loan, Bental received a loan from an Israeli bank for similar amount under similar terms and conditions. On September 8, 2013 Bental, made an on time repayment of such loan, which in turn TAT repaid the loan amount to Bental.

Capital expenditures for the years ended December 31, 2013, 2012 and 2011 were approximately $2.2 million, $2.1 million and $3.0 million, respectively. These capital expenditures were principally for the purchase of equipment for the OEM and MRO facilities. TAT funded these expenditures from cash flows from operations and also from financing activities. TAT expects that its available cash and cash equivalents and cash flow that will be generated from operations will be sufficient to enable it to fund its capital expenditures.

TAT believes that anticipated cash flow from operations and its current cash balances will be sufficient to meet its cash requirements for at least 12 months. TAT’s future capital requirements will depend on many factors, including its rate of revenue growth, the expansion of its selling and marketing activities, costs associated with expansion into new markets and the timing of the introduction of new products and services.

On March 19, 2014, subsequent to the balance sheet date, TAT’s board of directors declared a cash dividend in the total amount of $2 million (approximately NIS6.97 million), or $0.23 per share (approximately NIS0.79 per share), for all of the shareholders of TAT. The dividend will be paid to shareholders of record on April 21, 2014. TAT will pay the dividend on May 7, 2014.

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TAT’s Israeli operations are profitable and expected to continue to be profitable. Accordingly there are no liquidity constraints that require the distribution of retained earnings from TAT’s U.S. subsidiaries.

Cash Flows

The following table summarizes TAT’s cash flows for the periods presented:

	Year Ended December 31,
	(in thousands)
	2013			2012			2011
Net cash provided by operating activities	$	7,203		$	5,892		$	1,407
Net cash provided by (used in) investing activities		70			(9,707	)		(761	)
Net cash used in financing activities		(2,936	)		(7,261	)		(498	)
Net cash provided by discontinued operations		514			1,633			40
Net increase (decrease) in cash and cash equivalents		4,851			(9,443	)		188
Cash and cash equivalents at beginning of the year		17,786			27,229			27,041
Cash and cash equivalents at end of the year		22,637			17,786			27,229
Less – Cash and cash equivalents of discontinued operations at end of year		2,823			2,309			676
Cash and cash equivalents of continuing operations at end of year	$	19,814		$	15,477		$	26,553

The net cash provided by operating activities for the year ended December 31, 2013 amounted to approximately $7.2 million, compared to $5.9 million for the year ended December 31, 2012 and $1.4 for the year ended December 31, 2011.

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Net cash provided by operating activities for the year ended December 31, 2013 was principally derived from $5.3 million of net income from continuing operations and from the following adjustments for the following non-cash line items: an upwards adjustment of $1.9 million for depreciation and amortization; an upwards adjustment of $1.2 million for decrease in other accounts receivable, prepaid expenses and other; an upwards adjustment of $0.7 million for decrease inventories; an upwards adjustment of $0.3 million for increase in liability in respect of employee rights upon retirement and an upwards adjustment of $0.1 million for decrease in net deferred income tax asset. This was offset with a downward adjustment of $1.0 million for share in results of affiliated company; a downward adjustment of $1.2 million for increase in accounts receivable; a downward adjustment of $0.4 million for decrease in other accounts payable and accrued expenses and a downward adjustment of $0.3 million for decrease in other accounts payable and accrued expenses.

Net cash provided by operating activities for the year ended December 31, 2012 was principally derived from $0.6 million of net loss from continuing operations and from the following adjustments for the following non-cash line items: an upwards adjustment of $1.9 million for depreciation and amortization; an upwards adjustment of $3.8 million for share in results of affiliated company and impairment of share in affiliated company; an upwards adjustment of $1.7 million for decrease in net deferred income tax asset; an upwards adjustment of $0.7 million for decrease in amounts due from related parties; an upwards adjustment of $0.3 million for decrease in other accounts receivable and prepaid expenses and an upwards adjustment of $1.7 million for increase in trade accounts payable and other accounts payable and accrued expenses. This was offset with a downward adjustment of $0.8 million for increase in trade accounts receivable, downward adjustment of $0.4 million from change in fair value of derivatives and a downward adjustment of $2.9 million for increase in inventories.

Net cash provided by operating activities  for the year ended December 31, 2011 was principally derived from $0.5 million of net loss from continuing operations adjusted for the following non-cash line items: an upwards adjustment of $2.6 million for depreciation and amortization; an upwards adjustment of $2.5 million for write down of inventory, an upwards adjustment of $3.0 million for impairment of long lived assets; an upwards adjustment of $1.2 million for decrease in other accounts receivable and prepaid expenses. This was offset with a downward adjustment of $0.9 million for increase in deferred income taxes net, a downward adjustment of $2.4 million for increase in related parties, net and trade accounts receivable, a downward adjustment of $2.0 million for increase in inventories (excluding the above write down), a downward adjustment of $1.1 million for decrease in trade accounts payable and a downward adjustment of $1.5 million for decrease in other accounts payable and accrued expenses.

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Net cash used in investing activities was approximately $0.8 million for the year ended December 31, 2013, compared to net cash used in investing activities of $9.7 million for the year ended December 31, 2012 and net cash used in investing activities of approximately $0.8 million for the year ended December 31, 2011.

Of the cash used in investing activities in the year ended December 31, 2013 approximately $2.8 million was used for the purchase of property and equipment, primarily production equipment and building improvements, offset by $2.3 million from the release of restricted deposit.

Of the cash used in investing activities in the year ended December 31, 2012 approximately $2.1 million was used for the purchase of property and equipment, primarily production equipment and building improvements and $10.0 million used for investment in short-term deposit, partially offset by $1.9 million of proceeds received from selling marketable securities and $0.9 million from the release of restricted deposit.

Of the cash used in investing activities in the year ended December 31, 2011 approximately $3.0 million was used for the purchase of property and equipment, primarily production equipment and building improvements, partially offset $1.8 million from the release of restricted deposit.

     Net cash used in financing activities was approximately $2.9 million for the year ended December 31, 2013, compared to net cash used in financing activities of approximately $7.3 million for the year ended December 31, 2012 and net cash provided by financing activities of approximately $0.5 million for the year ended December 31, 2011.

In the year ended December 31, 2013, the net cash used in financing activities was primarily attributable to repayments of $0.7 million of short-term credit, repayments of $2.3 million of long-term loans.

In the year ended December 31, 2012, the net cash used in financing activities was primarily attributable to repayments of $4.5 million of short-term credit, repayments of $0.8 million of long-term loans and payment of $2.5 million of cash dividend.

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In the year ended December 31, 2011, the net cash used in financing activities was primarily attributable to repayments of $0.8 million of short-term credit and repayments of $3.0 million of long term loan, partially offset by proceeds of $0.7 million of short-term credit and proceeds of $2.6 million short term credit received from a bank.

A.              Research and Development, Patents and Licenses

Not applicable.

B.              Trend Information

Our revenues in the US in fiscal 2014 are expected to be impacted by global trends of increased traffic reported by airlines, by the increasing fuel costs that continue to impact the commercial airlines business environment by reducing airlines’ profitability and offsetting the positive impact of growing air traffic, by the expected slowdown in demand for MRO services as a result of airlines deferring MRO activities and utilizing existing stock (destocking) rather than maintaining inventory levels, by the fact that we continue to witness positive indications from commercial OEMs in the aerospace industry that increase backlog of new airplanes and/or airborne platforms/systems and by the fact that the defense market shows growing weakness and is impacted by budget constraints. We also expect that as soon as the aerospace and defense industries recover, our revenues will continue to trend upward.

C.              Off-Balance Sheet Arrangements

We are not a party to any material off-balance sheet arrangements. In addition, we have no unconsolidated special purpose financing or partnership entities that are likely to create material contingent obligations.

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D.              Tabular Disclosure of Contractual Obligations

The following table summarizes our minimum contractual obligations and commercial commitments as of December 31, 2013 and the effect we expect them to have on our liquidity and cash flow in future periods (not include future liabilities from held for sale operating segment).

Contractual Obligations	Payments due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 years
Debt obligations	$	883,000	$	883,000	$	-	$	-	$	-
Operating lease obligations (1)		2,994,000		993,000		1,483,000		568,000		-
Purchase commitments		4,019,000		4,019,000		-		-		-
Estimated loan interest (2)		8,000		8,000		-		-		-
Total	$	7,904,000	$	5,903,000	$	1,483,000	$	568,000	$	-

_________________

(1) Pursuant to the terms of the agreement we entered into with TAT Industries in 2000 to purchase its operations relating to the manufacture of aviation accessories, we rent from TAT Industries the real estate and buildings encompassing an area of approximately 302,000 square feet for a period of 24 years and eleven months.  In consideration we agreed to pay TAT Industries annual rental payments of approximately $432,000 for the year ended December 31, 2014 with an additional incremental payment of 2% per year.  Such rental rates are subject to revaluation every fifth year. In addition, this item include vehicle lease obligations of Gedera.

(2) Interest related to loans in the total amount of $883,000 which will be repaid in four annual installments commencing 2011. These loans bear quarterly interest of Libor + 3.5%.

In addition, we have long-term liabilities for severance pay that are calculated pursuant to Israeli severance pay law generally based on the most recent salary of the employees multiplied by the number of years of employment, as of the balance sheet date.  Employees are entitled to one month’s salary for each year of employment or a portion thereof.  As of December 31, 2013, our severance pay liability, net was $240,000.

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Item 6.     Directors, Senior Management and Employees

A.          Directors and Senior Management

Set forth below are the name, age, principal position and a biographical description of each of our directors and executive officers, as of the date hereof:

Name	Age	Position
Samuel Vlodinger	63	Chairman of the Board of Directors
Itsik Maaravi	54	Chief Executive Officer
Todd Schwartz	46	Chief Executive Officer of Piedmont
Yair Raz	58	Chief Executive Officer of Limco
Tiko Gadot	55	Chief Financial Officer
Noam Reshef	37	Vice President Operations
Avi Shani (1)(2)(3)(4)(5)	66	Outside Director
Dafna Gruber (1)(3)(4)(5)	48	Independent Director
Jan Loeb	55	Director
Ron Ben-Haim	45	Director
Aviram Halevi (1)(2)(3)(4)(5)	56	Outside Director

(1) “Independent Director” under the applicable NASDAQ Marketplace Rules and the applicable rules of the U.S. Securities and Exchange Commission

(2)  “Outside Director” as required by Israel’s Companies Law

(3) Member of Audit Committee and

(4) Member of the committee that examines TAT's financial statements prior to the Board of Directors' approval;

(5) Member of Compensation Committee.

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Mr. Samuel Vlodinger was elected by our Board of Directors as the Chairman of the Board of Directors in August 2013. Mr. Vlodinger has been a senior partner in FIMI since 2009. Prior to joining FIMI, Mr. Vlodinger held senior management positions in several industrial companies and has been an active private equity investor. Mr. Vlodinger holds a B.Sc. in industrial engineering from the Technion, Israel Institute of Technology. Mr. Vlodinger currently serves as the chairman of the board of directors of Tadir-Gan Precision Products, Ltd., Raval ACS, Ltd., Bagir Group and Ginegar Plastic Industries, Ltd.

Mr. Avi Shani has served as an outside director (within the meaning of the Israeli Companies Law) since August 2008 and is a member of TAT’s Audit Committee; in August 2011, Mr. Shani was re-elected to serve as an outside director for a second three-year term. Mr. Shani is also serving as a director of Psagot Providence Funds and of Psagot Pensions Funds. From 2005 until 2008 Mr. Shani served as the CEO of TCM Mobile, a start up company, and prior to that, during years 2000 - 2004 he served as Executive Vice President Investments and Chief Economist of IDB Development, a leading Israeli holding company, in charge of new Investments. Mr. Shani holds a B.A degree in Economics and an MBA, both from Tel Aviv University.

Mr. Ron Ben-Haim was elected as a director by our Board of Directors in August 2013. Mr. Ben-Haim has been a partner in FIMI since 2006. Mr. Ben Haim was previously with Compass Advisers, LLP, an investment banking firm based in New York and in Tel Aviv and with the Merrill Lynch Mergers & Acquisitions group in New York. Prior to Merrill Lynch, Mr. Ben-Haim worked at Teva Pharmaceuticals in production management. Mr. Ben-Haim holds a B.Sc. in industrial engineering from the Tel Aviv University and an MBA from New York University. Mr. Ben-Haim currently serves on the board of directors of Tadir-Gan Precision Products, Ltd., Raval ACS, Ltd., Bagir Group, Nirlat Paints, Ltd., Alony, Ltd. and Overseas Commerce, Ltd.

Ms. Dafna Gruber was elected as a director by our Board of Directors in November 2013. Since 2007, Ms. Gruber has been the Chief Financial Officer of NICE Systems, a NASDAQ and TASE listed company providing solutions that manage and analyze multimedia content and transactional data. Prior to that, Ms. Gruber has been Chief Financial Officer of Alvarion Ltd., a NASDAQ and TASE listed company that provides innovative wireless access solutions. Ms. Gruber is a Certified Public Accountant (CPA) and holds a B.A. in Accounting and Economics from Tel Aviv University.

Mr. Jan Loeb was elected as a director by our Board of Directors in August 2009. Mr. Loeb has served as President of Leap Tide Capital Management, Inc., a capital investment firm, since 2007. From February 2005 through January 2007, he served as a portfolio manager of Amtrust Capital Management, Inc. From February 2004 through January 2005, Mr. Loeb was a Portfolio Manager for Chesapeake Partners, a capital investment firm. From January 2002 through December 2004, Mr. Loeb was a Managing Director of Jefferies & Company, Inc., an investment banking firm based in New York City. From 1994 through 2001, Mr. Loeb was a Managing Director of Dresdner Kleinwort and Wasserstein, Inc., an investment banking firm based in New York City, which was formerly known as Wasserstein Perella & Co., Inc. Mr. Loeb is also a director of American Pacific Corp and was a director of Pernix Therapeutics Holdings, Inc. until September 2011. Mr. Loeb graduated from Baruch College – City University of New York with a baccalaureate in Finance and Investments.

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Mr. Aviram Halevi was elected as an outside director (within the meaning of the Israeli Companies Law) by our Board of Directors in November 2013. Mr. Halevi has been since 2010 the owner and CEO of Intel System Ltd., a provider of business intelligence services. Prior to that, from 2007 through 2009 Mr. Halevi served as the CEO of Terrogence Ltd., a producer of intelligence data for commercial markets. Mr. Halevi holds a B.Sc. in geology from the University of Toronto and an MBA from Tel Aviv University.

Mr. Itsik Maaravihas served as TAT’s Chief Executive Officer since January 2012. Prior to that, Mr. Maaravi served as President of TAT’s Piedmont subsidiary, a position he held since July 2011.  From July 2009 through June 2011 Mr. Maaravi was Chief Marketing Officer for Piedmont as well as for the Company’s Limco subsidiary.  Between 2000 and June 2009 Mr. Maaravi held senior marketing positions at Kamor Aviation and Israel Aerospace Industries.

Mr. Todd Schwarz has served as Chief Executive Offices of Piedmont since October 2012 and prior thereto as its Chief Financial Officer since January 2011.  He began his career with Ernst& Young as a tax specialist in 1989 and immediately before joining Piedmont was the Vice President of Finance and Administration for a regional real estate developer.  Mr. Schwarz holds a MBA from the University of Virginia’s Darden School of Business and a B.A. in Accountancy from North Carolina State University.

Dr. Yair Raz has served as Chief Executive Officer of Limco since November 2012. Prior to that Dr. Raz served as the Chief Operating Officer of Piedmont Aviation, a position he held since April 2012. From January 2011 to January 2012 Dr. Raz was the BTI Vice President Marketing and Business Development for North America. Between August 2005 and December 2011 Dr. Raz served as General Manager of PCI, a PWA and BTI Joint Venture in the US. Between 1995 and July 2005 Dr. Raz held a growing responsibility Leadership Positions with PCI in the US including Operation Manager, Engineering, Procurement and President Assistant. Between 1998 and 2012 Dr. Raz was also involved with the JV of BTI and PWA in Xian China. Between 1983 and 1995 Dr. Raz held growing leadership positions with BTL in Israel. Those potions included Quality and Plant Management. Dr. Raz holds a B.Sc degree in Mechanical Engineering and a M.Sc degree in Material science from the Technion in Haifa and a Phd. degree from La Salle University in the US.

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Mr. Tiko Gadothas served as TAT’s Chief Financial Officer since November 2013. Mr. Gadot has held several CFO positions in Israeli industrial companies. From 2004 – 2013 he was the CFO of Alliance Tire Company Ltd., which specializes in the development, manufacturing and marketing of tires for agriculture, forestry, construction, industrial and earth-moving applications. From 1999 – 2004 he was the CFO of Netafim Ltd., a global market leader in drip irrigation. Mr. Gadot is a Certified Public Accountant, holds a B.A. in Accounting and Economics from the Hebrew University in Jerusalem and holds an M.Sc. in Business Administration (major in industry) from Ben Gurion University, Israel.

Mr. Noam Reshef has served as TAT’s VP Operations since March 2014. Prior to that, Mr. Reshef managed a car-industry plastic factory and was in charge of the merger and integration of the company with one of its subsidiaries and is experience in the fields of operations, lean manufacturing and change management as a manager and as a consultant. Mr. Reshef holds a B.Sc. and M.Sc. degrees in industrial engineering from Ben-Gurion University.

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Compensation

The following table sets forth all compensation TAT paid with respect to all of its directors and executive officers as a group for the year ended December 31, 2013.

	Salaries, fees, Commissions and bonuses		Other benefits
All directors and executive officers as a group (12 persons)	$	1,462,000	$	167,000

During the year ended December 31, 2013, TAT paid its directors, the determined medium amounts permitted by law to an outside director (within the meaning of the Israeli companies Law) which was: a per meeting attendance fee of NIS 2,565 (approximately $711), plus an annual fee of NIS 68,885 (approximately $19,085).

B.              Board Practices

Introduction

According to the Israeli Companies Law and our articles of association, the management of our business is vested in our board of directors. The board of directors may exercise all powers and may take all actions that are not specifically granted to another organ in the Company (including our shareholders). Our executive officers are responsible for our day-to-day management. Our executive officers have individual responsibilities established by our chief executive officer and board of directors.

Election of Directors

Our articles of association provide for a board of directors consisting of such number of directors as may be determined from time to time at a general meeting of shareholders, provided that it shall be no less than two or more than eleven. Our board of directors is currently composed of sixdirectors, including three independent directors, two of whom also qualify as outside directors within the meaning of the Israeli Companies Law.

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Pursuant to our articles of association and in accordance with the Israeli Companies Law, our directors (except the outside directors) are elected at our annual general meeting of shareholders by a vote of the holders of a majority of the voting power represented and voting at such meeting; in addition, directors (except for outside directors) may be appointed by a vote of a majority of directors then in office. All our directors (except for outside directors) hold office until the annual general meeting of shareholders succeeding their election (provided that if no directors are elected at the annual general meeting, the directors in office at the time such meeting was convened shall continue to hold their office) or until their earlier death, resignation, removal or other circumstances as set forth in the Israeli law.  All the members of our Board of Directors (except for outside directors) may be reelected upon completion of their term of office.

The Israeli Companies Law requires the board of directors of a public company to determine a minimum number of directors with ‘‘accounting and financial expertise.’’  Our board of directors determined, accordingly, that at least two directors must have ‘‘accounting and financial expertise,’’ as such term is defined by regulations promulgated under the Israeli Companies Law.

We are exempt from the requirements of the NASDAQ Marketplace Rules with regard to the nomination process of directors since we are a controlled company within the meaning of NASDAQ Marketplace Rule 5615(c)(2).  See below in this Item 6. “Directors, Senior Management and Employees - Board Practices - NASDAQ Exemptions for a Controlled Company.”

Outside and Independent Directors

Outside Directors. Under the Israeli Companies Law, Israeli companies whose shares have been offered to the public or whose shares are listed in an authorized stock exchange (accordingly, such shares are considered as held by "the public") are required to appoint at least two outside directors who meet the independence criteria set by the Israeli Companies Law.

A person is qualified to serve as an outside director only if he or she has “accounting and financial expertise” or “professional qualifications,” as such terms are defined by the Israeli Companies Regulations (Conditions and Criteria for a Director Who Possesses Accounting Expertise and a Director Who Possesses Professional Competence), 2005.  At least one of the outside directors must have “accounting and financial expertise.”  Each of our outside directors has “accounting and financial expertise.”

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Outside directors are elected by a majority vote at a shareholders’ meeting.  In addition to the majority vote, the shareholder approval of the election of an outside director must satisfy either of two additional tests:

· 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 outside 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 outside director does not exceed 2% of the aggregate voting rights of our company.

In general, outside directors serve for a three-year term and may be reelected to two additional three-year terms by one of the following mechanisms: (1) the board of directors proposes the re-election of the nominee and the re-election is approved by the majority required for appointment of outside directors for their initial term; or (2) a shareholder holding 1% or more of the company's voting rights proposes the re-election of the nominee, and the re-election is approved by a majority of the votes cast by the shareholders of the company, excluding the votes of controlling shareholders or those who have a personal interest in the nomination, provided that the aggregate votes cast in favor of the re-election by shareholders who are not controlling shareholders and do not have a personal interest in the nomination constitute more than 2% of the company's voting rights .

An outside director may be removed from office at the initiative of the board of directors at a special general meeting of shareholders, if the board resolves that the statutory requirements for that person’s appointment as outside director no longer exist, or that the outside director has violated his or her duty of loyalty to the company.  The resolution of the special general meeting of shareholders regarding the termination of office of an outside director requires the same majority that is required for the election of an outside director.  The court may order the termination of the office of an outside director on the same grounds, following a motion filed by a director or a shareholder.  If an outside directorship becomes vacant and as a result, there is less than two directors who serve as outside directors in the company, the board of directors is required under the Israeli Companies law to convene a shareholders meeting immediately to appoint a new outside director.

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Each committee of the board of directors that is authorized to exercise powers vested in the board of directors must include at least one outside director and the audit committee must include all of the outside directors.  An outside director is entitled to compensation as provided in regulations adopted under the Israeli Companies Law and is otherwise prohibited from receiving any other compensation, directly or indirectly, in connection with such service.

Until the lapse of two years from termination of office, we may not engage an outside director or his spouse or child, to serve as an office holder and cannot employ or receive services from these persons, either directly or indirectly, including through a corporation controlled by that person; and with regards to a related person (to a such outside director) as defined in the Israeli Companies law which is not a spouse or child – until the lapse of one year from termination of office.

Independent Directors.  As a controlled company, within the meaning of NASDAQ Marketplace Rule 5615(c)(2), we are exempt from the NASDAQ Marketplace Rule which requires that a majority of our board of directors qualify as independent directors, within the meaning of the NASDAQ Marketplace Rules.  See Item 6. “Directors, Senior Management and Employees - Board Practices - NASDAQ Exemptions for a Controlled Company”.

Audit Committee

Under the Israeli Companies Law, the board of directors of any public company must establish an audit committee.  In general, the audit committee must consist of at least three directors and must include all of the outside directors; a majority of the audit committee members must comply with the director independence requirements prescribed by the Israeli Companies Law. The audit committee may not include (i) the chairman of the board of directors, (ii) any director employed by the Company or by a controlling shareholder of the company (including a company which is controlled by the controlling shareholder), (iii) any director providing services to the company or to a controlling shareholder of the company (including to a company which is controlled by the controlling shareholder) on an ongoing basis, or (iv) a controlling shareholder or any of the controlling shareholder’s relatives.

In addition, the NASDAQ Marketplace Rules require us to establish an audit committee comprised of at least three members, all of whom must be independent directors, each of whom is financially literate and satisfies the respective “independence” requirements of the Securities and Exchange Commission and NASDAQ and one of whom has accounting or related financial management expertise at senior levels within a company.

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Our audit committee acts also as a committee for the review and the approval of our financial statements, and as such, assists our board of directors in overseeing the accounting and financial reporting processes of our company and audits of our financial statements, including the integrity of our financial statements, compliance with legal and regulatory requirements, our independent registered public accountants’ qualifications and independence, the performance of our internal audit function and independent registered public accountants, finding any defects in the business management of our company and proposing to our board of directors ways to correct such defects, approving related-party (officers, directors, controlling shareholder, etc.)  transactions with the company as required by Israeli law, examining the scope of work and the payment to our independent auditors and such other duties as may be directed by our board of directors.  The audit committee may consult from time to time with our independent auditors and internal auditor with respect to matters involving financial reporting and internal accounting controls.

Our audit committee consists of three members of our board of directors (including two outside directors and one independent director) who satisfy the respective “independence” requirements of the Securities and Exchange Commission, NASDAQ and Israeli law for audit committee members.  Our board of directors has determined that each member of our audit committee qualifies as an audit committee financial expert, as defined by rules of the Securities and Exchange Commission.  The audit committee meets at least once each quarter.

Compensation Committee

Under the Israeli Companies Law, the board of directors of any public company must establish a compensation committee. The compensation committee must consist of at least three directors, include all of the outside directors (including one outside director serving as the chair of the compensation committee), and a majority of the committee members must comply with the director independence requirements prescribed by the Israeli Companies Law.  Similar to the rules that apply to the audit committee, the compensation committee may not include the chairman of the board, or any director employed by us, by a controlling shareholder or by any entity controlled by a controlling shareholder, or any director providing services to us, to a controlling shareholder or to any entity controlled by a controlling shareholder on a regular basis, or any director whose primary income is dependent on a controlling shareholder, and may not include a controlling shareholder or any of its relatives.  Individuals who are not permitted to be compensation committee members may not participate in the committee’s meetings other than to present a particular issue; provided, however, that an employee that is not a controlling shareholder or relative may participate in the committee’s discussions but not in any vote, and the company’s legal counsel and corporate secretary may participate in the committee’s discussions and votes if requested by the committee.

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The compensation committee’s duties include recommending to the board of directors a compensation policy for executives and monitor its implementation, approve compensation terms of executive officers, directors and employees affiliated with controlling shareholders, make recommendations to the board of directors regarding the issuance of equity incentive awards under our equity incentive plan and exempt certain compensation arrangements from the requirement to obtain shareholder approval under the Companies Law.  The compensation committee meets at least twice a year, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the committee or its chairperson.

Our compensation committee consists of our two outside directors and an independent director under the respective requirements of the SEC and NASDAQ and complies with the Israeli Companies Law criteria for compensation committee members.

Internal Audit

The Israeli Companies Law requires the board of directors of a public company to appoint an internal auditor following a recommendation by the audit committee.  The role of the internal auditor is to examine, among other things, the compliance of the Company’s conduct with applicable law and orderly business practice.  The internal auditor must meet certain statutory requirements of independence. Mr. Doron Cohen has served as our internal auditor since December 24, 2008.

Directors’ Service Contracts

There are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries.

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Approval of Related Party Transactions under Israeli Law

Fiduciary Duties of Office Holders

The Israeli Companies Law codifies the fiduciary duties that “office holders,” including directors and executive officers, owe to a company. An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act at a level of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to utilize reasonable means to obtain (i) information regarding the business feasibility of a given action brought for his approval or performed by him by virtue of his position and (ii) all other information of importance pertaining to the foregoing actions. The duty of loyalty requires that an office holder acts in good faith and for the benefit of the company, including (i) avoiding any conflict of interest between the office holder’s position in the company and any other position he holds or his personal affairs, (ii) avoiding any competition with the company’s business, (iii) avoiding exploiting any business opportunity of the company in order to receive personal gain for the office holder or others, and (iv) disclosing to the company any information or documents relating to the company’s affairs that the office holder has received by virtue of his position as an office holder.

Disclosure of Personal Interests of an Office Holder; Approval of Transactions with Office Holders

The Israeli Companies Law requires that an office holder promptly, and no later than the first board meeting at which such transaction is considered, disclose any personal interest that he or she may have and all related material information known to him or her and any documents in their position, in connection with any existing or proposed transaction by us. An office holder who did not disclose his or her personal interests, will be deemed as breaching his or her fiduciary duties. In addition, if the transaction is an extraordinary transaction, that is, a transaction other than in the ordinary course of business or other than on market terms, or likely to have a material impact on the company’s profitability, assets or liabilities, the office holder must also disclose any personal interest held by the office holder’s spouse, brother or sister, parent, grandparent, child as well as brother, sister or parent of such person's spouse or the spouse of any of the above, or by any corporation in which the office holder or his relative (as defined in the Israeli Companies Law) is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager.

Under the Israeli Companies Law, in general all arrangements as to compensation of office holders who are not directors (other than the Chief Executive Officer) require the approval of the compensation committee and the board of directors, including exculpation, insurance and indemnification of, or an undertaking to, indemnify an office holder who is not a director. The compensation of office holders who are directors and compensation of the Chief Executive Officer must be approved by our compensation committee, board of directors and the general meeting of our shareholders.

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Some transactions, actions and arrangements involving an office holder (or a third party in which an office holder has an interest) must be approved by the board of directors or as otherwise provided for in a company’s articles of association. If the transaction is an extraordinary transaction (which defined as a transaction not in the ordinary course of business and for a material value) such a transaction must be approved by the audit committee and by the board of directors itself, and under certain circumstances shareholders’ approval may be required. A director who has a personal interest in a transaction that is considered at a meeting of the board of directors or the audit committee may not be present during the board of directors or audit committee discussions and may not vote on the transaction, unless the transaction is not an extraordinary transaction or the majority of the members of the board or the audit committee have a personal interest, as the case may be. In the event the majority of the members of the board of directors or the audit committee have a personal interest, then the approval of the general meeting of shareholders is also required.

Disclosure of Personal Interests of a Controlling Shareholder; Approval of Transactions with Controlling Shareholders

The disclosure requirements that apply to an office holder also apply to a transaction in which a controlling shareholder of the company has a personal interest.  The Israeli Companies Law provides that an extraordinary transaction with a controlling shareholder or an extraordinary transaction with another person in whom the controlling shareholder has a personal interest or a transaction with a controlling shareholder or his relative regarding terms of service and employment, must be approved by the audit committee (or the compensation committee, as the case may be), the board of directors and the shareholders by a special majority, as follows. The shareholders’ approval must include the majority of shares voted at the meeting.  In addition to the majority vote, the shareholder approval must satisfy either of two additional tests:

· The majority includes at least a majority of the shares voted by shareholders who have no personal interest in the transaction; or

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· 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.

Under the regulations promulgated under the Israeli Companies Law, certain extraordinary transactions between a public company and its controlling shareholder(s) do not require shareholder approval . In addition, under such regulations, directors’ compensation and employment arrangements in a public company do not require the approval of the shareholders if both the audit committee and the board of directors agree that such arrangements are solely for the benefit of the company or if the directors’ compensation does not exceed the maximum amount of compensation for outside directors determined by applicable regulations. Also, employment and compensation arrangements for an office holder that is a controlling shareholder of a public company do not require shareholder approval if certain criteria are met. The foregoing exemptions from shareholder approval will not apply if one or more shareholders holding at least 1% of the issued and outstanding share capital of the company or of the company’s voting rights, objects to the use of these exemptions provided that such objection is submitted to the company in writing not later than fourteen days from the date of the filing of a report regarding the adoption of such resolution by the company. If such objection is duly and timely submitted, then the transaction or compensation arrangement of the directors will require shareholders’ approval as detailed above.

In addition, a private placement of securities that will (i) cause a person to become a controlling shareholder or (ii) increase the relative holdings of a shareholder that holds 5% or more of the company’s outstanding share capital, or (iii) will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital in a private placement in which 20% or more of the company’s outstanding share capital prior to the placement are offered, the payment for which (in whole or in part) is not in cash or not under market terms, requires approval by the board of directors and the shareholders of the company.

Compensation of Executive Officers and Directors; Executive Compensation Policies

In accordance with the Israeli Companies Law, we have adopted compensation policies for our executive officers and directors.  The purpose of the policies is to describe our overall compensation strategy for our executive officers and directors and to provide guidelines for setting their compensation, as prescribed by the Israeli Companies Law.  In accordance with the Israeli Companies Law, the policies must be reviewed and readopted at least once every three years.

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Approval of the compensation committee, the board of directors and our shareholders, in that order, is required for the adoption of the compensation policies.  The shareholders’ approval must include the majority of shares voted at the meeting.  In addition to the majority vote, the shareholder approval must satisfy either of two additional tests:

· 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.

Under the Israeli Companies Law, the compensation arrangements for officers (other than the Chief Executive Officer) who are not directors require the approval of the compensation committee and the board of directors; provided, however, that if the compensation arrangement is not in compliance with our executive compensation policy, the arrangement may only be approved by the compensation committee and the board of directors for special reasons to be noted, and the compensation arrangement shall also require a special shareholder approval.  If the compensation arrangement is an immaterial amendment to an existing compensation arrangement of an officer who is not a director and is in compliance with our executive compensation policy, the approval of the compensation committee is sufficient.

Arrangements regarding the compensation of the Chief Executive Officer and directors require the approval of the compensation committee, the board and the shareholders, in that order. In certain limited cases, the compensation of a new Chief Executive Officer who is not a director may be approved without approval of the shareholders.

Variable Cash Incentive

The Compensation Committee and Board of Directors may adopt, from time to time, a Cash Incentive Plan, which will set forth for each executive targets which form such executive's on target cash payment (the “On Target Cash Plan”) and the rules or formula for calculation of the On Target Cash Plan payment once actual achievements are known.

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The Compensation committee and Board of Directors may include, inter-alia, in the On Target Cash Plan predetermined thresholds and caps to correlate an executive’s On Target Cash Plan payments with actual achievements.

The annual On Target Cash Plan actual payment for the Active Chairman of the Board of Directors (the "Active Chairman"), the CEO and other executives in a given year shall be capped as determined by our Board of Directors, but in no event shall exceed the ratio set forth in the table below.

The CEO's and Active Chairman's individual On Target Cash Plan may be composed based on the mix of (i) the Company Target; (ii) Personal Target; and (iii) Personal Evaluation. The weight to be assigned to each of the components per each of the executives shall be as set forth in the table below.

	Active Chairman			CEO
Company Target		100	%		80% - 90	%
Personal KPI	NONE			NONE
Personal Evaluation	NONE				0%-20	%

The Company Target shall be determined in accordance with the following pre-determined targets: (1) sales budget, in accordance with the Company’s annual budget; (2) gross profit, in accordance with the Company’s annual budget; and (3) EBITDA, in accordance with the Company’s annual budget.

With regard to each one of the Company's measurable targets, reference points shall be determined in terms of numerical values, so that compliance with the precise numerical target as determined in the On Target Cash Plan shall constitute compliance with 100% of the target, and also, numerical values shall be determined which will constitute the lower threshold for compliance with the target. The actual rate of compliance with the targets shall be calculated in accordance with the said reference points. Failure to comply with the minimum threshold of at least 75% of a specific target shall not entitle the executive to payment of a bonus in respect of the said target. In the event of compliance at a rate of 75% or more with a specific target, the annual On Target Cash Plan shall be calculated in accordance with a key (i.e. linear, steps, etc.) which shall determine – in relation to the point of compliance with the target – the amount of the bonus in terms of a percentage of the executive annual base salary, all as shall be set forth in the On Target Cash Plan. In this respect, the Compensation Committee and the Board of Directors shall have the right to determine a higher (but not lower) entitlement threshold.

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The annual bonus shall be paid to the executive in the following manner:

- 80% of the amount of the annual bonus will be paid following the approval by the Board of Directors of the Company, of the financial statements of the relevant year (“Current Year Bonus”).

- 20% of the amount of the annual bonus shall be deferred by one year, and shall be paid following the approval by the Board of Directors of the Company of the financial statements of such year (“Deferred Bonus”).

The executive's eligibility to the payment of the Deferred Bonus shall be subject to the following cumulative conditions: (i) the Company recorded a positive net profit for the following year; and (ii) the executive had not ceased to provide services to the Company during the year in which the Deferred Bonus is paid resulting from one of the followings: (a) the executive had not terminated the engagement with the Company; or (b) the Company had not terminated the engagement with the Office Holder for "cause".

The CEO's cash bonus for fiscal year 2013 was determined in accordance with the above table (allocated 80% to Company Target and 20% to Personal Evaluation). The CEO achieved 62.4% of the Company Target (out of 80%) and the entire target for Personal Evaluation (20%). Therefore, the CEO achieved 82.4% of the Cash Plan Target as set forth in the table below:

	Reference points			Actual achieved
Company Target		80	%		62.4	%
Sales		40	%		37.6	%
Gross profit		30	%		24.8	%
EBITDA		30	%		-	%
Personal Evaluation		20	%		20	%
Total		100	%		82.4	%

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Indemnification and Insurance of Directors and Officers

Insurance of Office Holders

The Israeli Companies Law provides that a company may, if permitted by its articles of association, enter into a contract to insure an office holder for acts or omissions performed by the office holder in such capacity for:

·    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; 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.

Indemnification of Office Holders

The Israeli Companies Law provides that a company may, if permitted by its articles of association, indemnify an office holder for acts or omissions performed by the office holder in such capacity for:

·    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.

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In accordance with the Israeli Companies Law, a company’s articles of association may permit the company to:

·    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.

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Limitations on Exculpation, Insurance and Indemnification

The Israeli Companies Law provides that neither a provision of the articles of association permitting the company to enter into a contract to insure the liability of an office holder, nor a provision in the articles of association or a resolution of the board of directors permitting the indemnification of an office holder, nor a provision in the articles of association exempting an office holder from duty to the company shall be valid, where such insurance, indemnification or exemption relates to any of the following:

·    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.

Pursuant to our articles of association, the total amount of indemnification that we will pay (in addition to amounts received from an insurance company, if any) to all officers of the company, in aggregate, shall not exceed, in all circumstances, more than 25% of the company's shareholders equity as set forth in the company's recent consolidated financial statements prior to the date that the indemnity is paid. Our articles of association include provisions which allow us to insure, indemnify and exempt our office holders, subject to the provisions of the Israeli Companies Law.  We currently maintain directors’ and officers’ liability insurance to cover liabilities of up to $25 million per claim and in the aggregate; following the approvals by our audit committee and the board of directors in accordance with the conditions of a "framework transaction" approved by the general meeting of shareholders on August 30, 2010, such insurance has been renewed several times through July 14, 2014 (see below).

In November 2013, our shareholders approved a form of directors and officers letter of indemnification and exemption for liabilities and expenses incurred as a result of their acts in their capacity as directors and officers of our company, in an aggregate amount not to exceed 25% of our equity capital (net worth).

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On February 8, 2009, following the approval by our board of directors and audit committee, our shareholders approved the purchase of a tail (runoff) policy insuring the directors and officers of our company in office prior to the acquisition of the control by Isal Amlat, as part of Isal Amlat’s obligations under the purchase agreement.  The resolution to obtain such policy was adopted by a super majority vote, as required for the approval of transactions with related parties under Israeli law.  The policy will be in effect for 7 years, until September 1, 2015.  The coverage limit under such policy is 10 million dollars and the premium for such policy is 115,000 dollars for the term of the policy.

Following our acquisition of the shares of Limco-Piedmont held by the public in July 2009 we purchased a tail (runoff) policy insuring the former directors and officers of Limco-Piedmont.  The policy will be in effect for 7 years, until July 2, 2016. The coverage limit under the policy is $25 million and the premium for such policy is $190,000 dollars for the term of the policy.

In March 2013 our board of directors and audit committee approved the purchase of a directors and officers insurance policy for one year for the directors and officers of our company, its subsidiaries (Limco-Piedmont and Bental) and its controlling shareholder (TAT Industries). The coverage limit under the policy is 25 million dollars and the premium for the insurance term (one year) is approximately $112,000 out of which approximately $7,500 are charged to TAT Industries (renewed under the same terms for additional 5 months, ending on July 14, 2014, with a total premium of approximately $63,000).

The 2013 Annual and Extraordinary General Meeting of shareholders of TAT was held on November 14, 2013. Among other topics in the meeting, there was also a proposal to amend the Articles of Association of the Company to reflect recent amendments to the Israeli Companies Law and Israeli Securities Law and subject to this approval, to modify certain amendments to the form of indemnification and exemption undertaking by the Company to its directors and officers. Those two aforementioned decisions were approved in such general meeting.

NASDAQ Exemptions for a Controlled Company

We are a controlled company within the meaning of NASDAQ Marketplace Rule 5615(c)(2), or Rule 5615(c)(2), because the FIMI Funds beneficially own more than 50% of our voting shares.

Under Rule 5615(c)(2), a controlled company is exempt from the following requirements of NASDAQ Marketplace Rules 5605(b)(1), 5605(d) and 5605(e) that would otherwise require that:

·    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 either 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.

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We intend to continue to rely on these exemptions provided under Rule 5615(c)(2).

C.              Employees

As of December 31, 2013, we and our subsidiaries employed 478 employees (excluding Bental’s employees), of whom 392 were employed in manufacturing and quality control, 30 were employed in engineering and research and development and 56 were employed in administration, sales and marketing. Of such employees, 202 were located in Israel and 276 were employed by Limco and Piedmont and located in the United States.

Certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists Association) are applicable to our Israeli employees by order of the Israeli Ministry of Labor. These provisions concern mainly the length of the workday, minimum daily wages for professional workers, contributions to a pension fund, insurance for work-related accidents, procedures for dismissing employees, determination of severance pay and other conditions of employment.  We generally provide our employees with benefits and working conditions beyond the required minimums. Furthermore, under the collective bargaining agreements, the wages of most of our employees are linked to the Consumer Price Index, although the extent of the linkage is limited.

In addition, Israeli law generally requires severance pay upon the retirement or death of an employee or termination of employment without due cause.  Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute which is similar to the United States Social Security Administration. The payments thereto amount to approximately 12% of wages, with the employee contributing approximately 43% and the employer approximately 56%.

A general practice followed by us, although not legally required, is the contribution of monies on behalf of its senior employees to a fund known as “Management Insurance.”  This fund provides a combination of savings plan, insurance and severance pay benefits to the employee, giving the employee a lump sum payment upon retirement and securing his right to receive severance pay, if legally entitled, upon termination of employment. The employee contributes an amount equal to approximately 5%-6% of his wages and the employer contributes an additional amount of approximately 13-1/3% - 16% of such wages.

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D.              Share Ownership

Beneficial Ownership of Executive Officers and Directors

Except as set forth under ‘Stock Option Plans’ and in item 7A below, none of our directors and executive officers beneficially owns more than 1% of our outstanding shares.

Stock Option Plans

In November 2011, our audit committee and board of directors approved the 2012 stock option plan (the “2012 Plan”), which was subsequently approved by the Company’s shareholders, on June 28, 2012.  According to the 2012 plan an aggregate of 380,000 options (“Options”) exercisable into up to 380,000 Ordinary shares, 0.9 NIS par value, of the Company will be granted to certain members of our board of directors and certain senior executives in TAT, Limco and Piedmont, at an exercise price of $6.5 per share. The Options vest over a three-year period (one-third each year with the first one-third vesting on June 28, 2013), but the vesting of 50% of the Options is subject, in addition, to certain minimum shareholders' equity during a period of 4 years from the grant date. On August 21, 2012, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 330,000 Options, which were granted on October 4, 2012 (out of which 178,333 options were forfeited through December 31, 2013).

On March 19, 2014, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 195,000 Options, at an exercise price of $8.79 per share, to senior executives.

Item 7.    Major Shareholders and Related Party Transactions

A.              Major Shareholders

FIMI Opportunity V, L.P. and FIMI Israel Opportunity FIVE, Limited Partnership, or the FIMI Funds, are the beneficial holders of 53.8% of TAT’s Ordinary shares (4,732,351 shares). Leap-Tide Capital Management Inc., which is controlled by Mr. Jan Loeb, a member of our board of directors, is the beneficial holder of 5.9% of TAT’s Ordinary shares (522,607 shares). No other shareholder is known to us to be a beneficial owner of 5% or more of TAT’s Ordinary shares.

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The following table sets forth certain information as of February 28, 2014, regarding the beneficial ownership by all shareholders known to us to own beneficially 5% or more of our Ordinary shares:

Name	Number of Ordinary Shares Beneficially Owned(1)		Percentage of Ownership(2)
FIMI Funds (3)		4,732,351		53.7	%
Leap-Tide Capital Management Inc.		522,607		5.9	%

________________________

(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission 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 8,805,236 Ordinary shares issued and outstanding as of February 28, 2014 (net of 274,473 dormant shares).

(3) Based on a Schedule 13D filed on August 14, 2013, FIMI Opportunity V, L.P., FIMI Israel Opportunity Five, Limited Partnership (together, the "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 4,732,351 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 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 67891, Israel.

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Significant Changes in the Ownership of Major Shareholders

On March 11, 2009 and on August 13, 2009, TAT’s board of directors authorized its management to engage Oppenheimer Israel Investment House for the blind trust purchase of TAT’s shares under rule 10b5-1 of the Securities Exchange Act of 1934. The first purchase plan, which was discontinued on March 26, 2009, resulted on the purchase of 4,650 shares for a cumulative amount of $ 26 thousand. The second purchase plan, which was discontinued on  November 21, 2009, included licensing Oppenheimer Israel to purchase shares of TAT on a foreign stock exchange in an aggregate amount of up to $2 million (approximately NIS 7.8 million) for a period of six months and at a price not exceeding $9 per share. As of December 31, 2010, 253,390 shares were purchased, representing about 2.8% of the Company's share capital in consideration of approximately $2 million (an average of $7.90 per share). The purchased shares became dormant as defined in the Israeli Companies Law.

In September, 2011 Isal Amlat purchased an aggregate of 18,600 Ordinary shares of TAT at an average price of 20.39 NIS per share (approximately $5.54 per share). Such purchases were made on the Tel Aviv Stock Exchange. Following such purchases, Isal beneficially owned 4,750,951 Ordinary shares, representing 54.00% of TAT’s Ordinary shares.

On May 21, 2012, TAT’s Board of Directors authorized a share repurchase plan, under Rule 10b5-1 of the Securities Exchange Act of 1934.  The plan was for a period of 6 months (subject to extension) and provided for the purchase of shares in an aggregate amount of up to $0.5 million U.S. dollars. Such plan replaced and superseded a prior repurchase plan approved by TAT’s Board of Directors, on February 21, 2012. On November 21, 2012 the term of such stock repurchase plan ended. As of such date, the Company had purchased 16,433 shares for approximately $71 thousands (average of $4.32 per share) constituting less than 0.1% of TAT’s issued shares.

On October 2012 two lenders to TAT’s then controlling shareholders, KMN Industries and TAT Industries, filed separate petitions to the court to enforce liens granted to such lenders by each of the controlling shareholders in certain collateral including KMN Industries’ holdings of an approximately 80% ownership interest in TAT Industries (which in turn owned approximately 43% of TAT's outstanding share capital) and KMN Industries’ direct holdings in TAT (which represented approximately 10% of TAT's outstanding share capital).

On December 18, 2012 the court appointed permanent receivers on behalf of the two lenders mentioned above for the purpose of jointly enforcing the liens granted to such lenders. On March 15, 2013 the receivers of TAT’s shares announced a tender process for the sale of such shares.

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On August 7, 2013 the receivers informed TAT that the FIMI Funds acquired 4,732,351 Ordinary shares of TAT constituting 53.8% of TAT’s outstanding share capital as of the transaction date, after receiving all required court approvals and the transfer of the consideration by the FIMI Funds to the receivers.

Major Shareholders Voting Rights

Our major shareholders do not have different voting rights.

Record Holders

Based on a review of the information provided to us by our transfer agent, as of March 2, 2014, there were 43 holders of record of our Ordinary shares, of which 37 record holders holding less than 1.0% of our Ordinary shares had registered addresses in the United States.  These numbers are not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside since many of these Ordinary shares were held of record by brokers or other nominees including CEDE & Co., the nominee for the Depositary Trust Company (the central depositary for the U.S. brokerage community), which held approximately 70% of our outstanding Ordinary shares as of such date.

B.              Related Party Transactions

Management and Services Agreement with TAT Industries

In February 2000, TAT entered into an agreement with TAT Industries, TAT’s then controlling shareholder, to purchase operations of TAT Industries relating to the manufacture of aviation accessories and the lease of certain real estate and buildings. Pursuant to the terms of the agreement, all of the employees of TAT Industries were transferred to TAT effective as of January 1, 2000, without any change in the conditions of their employment. Until January 31, 2014, following the sale of TAT’s shares to FIMI, TAT Industries paid TAT $50,000 per year for administrative, accounting and secretarial services provided by TAT to TAT Industries. On January 31, 2014 the services agreement between TAT and TAT Industries was terminated, effective as of such date.

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In addition, pursuant to the terms of the agreement, TAT sub-leases from TAT Industries approximately 301,000 square foot of the Gedera facility until the end of the respective lease agreements TAT Industries has with the Israel Land Authority (see also under Item 4. Information on the Company, C. Property, Plants and Equipment) for a period of 24 years and eleven months, for rental fee which is subject to revaluation every fifth year, with an additional incremental payment of 2%. In 2010 the rental fee was revaluated by a real estate appraiser, and as a result was increased to $400,000 per year with an additional incremental payment of 2% per year. Total rental payment TAT paid to TAT Industries during 2013 and 2012 were $424,000 and $416,000, respectively. See item 4.C "Information on the Company- Property, Plants and Equipment". According to the requirements of the Israeli Companies Law, as amended in 2011, in January 2012 our audit committee has reapproved the terms of the sub-lease until the next revaluation by a real appraiser, due in 2015.

On April 22, 2012, the Board of Directors of the Company approved and ratified payments made by the Company to certain third parties on account of debts of TAT Industries Ltd., the Company's then controlling shareholder, to such third parties. As of December 31, 2013 TAT Industries does not have any outstanding debt to TAT.

Through November 2013, TAT Industries and TAT reported to the Value Added Tax Authorities on a consolidated basis.

Management Agreement with ISAL

In March 2012, the audit committee and the board of directors of TAT approved a new three-year management agreement with Isal Amlat, commencing as of February 8, 2012 (the "New Management Agreement"). Each of TAT and Isal Amlat were entitled to terminate the New Management Agreement subject to a prior written notice of 4 months. Pursuant to the New Management Agreement, in consideration of the management services provided by Isal Amlat, TAT paid Isal Amlat  management fees in a total annual amount of NIS1,500,000 linked to the Consumers Price Index payable on a monthly basis, plus VAT.In addition, Isal Amlat was entitled to repayment of expenses actually borne as part of providing the management services. The New Management Agreement was approved by the shareholders of TAT on June 28, 2012.

On August 21, 2012 the board of directors of TAT approved, following an approval of TAT’s audit committee, a change to the New Management Agreement with Isal Amlat, effective from such date according to which the scope of the services provided by Isal Amlat to TAT were reduced and the annual management fees were also reduced by a total amount of NIS570,000, following such a reduction such annual management fee was NIS 930,000.

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In addition, the Company received management services from a private company controlled by Mr. Nathan Galili (“Galili”), CEO of KNM Industries Ltd. (a private company through which Isal Amlat indirectly held control in the Company). The management services consisted of a half-time position of Galili, which value is more than the reduced amount, and additionally included his services as active chairman of Bental. For those services the Company paid the management company annual management fees equal to the reduced amount, in addition to NIS7,000 (plus VAT), as a monthly remuneration for travelling expenses to Bental. In addition, if during the service period or within a twelve month period from the end of the service period the Company will sell its holding in Bental, for more than $6.6 million (“low threshold”), then the management company will be eligible for a bonus which will be determined as follows:

- 2% out of the 1st million above the low threshold, the Company will receive for its holding in Bental, plus

- Additional 3% out of the 2nd million above the low threshold the Company will receive for its holding in Bental, plus

- Additional 5% out of the 3rd million above the low threshold the Company will receive for its holding in Bental.

- It is clarified that in any event the amount of the bonus shall not exceed $100 thousand.

- Such management services will be provided until February 8, 2015 (the end of term of the new management agreement with Isal Amlat). Each of the parties (TAT and the management company) may terminate the agreement with a prior written notice of four months.

On January 27, 2013 TAT informed Isal Amlat that no management services had been provided by Isal Amlat to TAT during the preceding months, and that TAT decided to immediately terminate the Management Agreement. At that date TAT ceased paying management fees.

On February 8, 2013 Mr. Galili informed TAT on the termination of the engagement with TAT, effectively immediately while management fees were paid throughout June 8, 2013 at the end of the four-month notice period. Mr. Galili ceased providing management services on February 8, 2013.

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Inclusion of TAT Industries in a Directors' and Officers' Liability Insurance Policies

Our directors' and officers' liability insurance policy (see Item 6.B "Board Practices- Exculpation, Indemnification and Insurance of Directors and Officers”) included our former parent company, TAT Industries, through October 20, 2013.  TAT Industries bore $7,500 out of the total $112,000 annual premium with respect to the insurance.

Management Agreement with Bental

On June 14, 2010, following the approval of TAT’s Board of Directors and audit committee, TAT and Bental entered into a management agreement pursuant to which in consideration of management services provided by TAT, Bental will pay to TAT an amount of $120,000 plus VAT per fiscal year, commencing June 2010. Such management fees were paid until June 30, 2013, following which the extent of such services reduced significantly together with the intent of the Company to sell its entire interest in Bental.

Loan from Bental

On September 7, 2011 TAT received a loan from its subsidiary, Bental, in the total amount of NIS2.5 million (approximately $0.7 million), to be repaid in whole at the end of a 24 month period (the “Term”). The principle amount bears interest of Prime +1% payable on a quarterly basis and may be repaid at any time during the Term upon TAT’s discretion. Simultaneously with such loan, Bental received a loan from an Israeli bank for a similar amount under similar terms and conditions. On September 8, 2013 Bental repaid the loan to the bank, and TAT repaid the loan amount to Bental.

Other Relationships

Mr. Itsik Maaravi, TAT’s Chief Executive Officer and Mr. Yaron Shalem, former TAT’s Chief Financial Officer, also served in the same positions in TAT Industries, until January 6, 2014 and December 1, 2013, respectively.

Mr. Maaravi, TAT’s Chief Executive Officer also serves as a director of FAvS.

C.              Interests of Experts and Counsel

Not applicable.

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Item 8.    Financial Information

A.              Consolidated Statements and Other Financial Information

See the consolidated financial statements, including the notes thereto, included in Item 18.

Legal Proceedings

On November 29, 2011, a factoring company ("the plaintiff"), filed a claim with the magistrates court in Tel-Aviv against the Company, Bental and ten others ("the respondents"), jointly and severally, for the amount of 6,151 thousand NIS (approximately $1,620 thousand). The plaintiff's case against the Company is based on invoices that were presented to the plaintiff by supplier of the Company (“the supplier”), by virtue of assignment of rights, which were originally issued to the Company by the supplier for certain alleged services. On February 5, 2012 the Company filed for its statement of defense, in which it denied the plaintiff's claims and clarified that it acted according to the deed of assignment of rights, and that the invoices neither represent nor reflect real transactions and/or real services which were rendered. The Company is of the opinion that its exposure due to the claim filed is not probable to be materialized and thus no provision was recorded in regard of that claim of December 31, 2013.

Dividend Distribution Policy

The Israel Companies Law also restricts our ability to declare dividends in a way that we can only distribute dividends from profits (as defined in the law), provided that there is no reasonable suspicion that the dividend distribution will prevent us from meeting our existing and future expected obligations as they come due.

B.              Significant Changes

On February 18, 2014, we entered into an agreement to sell our entire interest in Bental, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5 million. Following such transaction, Bental Investments will hold 100% of Bental’s outstanding share capital. Closing of the transaction is expected to take place within the next several weeks.

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Item 9.    The Offer and Listing

A.              Offer and Listing Details

Annual Stock Information

The following table sets forth, for each of the years indicated, the high and low sales prices of our Ordinary shares on the NASDAQ Global Market and the TASE:

	NASDAQ Global Market(1)				Tel Aviv Stock Exchange
	High		Low		High		Low
Fiscal Year Ended December 31, 2004		9.80		6.21		—		—
Fiscal Year Ended December 31, 2005		9.35		5.25	NIS 35.50		NIS 29.70
Fiscal Year Ended December 31, 2006		19.52		5.92		82.10		30.25
Fiscal Year Ended December 31, 2007		28.18		11.37		116.70		47.68
Fiscal Year Ended December 31, 2008		12.24		3.62		53.00		15.52
Fiscal Year Ended December 31, 2009		9.13		3.95		33.90		16.53
Fiscal Year Ended December 31, 2010		9.38		5.19		37.36		18.30
Fiscal Year Ended December 31, 2011		6.32		4.20		22.19		15.68
Fiscal Year Ended December 31, 2012		6.05		3.64		23.42		14.81
Fiscal Year Ended December 31, 2013		8.05		5.58		28.93		20.60

(1) On June 24, 2009 TAT’s Ordinary shares began trading on the NASDAQ Global Market.

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Quarterly Stock Information

The following table sets forth, for each of the full financial quarters in the two most recent full financial years and any subsequent period, the high and low sales prices of our Ordinary shares on the NASDAQ Global Market and the TASE:

	NASDAQ Global Market				Tel Aviv Stock Exchange
	High		Low		High		Low
2012
First Quarter		4.58		4.12	NIS 17.50		NIS 15.31
Second Quarter		4.80		4.12		17.96		15.26
Third Quarter		4.47		3.64		17.15		14.84
Fourth Quarter		6.04		3.66		23.42		14.81
2013
First Quarter		7.22		5.58	NIS 26.93		NIS 20.60
Second Quarter		7.06		6.01		25.82		22.02
Third Quarter		8.05		6.67		28.47		24.62
Fourth Quarter		8.05		7.40		28.93		25.49
2014
First Quarter(through March 17, 2014)		8.54		7.95	NIS 29.89		NIS 27.22

Monthly Stock Information

The following table sets forth, for the most recent six months, the high and low sales prices of our Ordinary shares on the NASDAQ Global Market and the TASE:

	NASDAQ Global Market				Tel Aviv Stock Exchange
	High		Low		High		Low
October  2013		8.05		7.77	NIS 28.93		NIS 27.43
November  2013		7.95		7.4		28.93		26.90
December 2013		8.00		7.42		28.57		25.49
January 2014		8.34		7.95		28.93		27.22
February 2014		8.54		8.17		29.89		28.78
March 2014 (through March 17, 2014)		8.40		8.25		29.52		28.70

B.              Plan of Distribution

Not applicable.

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C.              Markets

Our Ordinary shares are traded on the NASDAQ Global Market under the symbol “TATT”.  On August 16, 2005, we listed our shares for trade on the TASE as a dual listed company.

D.              Selling Shareholders

Not applicable.

E.               Dilution

Not applicable.

F.               Expense of the Issue

Not applicable.

Item 10.  Additional Information

A.              Share Capital

Not applicable.

B.              Memorandum and Articles of Association

Set out below is a description of certain provisions of our Memorandum of Association, Articles of Association and of the Israeli Companies Law related to such provisions.  This description is only a summary and does not purport to be complete and is qualified by reference to the full text of the Memorandum of Association and Articles of Association, which are incorporated by reference as exhibits to this Annual Report, and to Israeli law.

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Purposes and Objects of the Company

We are a public company registered with the Israeli Companies Registry and have been assigned company number 52-0035791.  Section 2 of our memorandum of association provides that we were established for the purpose of engaging in the business of providing services of planning, development, consultation and instruction in the electronics field. In addition, the purpose of our company is to perform various corporate activities permissible under Israeli law.

On February 1, 2000, the Israeli Companies Law came into effect and superseded most of the provisions of the Israeli Companies Ordinance (New Version), 5743-1983, except for certain provisions which relate to liens, bankruptcy, dissolution and liquidation of companies. Under the Israeli Companies Law, various provisions, some of which are detailed below, overrule the current provisions of our articles of association.

The Powers of the Directors

Under the provisions of the Israeli Companies Law which prevails over our Articles of Association in certain issues, a director cannot participate in a meeting nor vote on a proposal, arrangement or contract in which he or she is materially interested except in cases where a majority of the directors are materially interested in the same transaction. In addition, our directors cannot vote on compensation to themselves without the approval of our compensation committee and our shareholders at a general meeting, except for certain cases in which there is no need for the approval of the general meeting in accordance with the regulations promulgated under the Israeli Companies Law. See Item 6. “Directors, Senior Management and Employees – Board Practices – Approval of Related Party Transactions Under Israeli Law.”

The authority of our directors to enter into borrowing arrangements on our behalf is not limited, except in the same manner as any other transaction by us.

Our articles of association do not impose any mandatory retirement or age-limit requirements on our directors and our directors are not required to own shares in our company in order to qualify to serve as directors.

Rights Attached to Shares

Our authorized share capital consists of 10,000,000 Ordinary shares of a nominal value of NIS 0.90 each.  All outstanding Ordinary shares are validly issued, fully paid and non-assessable.

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The rights attached to the Ordinary shares are as follows:

Dividend rights.  Holders of our Ordinary shares are entitled to the full amount of any cash or share dividend subsequently declared.  The board of directors may declare dividends in accordance with the provisions of the Israeli Companies Law as mentioned above.  See Item 8.A. “Financial Information – Consolidated and Other Financial Information – Dividend Distribution Policy”. If after one year a dividend has been declared and it is still unclaimed, the board of directors is entitled to invest or utilize the unclaimed amount of dividend in any manner to our benefit until it is claimed.  We are not obligated to pay interest or linkage differentials on an unclaimed dividend.

Voting rights.  Holders of Ordinary shares have one vote for each Ordinary share held on all matters submitted to a vote of shareholders.  Such voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future.

The quorum required for any meeting of shareholders consists of at least two shareholders present in person or represented by proxy who hold or represent, in the aggregate, at least one third of the voting rights of the issued share capital.  A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place or any time and place as the directors designate in a notice to the shareholders. At the reconvened meeting, the required quorum consists of any two members present in person or by proxy.

Under our Articles of Association, any resolution, including resolutions amending our memorandum of association or articles of association, winding-up, authorization of a class of shares with special rights, or other changes as specified in our Articles of Association, requires approval of the holders of a majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting thereon.

Pursuant to the Israeli Companies Law and our articles of association, our directors (other than outside directors) are elected at our annual general meeting of shareholders by a vote of the holders of a majority of the voting power represented and voting at such meeting and hold office until the next annual general meeting of shareholders and until their successors have been elected. All the members of our Board of Directors (except the outside directors) may be reelected upon completion of their term of office.  For information regarding the election of outside directors, see Item 6. “Directors, Senior Management and Employees – Board Practices — Election of Directors.”

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Rights to share in our company’s profits.  Our shareholders have the right to share in our profits distributed as a dividend and any other permitted distribution.  See this Item 10B. “Additional Information – Memorandum and Articles of Association – Rights Attached to Shares – Dividend rights.”

Rights to share in surplus in the event of liquidation.  In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of Ordinary shares in proportion to the nominal value of their holdings. This right may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Liability to capital calls by our company.  Under our memorandum of association and the Israeli Companies Law, the liability of our shareholders is limited to the par value of the shares held by them.

Limitations on any existing or prospective major shareholder. See Item 6. “Directors and Senior Management –Board Practices - Approval of Related Party Transactions Under Israeli Law.”

Changing Rights Attached to Shares

According to our Articles of Association, in order to change the rights attached to any class of shares, unless otherwise provided by the terms of the class, such change must be adopted by a general meeting of the shareholders and by a separate general meeting of the holders of the affected class with a majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting thereon.

Annual and Extraordinary Meetings

Under the Israeli Companies Law a company must convene an annual meeting of shareholders at least once every calendar year and within fifteen months of the last annual meeting. The agenda of the annual meeting includes discussing the financial statements and the report of the board of directors and may also include the appointment of directors and independent auditors as well as other issues. Depending on the matter to be voted upon, notice of at least 21 days or 35 days prior to the date of the meeting is required.  Our board of directors may, in its discretion, convene additional meetings as “special general meetings.”  With respect to “special general meetings" notice of at least 35 days prior to the date of the meeting is required.  In addition, the board must convene a special general meeting upon (1) the demand of two of the directors or 25% of the nominated directors, and (2) one or more shareholders having at least 5% of the outstanding share capital and at least 1% of the voting power in the company, or one or more shareholders having at least 5% of the voting power in the company.  See Item 10B. “Additional Information - Memorandum and Articles of Association - Rights Attached to Shares - Voting Rights.”

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Limitations on the Rights to Own Securities in Our Company

Neither our memorandum of association or our articles of association nor the laws of the State of Israel restrict in any way the ownership or voting of shares by non-residents, except with respect to subjects of countries which are in a state of war with Israel.

Provisions Restricting Change in Control of Our Company

The Israeli Companies Law requires that mergers between Israeli companies be approved by the board of directors and general meeting of shareholders of both parties to the merger transaction.  The approval of the board of directors of both companies is subject to such boards’ confirmations that there is no reasonable doubt that after the merger the surviving company will be able to fulfill its obligations towards its creditors. Each company must notify its creditors about the contemplated merger.  Under the Israeli Companies Law, our Articles of Association are deemed to include a requirement that such merger be approved by an extraordinary resolution of the shareholders, as explained above.  The approval of the merger by the general meetings of shareholders of the companies is also subject to additional approval requirements as specified in the Israeli Companies Law and regulations promulgated there under.  See also Item 6. “Directors, Senior Management and Employees – Board Practices – Approval of Related Party Transactions Under Israeli Law.”

Disclosure of Shareholders Ownership

The Israeli Securities Law, 5728-1968 and regulations promulgated thereunder contain various provisions regarding the ownership threshold above which shareholders must disclose their share ownership.  However, these provisions do not apply to companies, such as ours, whose shares are publicly traded in Israel as well on the NASDAQ Global Market.  We are required pursuant to the Israeli Securities Law and the regulations promulgated thereunder to submit to the Israeli Securities Authority and the TASE, through a public immediate report, among other things, all information that we receive from our shareholders regarding their shareholdings in our company, provided that such information was published or is required to be published under applicable foreign law.

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Changes in Our Capital

The Board has the right to issue shares. Changes in our capital are subject to the approval of the shareholders at a general meeting by a majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting thereon.

There are no restrictions on the rights of nonresident or foreign shareholders to hold or vote the Ordinary Shares.

C.              Material Contracts

Bental Acquisition

Following a series of transactions occurring between March 2008 and March 2009, TAT acquired 70% control of Bental. The acquisition of the Bental shares (for an aggregate price of $9.2 million) was financed by loans in a total amount of $6.25 million received from Bank Mizrahi and TAT’s internal resources.

On February 18, 2014, we entered into an agreement to sell our entire interest in Bental, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5 million. Following such transaction, Bental Investments will hold 100% of Bental’s outstanding share capital. Closing of the transaction is expected to take place within the next several weeks.

Plan of Merger with Limco-Piedmont

On April 3, 2009 we entered into an Agreement and Plan of Merger with Limco-Piedmont and LIMC Acquisition Company, a Delaware corporation and our wholly-owned subsidiary, pursuant to which we acquired on July 2, 2009, all of the publicly held shares of Common stock of Limco pursuant to a stock for stock merger. Under the terms of the merger agreement, Limco-Piedmont's stockholders received one half of an Ordinary share of TAT for each share of Limco-Piedmont Common stock they own. Following the merger, Limco-Piedmont became our wholly owned subsidiary.

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FAvS Transaction

Pursuant to a Stock Purchase Agreement dated November 9, 2009 with FAvS, TAT’s subsidiary, Piedmont, acquired on December 4, 2009, 288,334 shares of Class B Common stock of First Aviation Services Inc., or FAvS, representing 37% of FAvS' then share capital (total number of shares acquired is adjusted as result of a 1 for 20 reverse stock split) 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, which was 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.

The shares of FAvS Class B Common Stock acquired by Piedmont are 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. 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 also 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. The stockholders agreement and rights agreement were amended on June 30, 2011 in connection with the settlement of the dispute described further below.

Piedmont agreed to guaranty $7 million of the debt incurred by FAvS in connection with the AeTR acquisition by providing a letter of credit to the lender for FAvS.  The guaranty was for a period of up to two years and reduced as such debt amortized.  Piedmont was 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 also entered into an intercreditor agreement with the lender to FAvS which subordinated Piedmont’s claims if the letter of credit is drawn upon to the obligations of FAvS to the lender.

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On October 1, 2010, Piedmont agreed to secure the guarantee for $6.6 million, by providing a new letter of credit to the lender for FAvS. Such guaranty was for a period of 15 months ending December 31, 2011 and its amount was reduced as such debt amortizes in increments of $0.1 million per month. Piedmont was also granted a second lien on the assets of FAvS to secure the repayment obligations of FAvS in the event that the letter of credit is drawn upon. Piedmont also entered into an intercreditor agreement with the lender to FAvS which subordinated Piedmont’s claims if the letter of credit is drawn upon to the obligations of FAvS to the lender.

FAvS and Piedmont also entered into a one-year services agreement pursuant to which Piedmont provided certain finance, human resources, IT and quality control services to FAvS and a multi-year services agreement pursuant to which a subsidiary of Piedmont provides certain plating, machining and grinding services to FAvS.

A commercial dispute arose between Piedmont and FAvS relating to the propeller maintenance business which had been contributed to FAvS by Piedmont as part of the transaction discussed above.  The commercial dispute began in April 2010 when a customer of the propeller maintenance business requested reimbursement from FAvS for damages to certain propellers.  FAvS then sought reimbursement from Piedmont for such amounts.  Although Piedmont rejected all of FAvS’ claims with regards to Piedmont’s responsibility for the claimed damages, the parties reached an agreement pursuant to which Piedmont loaned $700,000 to FAvS and agreed to bear a portion of the additional cost of the replacement of propeller blades that FAvS would be responsible for. In exchange FAvS agreed to waive all claims against Piedmont with respect to such customer. Such loan was subsequently forgiven.

Notwithstanding such waiver, in the last quarter of 2010, FAvS again asserted claims against Piedmont relating to the propeller maintenance business, including claims not previously asserted.  After reviewing this issue during 2010 fourth quarter and thereafter, the company estimated the additional liability it may bear and accordingly wrote off the payment and recorded an accrual, which it believed, covered its potential cost in connection with this matter.

In order to finally settle all disputes between them, on June 30, 2011 Piedmont and FAvS entered into a Settlement Agreement and Release (the “Settlement Agreement”).  Pursuant to the Settlement Agreement, each party fully released the other party and acknowledged that the settlement was a compromise of disputed claims and was not to be construed as an admission of liability or wrongdoing.  In addition, each party agreed not to disparage the other and Piedmont paid an aggregate of $700,000 to FAvS.

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Simultaneously with the execution of the Settlement Agreement, Mr. Hollander, the Chief Executive Officer and controlling stockholder of FAvS, purchased 166,113 shares of Class A Common Stock of FAvS at a price of $18.06 per share (for an aggregate price of $3 million).  In addition, Piedmont agreed to extend its guarantee of the bank debt incurred by FAvS to fund the AeTR transaction through June 30, 2013 and to continue to provide a letter of credit to secure such guarantee.  The amortization schedule for such debt was revised so that no amortization will occur until June 30, 2012.  Thereafter the debt amortized at the rate of $200,000 per month.  The guarantee was terminated on March 2013, see below.

The Stockholders Agreement entered into in 2009 between Piedmont and Mr. Hollander was also amended to delete the reciprocal drag along rights and to provide that Piedmont may designate one member to the Board of Directors of FAvS (rather than the two provided in the original agreement).  Finally, the Rights Agreement entered into in 2009 between Piedmont and FAvS was amended so that Piedmont’s right to approve certain material corporate actions by FAvS has been limited to the right to approve contracts or agreements with affiliates of FAvS.  The amendment also provides that the approval of Piedmont will not be required if FAvS seeks to raise additional capital from Mr. Hollander so long as the consideration being paid by Mr. Hollander is not less than the consideration that would be paid by a third-party in an arms-length transaction and is fair, equitable and reasonable under the circumstances.

In connection with the Settlement Agreement and the dilution in Piedmont’s interest in FAvS, the Company recorded, at June 30, 2011, a gain in the amount of $0.24 million related to the $3 million capital investment in FAvS by Mr. Hollander.

In June, 2012, FAvS entered into a transaction with Mr. Hollander, pursuant to which FAvS borrowed $3.0 million from Mr. Hollander, secured by a third lien on the assets of FAvS. The loan bears interest at 10% and in addition Mr. Hollander was issued warrants to purchase shares of Class A Common Stock of FAvS, representing 15% of FAvS post-exercise shareholders’ equity, at an exercise price of $7.00 per share.

Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT’s investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of a third party valuation. Based on the results of this test the Company determined that its investment in FAvS was impaired by $3.3 million. The impairment was due to a decline in FAvS’ profitability margins and future forecasted sales levels which related to the business of API, one of FAvS subsidiaries, and approximates TAT’s share in the loss resulting from the API Transaction discussed below.

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On March 18, 2013 FAvS sold 97% of the stock of API for a total purchase price of $16.5 million, of which $15.9 million was used to repay debt (the “API Transaction”). The sale resulted in FAvS retaining a 3% equity interest in the API business. The API transaction resulted in a loss from discontinued operations and write-down of the API business of $11.5 million which was included in the FAvS loss for the year ended December 31, 2012. Simultaneously with the transaction FAvS paid-off its Term Loan in the amount of $4.0 million thereby terminating the guarantee and releasing the Letter of Credit provided by TAT to secure such guarantee. Accordingly the restricted deposit associated with the above Letter of Credit, was released as well.

Market Maker (TASE) Agreement

On August 15, 2011, TAT entered into a Market Making agreement for its shares traded on the Tel Aviv Stock Exchange (TASE) with Harel Finance Trade & Securities Ltd. for the purpose of improving liquidity of TAT shares. The agreement is for a 12 month period, subject for TASE’s approval. The agreement will be automatically extended in 12 month periods, unless otherwise terminated by either of the parties giving 30 days notice or in accordance with certain regulatory circumstances. TAT will pay an immaterial fee in connection with the said agreement.

D.              Exchange Controls

Israeli law and regulations do not impose any material foreign exchange restrictions on non-Israeli holders of our Ordinary shares. In May 1998, a new “general permit” was issued under the Israeli Currency Control Law, 1978, which removed most of the restrictions that previously existed under such law, and enabled Israeli citizens to freely invest outside of Israel and freely convert Israeli currency into non-Israeli currencies.

Non-residents of Israel who purchase our Ordinary shares will be able to convert dividends, if any, thereon, and any amounts payable upon our dissolution, liquidation or winding up, as well as the proceeds of any sale in Israel of our Ordinary shares to an Israeli resident, into freely-repatriable dollars, at the exchange rate prevailing at the time of conversion, provided that the Israeli income tax has been withheld (or paid) with respect to such amounts or an exemption has been obtained.

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E.              Taxation

The following is a discussion of Israeli and United States tax consequences material to our shareholders. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, the views expressed in the discussion might not be accepted by the tax authorities in question. The discussion is not intended, and should not be construed, as legal or professional tax advice and does not exhaust all possible tax considerations.

You are urged to consult your own tax advisor as to the Israeli, United States and other tax consequences of the purchase, ownership and disposition of our Ordinary shares, including, in particular, the effect of any non-Israeli, state or local taxes.

Israeli Tax Considerations

The following is a summary of the principal Israeli tax laws applicable to us, of the Israeli Government programs from which we benefit and of the Income Tax Law (Inflationary Adjustments), 1985. This section also contains a discussion of material Israeli tax consequences to our shareholders who are not residents or citizens of Israel. This summary does not discuss all aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances, or to some types of investors subject to special treatment under Israeli law. Examples of investors subject to special treatment under Israeli law include residents of Israel, traders in securities, or persons who own, directly or indirectly, 10% or more of our outstanding voting capital, all of whom are subject to special tax regimes not covered in this discussion. Some parts of this discussion are based on new tax legislation that has not been subject to judicial or administrative interpretation. The discussion should not be construed as legal or professional tax advice and does not cover all possible tax consequences.

General Corporate Tax Structure

Israeli companies were generally subject to corporate tax at the rate of 25% in 2010, which was reduced to  24% in 2011, and was due to further gradually reduced to 18% in 2016 and thereafter. On December 5, 2011, the Knesset (Israel's Parliament) passed a law for changing the tax burden (Legislative Amendments), which cancels, among others, the gradual reduction in the corporate tax rates in Israel. In addition, the corporate tax in Israel increased to 25% starting in 2012.

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In August 2013, the Israeli Knesset approved an increase in the corporate tax rate to 26.5% for 2014 and thereafter.

However, the rate is effectively reduced for income derived from an approved enterprise and beneficiary enterprise, as discussed below.

We do not expect that the August 2013 Amendment to have a material effect on the tax payable in respect of our Israeli operations.

Tax Benefits under the Law for the Encouragement of Capital Investments, 1959

We have one capital investment program that has been granted “approved enterprise” status under the Law for the Encouragement of Capital Investments, 1959, commonly referred to as the Investment Law, and one program that qualify as a “beneficiary enterprise” pursuant to an amendment to the Investment Law that came into effect on April 1, 2005. These programs were waived as part of the "Preferred enterprise" which is part of the "2011 Amendment" mentioned below.

Prior to the April 2005 amendment, the Investment Law provided that capital investments in a production facility (or other eligible assets) may be designated as an approved enterprise upon prior approval from the Investment Center of the Israel Ministry of Industry, Trade and Labor, or the Investment Center.

On April 1, 2005, an amendment to the Investment Law came into effect, which revised the criteria for investments qualified to receive tax benefits.  An eligible investment program under that amendment provided for benefits as a beneficiary enterprise (rather than the previous terminology of approved enterprise).  Among other things, the April 2005 amendment provided  tax benefits to both local and foreign investors.  Companies that meet the specified criteria received the tax benefits without need for prior approval and instead, a company was to  claim the tax benefits offered by the Investment Law directly in its tax returns.

The period of tax benefits for the then new beneficiary enterprise commences in the year that is the later of: (i) the year in which taxable income is first generated by a company, or (ii) a year selected by the company for commencement, on the condition that the company meets certain provisions provided by the Investment Law.  The amendment does not apply to investment programs approved prior to December 31, 2004 and applies only to new investment programs.  We began to generate income under the provision of the new amendment as of the beginning of 2006.

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After expiration of the initial tax exemption period, the company is eligible for what was considered then a reduced corporate tax rate of 10% to 25% for the following five to eight years, depending on the extent of foreign investment in the company.  The benefits period was limited to 12 years from completion of the investment under the approved plan or 14 years from the date of the approval, whichever is earlier.  A company in which more than 25% of the shareholders are non-residents of Israel, defined under the Investment Law as a Foreign Investors Company, may be eligible for benefits for an extended period of up to ten years.

If a company distributes dividends from tax-exempt approved enterprise and/or beneficiary enterprise income, the company will be taxed on the otherwise exempt income at the same reduced corporate tax rate that applies to it after the initial exemption period.  Distribution of dividends derived from approved enterprise and beneficiary enterprise income that was taxed at reduced rates, but not tax exempt, does not result in additional tax consequences to the company.  Shareholders who receive dividends derived from approved enterprise and beneficiary enterprise income are generally taxed at a rate of 15%, which is withheld and paid by the Company paying the dividend, if the dividend is distributed during the benefits period or within the following 12 years.

The benefits available to an approved enterprise and beneficiary enterprise were conditioned upon terms stipulated in the Investment Law and the related regulations (which include making specified investments in property and equipment, and financing a percentage of these investments with share capital), and, for an approved enterprise, the conditions contained in the certificate of approval from the Investment Center.  If we do not fulfill these conditions, in whole or in part, the benefits can be cancelled and we may be required to refund the amount of the benefits, linked to the Israeli consumer price index plus interest. We believe that our approved enterprise and beneficiary enterprise programs currently operate in compliance with all applicable conditions and criteria, but we cannot assure you that they will continue to do so.

We have derived,  a material portion of our operating income from our approved enterprise and beneficiary enterprise facilities.  We were therefore eligible for a tax exemption for a limited period on undistributed approved enterprise and beneficiary enterprise income.  We intend to reinvest the entire amount of our tax-exempt income and not to distribute this income as a dividend.

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Tax Benefits and Grants for Research and Development

Israeli tax law allows, under specific conditions, a tax deduction in the year incurred for expenditures, including capital expenditures, relating to scientific research and development projects, if the expenditures are approved by the relevant Israeli government ministry, determined by the field of research, and the research and development is for the promotion of the company and is carried out by or on behalf of the company seeking such deduction. Expenditures not so approved are deductible over a three-year period.  However, expenditures from proceeds made available to us through government grants are not deductible according to Israeli law.

Tax Benefits under the Law for the Encouragement of Industry (Taxes), 1969

According to the Law for the Encouragement of Industry (Taxes), 1969, or the Industry Encouragement Law, an Industrial Company is a company resident in Israel, at least 90% of the income of which, in a given tax year, determined in Israeli currency (exclusive of income from some government loans, capital gains, interest and dividends), is derived from an industrial enterprise owned by it.  An “industrial enterprise” is defined as an enterprise whose major activity in a given tax year is industrial production activity.

Under the Industry Encouragement Law, Industrial Companies are entitled to the following preferred corporate tax benefits:

·    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.

Eligibility for benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any governmental authority.

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Additional amendments to the Approved Enterprise 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 previous years’ incentives that were 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 10% in areas in Israel that are designated as Development Zone A and 15% elsewhere in Israel during 2011-2012, 7% and 12.5%, respectively, in 2013-2014, and 6% and 12%, respectively, thereafter. Income derived by a Preferred Company from a ‘Special Preferred Enterprise’ (as defined in the Approved Enterprise) would enjoy further reduced tax rates for a period of ten years of 5% in Zone A and 8% elsewhere. As with dividends distributed from taxable income derived from an Approved Enterprise or Benefiting Enterprise during the applicable benefits period, dividends distributed from Preferred Income would be subject to a 15% tax (or lower, if so provided under an applicable tax treaty), which would generally be withheld by the distributing company. While the Company may incur additional tax liability in the event of distribution of dividends from tax exempt income generated from its Approved and Benefiting Enterprises, no additional tax liability will be incurred by the Company in the event of distribution of dividends from income taxed in accordance with the 2011 Amendment.

 Under the transitional provisions of the 2011 Amendment, the Company elects to irrevocably implement the 2011 Amendment with respect to its existing Approved and Benefiting Enterprises while waiving benefits provided under the legislation prior to the 2011 Amendment.

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 20% (instead of 15%). In addition, tax rates under the Preferred Enterprise were also raised effective as of January 1, 2014 to 9% in Zone A and 16% elsewhere (instead of the 6% and 12%, respectively).

We cannot assure you that we will continue to qualify as an Industrial Company or that the benefits described above will be available to us in the future, which would entail the loss of the benefits that relate to this status.

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Special Provisions Relating to Taxation under Inflationary Conditions

The Income Tax Law (Inflationary Adjustments), 1985, referred to as the Inflationary Adjustments Law, which attempts to overcome the problems presented to a traditional tax system by an economy undergoing rapid inflation.  The Inflationary Adjustments Law is highly complex.

On February 26, 2008, the Israeli Parliament (the Knesset) enacted the Income Tax Law (Inflationary Adjustments) (Amendment No. 20) (Restriction of Effective Period), 2008, which we refer to as the Inflationary Adjustments Amendment.  In accordance with the Inflationary Adjustments Amendment, the effective period of the Inflationary Adjustments Law will cease at the end of the 2007 tax year and as of the 2008 tax year the provisions of the law shall no longer apply, other than the transitional provisions intended at preventing distortions in the tax calculations.  In accordance with the Inflationary Adjustments Amendment, commencing the 2008 tax year, income for tax purposes will no longer be adjusted to a real (net of inflation) measurement basis.  Furthermore, the depreciation of inflation immune assets and carried forward tax losses will no longer be linked to the Israeli consumer price index.

Taxation of Dividends Paid on our Ordinary Shares

Taxation of Israeli Shareholders

Israeli resident individuals are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary shares, other than bonus shares (share dividends) or stock dividends, at the rate of 20%, or 25% for a shareholder that is considered a material shareholder (within the meaning of the Israeli Income Tax Ordinance) at any time during the 12-month period preceding such distribution.  Dividends paid on our Ordinary shares to Israeli companies are exempt from such tax, except for dividends distributed from income derived outside of Israel, which are subject to the 25% tax rate.

Dividends paid from income derived from any of our approved enterprises or beneficiary enterprises are subject to tax, which is withheld at the source, at the rate of 20%, although we cannot assure you that we will designate the profits that are being distributed in a way that will reduce shareholders’ tax liability to this tax rate.

Taxation of Non-Israeli Shareholders

Non-residents of Israel are subject to Israeli income tax on income accrued or derived from sources in Israel, including passive income such as dividends. As of January 1, 2012, on distributions of dividends by an Israeli company to non-Israeli shareholders, other than bonus shares and stock dividends, income tax is applicable at the rate of 25%, or 30% for a shareholder that is considered a significant shareholder at any time during the 12-month period preceding such distribution, unless a different rate is provided in a treaty between Israel and the shareholder’s country of residence. As aforesaid, dividends of income generated by an Approved Enterprise (or Benefited Enterprise) are subject to withholding tax at a rate of 20%.

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Under the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of shares who is a treaty U.S. resident is 25%, or 15% if the dividends are generated by an Approved Enterprise (or Benefited Enterprise). However, if the income out of which the dividend is being paid is not attributable to an Approved Enterprise (or Benefited Enterprise) and not more than 25% of our gross income consists of interest or dividends, then such tax rate is reduced to 12.5% for a non-resident that is a U.S. corporation and holds 10% or more of our issued voting power during the part of the tax year that precedes the date of payment of the dividend and during the whole of its prior tax year.

Capital gains taxes applicable to non-Israeli shareholders

Capital gains from the sale of our Ordinary shares by non-Israeli shareholders are exempt from Israeli taxation, provided that the capital gain is not derived from a permanent establishment in Israel.  In addition, the U.S.-Israel tax treaty exempts U.S. residents who hold less than 10% of our voting rights, and who held less than 10% of our voting rights during the 12 months prior to a sale of their shares, from Israeli capital gains tax in connection with such sale.

United States Federal Income Tax Consequences

The following discussion summarizes the material U.S. federal income tax considerations generally applicable to the purchase, ownership and disposition of our Ordinary shares. Unless otherwise stated, this summary deals only with shareholders that are U.S. Holders (as defined below) who hold their Ordinary shares as capital assets.

As used in this section, the term “U.S. Holder” means a beneficial owner of an Ordinary share who is:

·    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;

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·    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.

The term “Non-U.S. Holder” means a beneficial owner of an Ordinary share that is an individual, corporation, estate or trust and is not a U.S. Holder. The tax consequences to a Non-U.S. Holder may differ substantially from the tax consequences to a U.S. Holder. Certain aspects of U.S. federal income tax relevant to a Non-U.S. Holder are discussed below.

This description is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, and the US-Israel Tax Treaty, each as in effect as of the date of this prospectus. These sources may change, possibly with retroactive effect, and are open to differing interpretations. This description does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under U.S. federal income tax law, including:

·    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.

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If a partnership or an entity treated as a partnership for U.S. federal income tax purposes owns Ordinary shares, the U.S. federal income tax treatment of a partner in such a partnership will generally depend upon the status of the partner and the activities of the partnership. A partnership that owns Ordinary shares and the partners in such partnership should consult their tax own advisors about the U.S. federal income tax consequences of holding and disposing of Ordinary shares.

This discussion does not consider the possible application of U.S. federal gift or estate tax or alternative minimum tax.

All investors are urged to consult their own tax advisors as to the particular tax consequences to them of an investment in our Ordinary shares, including the effect and applicability of United States federal, state, local and foreign income and other tax laws (including estate and gift tax laws) and tax treaties.

Distributions Paid on the Ordinary Shares

Subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. Holder generally will be required to include in his or her gross income as ordinary dividend income the amount of any distributions paid on the Ordinary shares, including the amount of any Israeli taxes withheld, to the extent that those distributions are paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Subject to the discussion below under “Passive Foreign Investment Company Considerations,” distributions in excess of our earnings and profits will be applied against and will reduce the U.S. Holder’s tax basis in its Ordinary shares and, to the extent they exceed that tax basis, will be treated as gain from a sale or exchange of those Ordinary shares.  Our dividends will not qualify for the dividends-received deduction applicable in some cases to U.S. corporations.

Dividends that we pay in NIS, including the amount of any Israeli taxes withheld therefrom, will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such dividends are received, regardless of whether the payment is in fact converted into U.S. dollars. A U.S. Holder who receives payment in NIS and converts NIS into U.S. dollars at an exchange rate other than the rate in effect on such day will have a foreign currency exchange gain or loss that would be treated as ordinary income or loss. U.S. Holders should consult their own tax advisors concerning the U.S. tax consequences of acquiring, holding and disposing of NIS.

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Subject to certain limitations, “qualified dividend income” received by a non-corporate U.S. Holder in tax years beginning on or before December 31, 2010 will be subject to tax at a reduced maximum tax rate of 15%. Distributions taxable as dividends paid on the Ordinary shares should qualify for the 15% rate provided that we are not a passive foreign investment company (as described below) for U.S. tax purposes and that either: (i) we are entitled to benefits under the income tax treaty between the United States and Israel (the “U.S.-Israel Tax Treaty”) or (ii) the Ordinary shares are readily tradable on an established securities market in the United States and certain other requirements are met. We believe that we are entitled to benefits under the U.S.-Israel Tax Treaty and that the Ordinary shares currently will be readily tradable on an established securities market in the United States. However, no assurance can be given that the Ordinary shares will remain readily tradable. The rate reduction does not apply unless certain holding period requirements are satisfied. With respect to the Ordinary shares, the U.S. Holder must have held such shares for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date. The rate reduction also does not apply to dividends received from passive foreign investment companies, see discussion below, or in respect of certain hedged positions or in certain other situations. The legislation enacting the reduced tax rate contains special rules for computing the foreign tax credit limitation of a taxpayer who receives dividends subject to the reduced tax rate. U.S. Holders of Ordinary shares should consult their own tax advisors regarding the effect of these rules in their particular circumstances.

Subject to the discussion below under “Information Reporting and Back-up Withholding,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on dividends received on Ordinary shares unless that income is effectively connected with the conduct by that Non-U.S. Holder of a trade or business in the United States, in which case a corporate Non-U.S. Holder may also be subject to the U.S. branch profits tax.

Foreign Tax Credit

Any dividend income resulting from distributions we pay to a U.S. Holder with respect to the Ordinary shares generally will be treated as foreign source income for U.S. foreign tax credit limitation purposes. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from taxable income or credited against a U.S. Holder’s U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, any dividend that we distribute generally will constitute “passive category income,” or, in the case of certain U.S. Holders, “general category income.” The rules relating to the determination of foreign source income and the foreign tax credit are complex, and the availability of a foreign tax credit depends on numerous factors. Each investor who is a U.S. Holder should consult with its own tax advisor to determine whether its income with respect to the Ordinary shares would be foreign source income and whether and to what extent that investor would be entitled to a foreign tax credit.

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Disposition of Ordinary Shares

Upon the sale or other disposition of Ordinary shares, subject to the discussion below under “Passive Foreign Investment Company Considerations,” a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition and the holder’s adjusted tax basis in the Ordinary shares. U.S. Holders should consult their own advisors with respect to the tax consequences of the receipt of a currency other than U.S. dollars upon such sale or other disposition.

Gain or loss upon the disposition of the Ordinary shares will be treated as long-term if, at the time of the sale or disposition, the Ordinary shares were held for more than one year. The deductibility of capital losses by a U.S. Holder is subject to limitations. In general, any gain or loss recognized by a U.S. Holder on the sale or other disposition of Ordinary shares will be U.S. source income or loss for U.S. foreign tax credit purposes. U.S. Holders should consult their own tax advisors concerning the source of income for U.S. foreign tax credit purposes and the effect of the U.S.-Israel Tax Treaty on the source of income.

Subject to the discussion below under “Information Reporting and Back-up Withholding,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on any gain realized on the sale or exchange of Ordinary shares unless:

·    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.

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Passive Foreign Investment Company Considerations

Special U.S. federal income tax rules apply to U.S. Holders owning shares of a passive foreign investment company. A non-U.S. corporation will be considered a passive foreign investment company for any taxable year in which, after applying certain look-through rules, 75% or more of its gross income consists of specified types of passive income, or 50% or more of the average value of its assets consists of assets that produce, or are held for the production of, passive income. For this purpose, passive income includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets which produce passive income.

If we were classified as a passive foreign investment company, a U.S. Holder could be subject to increased tax liability upon the sale or other disposition of Ordinary shares or upon the receipt of amounts treated as “excess distributions.” Under these rules, the excess distribution and any gain would be allocated ratably over the U.S. Holder’s holding period for the Ordinary shares, and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a passive foreign investment company would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal tax rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. The tax liability with respect to the amount allocated to years prior to the year of the disposition, or “excess distribution,” cannot be offset by any net operating losses. In addition, holders of stock in a passive foreign investment company may not receive a “step-up” in basis on shares acquired from a decedent. If we are a passive foreign investment company in any year, a U.S. Holder would be required to file an annual return on IRS Form 8621 regarding distributions received with respect to Ordinary shares and any gain realized on the disposition of Ordinary shares.

Based on our current and projected income, assets and activities, we do not believe that we will be a passive foreign investment company for our current taxable year. However, because the determination of whether we are a passive foreign investment company is based upon the composition of our income and assets from time to time, we cannot be certain that we will not be considered a passive foreign investment company for the current taxable year or any future taxable year.

The passive foreign investment company tax consequences described above will not apply to a U.S. Holder if the U.S. Holder makes an election to treat us as a qualified electing fund, or QEF.  If a U.S. Holder makes a timely QEF election, the U.S. Holder would be required to include in income for each taxable year it’s pro rata share of our ordinary earnings as ordinary income and it’s pro rata share of our net capital gain as long-term capital gain, whether or not such amounts are actually distributed to the U.S. Holder. However, a U.S. Holder would not be eligible to make a QEF election unless we comply with certain applicable information reporting requirements. We will provide U.S. Holders with the information needed to report income and gain under a QEF election should we become a passive foreign investment company.

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As an alternative to making a QEF election, a U.S. Holder of passive foreign investment company stock which is publicly traded may in certain circumstances avoid certain of the tax consequences generally applicable to holders of a passive foreign investment company by electing to mark the stock to market annually and recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the passive foreign investment company stock and the U.S. Holder’s adjusted tax basis in the passive foreign investment company stock. Losses would be allowed only to the extent of net mark-to-market gain previously included by the U.S. Holder under the election for prior taxable years. Income recognized and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of Ordinary shares with respect to which the mark to market election is made, are generally treated as ordinary income or loss (except that loss is treated as capital loss to the extent the loss exceeds the net mark-to-market gains, if any, that a U.S. Holder included in its income with respect to such Ordinary shares in prior years). However, gain or loss from the disposition of Ordinary shares (as to which a “mark-to-market” election was made) in a year in which we are no longer a passive foreign investment company, will be capital gain or loss. The mark-to-market election is available for so long as our Ordinary shares constitute “marketable stock,” which includes stock of a passive foreign investment company that is “regularly traded” on a “qualified exchange or other market.” Generally, a “qualified exchange or other market” includes a national securities exchange that is registered with the Securities and Exchange Commission or the national market system established pursuant to Section 11A of the Securities Exchange Act of 1934. A class of stock that is traded on one or more qualified exchanges or other markets is “regularly traded” on an exchange or market for any calendar year during which that class of stock is traded, other than in the minimized quantities, on at least 15 days during each calendar quarter. We believe that The NASDAQ Global Market will constitute a qualified exchange or other market for this purpose. However, we cannot be certain that our Ordinary shares will continue to trade on The NASDAQ Global Market or that the Ordinary shares will be regularly traded for this purpose.

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The rules applicable to owning shares of a passive foreign investment company are complex, and each holder who is a U.S. Holder should consult with its own tax advisor regarding the consequences of investing in a passive foreign investment company.

Information Reporting and Backup Withholding

Payments in respect of Ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and to U.S. backup withholding tax at a rate equal to the fourth lowest income tax rate applicable to individuals (which, under current law, is 28%). Backup withholding will not apply, however, if you (i) are a corporation or come within certain exempt categories, and demonstrate the fact when so required, or (ii) furnish a correct taxpayer identification number and make any other required certification. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.

Any U.S. holder who holds 10% or more in vote or value of our Ordinary shares will be subject to certain additional United States information reporting requirements.

U.S. Gift and Estate Tax

An individual U.S. Holder of Ordinary shares will generally be subject to U.S. gift and estate taxes with respect to Ordinary shares in the same manner and to the same extent as with respect to other types of personal property.

F.              Dividends and Paying Agents

Not applicable.

154

G.              Statement by Experts

Not applicable.

H.              Documents on Display

We are subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended, as applicable to “foreign private issuers” as defined in Rule 3b-4 under the Exchange Act, and in accordance therewith, we file annual and interim reports and other information with the Securities and Exchange Commission.

As a foreign private issuer, we are exempt from certain provisions of the Exchange Act.  Accordingly, our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act and transactions in our equity securities by our officers and directors are exempt from reporting and the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act.  In addition, we are not required under the Exchange Act to file periodic reports and financial statements as frequently or as promptly as United States companies whose securities are registered under the Exchange Act.  However, we make available on our website www.tat-technologies.com, our annual audited financial statements, which have been examined and reported on, with an opinion expressed by an independent public accounting firm, and we intend to file reports with the Securities and Exchange Commission on Form 6-K containing unaudited financial information for the first three quarters of each fiscal year.

This annual report on Form 20-F and the exhibits thereto and any other document we file pursuant to the Exchange Act may be inspected without charge and copied at prescribed rates at the following Securities and Exchange Commission public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549; and on the Securities and Exchange Commission Internet site (http://www.sec.gov) and on our website www.tat-technologies.com. You may obtain information on the operation of the Securities and Exchange Commission’s public reference room in Washington, D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Exchange Act file number for our Securities and Exchange Commission filings is 0-16050.

In addition, since August 16, 2005 we are also listed on the TASE.  From such date we submit copies of all our filings with the SEC to the Israeli Securities Authority and TASE. Such copies can be retrieved electronically through the TASE internet messaging system (www.maya.tase.co.il) and, in addition, through the MAGNA distribution site of the Israeli Securities Authority (www.magna.isa.gov.il).

155

The documents concerning our company which are referred to in this annual report may also be inspected at our offices located at Re’em Industrial Park Neta, Boulevard Bnei Ayish, Gedera, Israel.

I.              Subsidiary Information

Not applicable.

Item 11.  Quantitative and Qualitative Disclosures about Market Risk

We do not own and have not issued any market risk sensitive instruments about which disclosure is required to be provided pursuant to this Item.

Effects of Changes in Interest Rates

We pay interest on our long-term loans facilities in accordance with the nature of each loan. For loans that bear Libor Rate, we pay interest at a rate per annum equal to up to 3.5% in excess of the Libor Rate. As a result, changes in the general level of interest rates directly affect the amount of interest payable by us under these facilities.  As of December 31, 2013 we do not have any loans that bear fixed interest rate or linked to the Consumer Price Index (the “CPI”).

Effects of Currency Exchange Fluctuations

Our financial statements are stated in dollars, while a portion of our expenses, primarily labor expenses, is incurred in NIS and a part of our revenues are quoted in NIS.  Additionally, certain assets, as well as a portion of our liabilities, are denominated in NIS. As a result, our operations may be affected by fluctuations of the U.S. dollar/NIS exchange rate.  In 2013, the NIS appreciated against the U.S. dollar by 7.0%, while in 2012 the NIS appreciated against the U.S. dollar by 2.3%.  We estimate that a devaluation of 1% of the U.S. dollar against the NIS would result in a decrease of approximately $150,000 in our operating income.

Item 12.  Description of Securities Other than Equity Securities

Not Applicable.

156

PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.  Material Modifications to the Rights of Security Holders

None.

Item 15.  Controls and Procedures

Not applicable.

Item 15T. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our chief executive officer and chief financial officer to allow timely decisions regarding required disclosure.  Our management, including our chief executive officer and chief financial officer, conducted an evaluation of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e), as of the end of the period covered by this Annual Report on Form 20-F.  Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

157

· 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.

 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.  In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992). Based on that assessment, our management concluded that as of December 31, 2013, our internal control over financial reporting is effective.

 This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial report.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

158

Item 16.     [Reserved]

Item 16A.  Audit Committee Financial Expert

Our board of directors has determined that each member of our audit committee each of whom also qualifies as independent director, meets the definition of an audit committee financial expert, as defined by rules of the Securities and Exchange Commission.  For a brief listing of the relevant experience of the member of our audit committee, see Item 6.A. “Directors, Senior Management and Employees — Directors and Senior Management.”

Item 16B.  Code of Ethics

We have adopted a code of ethics that applies to our chief executive officer and all senior financial officers of our company, including the chief financial officer, chief accounting officer or controller, or persons performing similar functions.  The code of ethics is publicly available on our website at www.tat-technologies.com.  Written copies are available upon request.  If we make any substantive amendment to the code of ethics or grant any waivers, including any implicit waiver, from a provision of the codes of ethics, we will disclose the nature of such amendment or waiver on our website.

Item 16C.  Principal Accountant Fees and Services

Fees Paid to Independent Public Accountant

The following table sets forth, for each of the years indicated, the fees paid to our principal independent registered public accounting firm.  All of such fees were pre-approved by our Audit Committee.

		Year Ended December 31,
Services Rendered		2013		2012
Audit (1)	$	210,000	$	257,000
Tax (2)		65,000		47,000
Total	$	275,000	$	304,000

(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.

159

Pre-Approval Policies and Procedures

Our Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm Kesselman & Kesselman, a member of PricewaterhouseCoopers International Ltd.  Pre-approval of an audit or non-audit service may be given as a general pre-approval, as part of the audit committee’s approval of the scope of the engagement of our independent auditor, or on an individual basis.  Any proposed services exceeding general pre-approved levels also require specific pre-approval by our audit committee.  The policy prohibits retention of the independent public accountants to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the SEC, and also requires the Audit Committee to consider whether proposed services are compatible with the independence of the public accountants.

Item 16D.    Exemptions from the Listing Standards for Audit Committee

Not Applicable.

Item 16E.     Purchase of Equity Securities By The Issuer and Affiliated Purchasers

Not Applicable.

Item 16F.     Change in Registrant’s Certifying Accountant.

Not Applicable.

Item 16G.     Corporate Governance

The following are the significant ways in which our corporate governance practices differ from those followed by domestic companies under the Nasdaq Rules:

Shareholder Approval.   Although the Nasdaq Rules generally require shareholder approval of equity compensation plans and material amendments thereto, we follow Israeli Companies Law, which is to have such plans and amendments approved only by the board of directors, unless such arrangements are for the compensation of directors, Chief Executive Officer or a transaction with the controlling shareholder, in which case they also require the approval of the compensation committee and the shareholders.

160

In addition, rather than follow the Nasdaq Rules requiring shareholder approval for the issuance of securities in certain circumstances, we follow Israeli law, under which a private placement of securities requires approval by our board of directors and shareholders if it will cause a person to become a controlling shareholder (generally presumed at 25% ownership) or if:

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 on 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.

Annual Reports.  While the Nasdaq Rules generally require that companies send an annual report to shareholders prior to the annual general meeting, we follow the generally accepted business practice for companies in Israel. Specifically, we file annual reports on Form 20-F, which contain financial statements audited by an independent registered public accounting firm, electronically with the SEC and post a copy on our website.

161

PART III

Item 17.  Financial Statements

We have elected to furnish financial statements and related information specified in Item 18.

Item 18.  Financial Statements

Consolidated Financial Statements of the Company
Index to Financial Statements	F-2
Reports of Independent Registered Public Accounting Firm	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 Equity	F-9
Consolidated Statements of Cash Flows	F-10-F-11
Notes to Consolidated Financial Statements	F-12-F-67

Item 19.  Exhibits

The following exhibits are filed as a part of this Annual Report:

1.1           Memorandum of Association of the Registrant(1)

1.2           Articles of Association of the Registrant(filed herewith)

2.1           Specimen Certificate for Ordinary Shares (1)

4.1           2012 Stock Option Plan (7)

4.2 Agreement dated February 10, 2000, by and between the Registrant and TAT Industries Ltd. (English summary translation) (2)

4.3 English translation of Share Sales Agreement, dated March 27, 2008, by and between the Registrant and Bental Investments Cooperative Agricultures Society Ltd. (5)

162

4.4 English translation of Shareholders’ Agreement, dated May 21, 2008, by and between the Registrant, Tat Industries Ltd. and Bental Investments Cooperative Agricultures Society Ltd. (5)

4.5 English translation of Amendment to the Share Sales and Options Agreement and the Shareholders’ Agreement, dated May 21, 2008, by and between the Registrant, Tat Industries Ltd. and Bental Investments Cooperative Agricultures Society Ltd. (5)

4.6 English translation of Share Sales Agreement dated April 15, 2008, by and between the Registrant and Mivtach Shamir Investments (1993) Ltd. (5)

4.7 Agreement and Plan of Merger dated April 3, 2009 by and between the Registrant, Limco-Piedmont, Inc. and LIMC Acquisition Company(4)

4.8 TAT's Executive and Directors Compensation Policy (filed herewith)

4.9 Form of Officers Indemnification Undertaking (filed herewith)

5.0 Reports of Other Certified Public Accountants filed: First Aviation Services Inc.

8              List of Subsidiaries of the Registrant

12.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

12.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

13.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

14.1 Consent of Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited.

14.2 Consent of Dixon Hughes Goodman LLP

_________________

(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.

163

(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.

164

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

TAT TECHNOLOGIES LTD.
By:	/s/ Tiko Gadot
	Tiko Gadot
	Chief Financial Officer (Principal Accounting Officer)

Date: March 19, 2014

165

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2013

IN U.S. DOLLARS

INDEX

	Page
Report of Independent Registered Public Accounting Firm	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 Equity	F-9
Consolidated Statements of Cash Flows	F-10 - F-11
Notes to Consolidated Financial Statements	F-12 - F-67

F - 2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of

TAT Technologies Ltd.

We have audited the accompanying consolidated balance sheets of TAT Technologies Ltd. and its subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of First Aviation Services Inc., an equity method investee, as of and for the years ended December 31, 2013 and 2012. The First Aviation Services Inc. financial statements audited by other auditors were prepared on a "historical" basis (prior to basis adjustments primarily related to impairment charges recorded by the Company) and reflect total net assets of $8,140,000 and $5,160,000 as of December 31, 2013 and 2012, respectively, and total net income (loss) of $3,158,000 and ($12,979,000) for the years ended December 31, 2013 and 2012, respectively (subsequently adjusted by the Company to net assets of $2,289,000 and$1,264,000, and net income (loss) of $1,025,000 and ($3,756,000), respectively, to reflect the share in the results of First Aviation Services Inc. and other adjustments primarily related to impairment charges recorded by the Company).  We audited the adjustments necessary to convert the “historical” basis financial statements of First Aviation Services Inc. to the basis reflected in the Company’s consolidated financial statements. The First Aviation Services Inc. financial statements were audited by other auditors (whose report thereon dated March 6, 2014 expressed an unqualified opinion on those financial statements) has been furnished to us, and our opinion expressed herein, insofar as it relates to the historical amounts included for First Aviation Services Inc., is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s Board of Directors and management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2013 and 2012 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

Tel-Aviv, Israel	/s/ Kesselman & Kesselman
March 19, 2014	Certified Public Accountants (lsr.)
	A member firm of PricewaterhouseCoopers International Limited

F - 3

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S dollars in thousands

	December 31,
	2013		2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	19,814	$	17,786
Short-term bank deposits		10,059		10,048
Short-term restricted deposits		-		2,307
Accounts receivable-trade, net		18,387		21,156
Other accounts receivable and prepaid expenses		3,314		4,587
Inventories, net		29,395		33,031
Assets held for sale		9,959		-
Total current assets		90,928		88,915
INVESTMENT AND OTHER NON CURRENT ASSETS:
Investment in an affiliated company		2,289		1,264
Funds in respect of employee rights upon retirement		2,900		3,318
Deferred income taxes		1,616		2,535
		6,805		7,117
PROPERTY, PLANT AND EQUIPMENT, NET		11,147		12,910
Total long-term assets		17,952		20,027
Total assets	$	108,880	$	108,942

The accompanying notes are an integral part of the consolidated financial statements.

F - 4

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S dollars in thousands, except share data

	December 31,
	2013			2012
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short term bank loan and current maturities of long-term loans	$	910		$	3,274
Accounts payable trade		6,941			6,804
Other accounts payable and accrued expenses		5,815			7,407
Liabilities held for sale		3,428			-
Total current liabilities		17,094			17,485
NON CURRENT LIABILITIES:
Long-term loans, net of current maturities		-			1,116
Other long-term liabilities		58			-
Liability in respect of employee rights upon retirement		3,140			3,815
Deferred income taxes		1,058			1,490
Total long-term liabilities		4,256			6,421
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 14)
Total liabilities		21,350			23,906
EQUITY:
Ordinary shares of NIS 0.9 par value :
Authorized: 10,000,000 shares at December 31, 2013 and 2012;  Issued: 9,079,709 and 9,073,043 shares at December 31, 2013 and 2012, respectively; Outstanding: 8,805,236 and 8,798,570 shares at December 31, 2013 and 2012, respectively		2,792			2,790
Additional paid-in capital		64,454			64,410
Treasury stock, at cost, 274,473 shares at December 31, 2013 and 2012		(2,088	)		(2,088	)
Accumulated other comprehensive loss		(429	)		(897	)
Retained earnings		20,840			18,018
Total shareholders' equity		85,569			82,233
Non-controlling interest		1,961			2,803
Total equity		87,530			85,036
Total liabilities and equity	$	108,880		$	108,942

The accompanying notes are an integral part of the consolidated financial statements.

F - 5

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S dollars in thousands

	Year ended December 31,
	2013			2012			2011
Revenues:
Products	$	34,364		$	36,263		$	36,837
Services		45,187			41,652			36,902
		79,551			77,915			73,739
Cost of revenues:
Products		24,892			25,177			24,914
Services		35,987			33,362			31,794
Write down of inventory and impairment charges of long lived assets		-			-			5,465
		60,879			58,539			62,173
Gross profit		18,672			19,376			11,566
Operating expenses:
Research and development, net		713			995			455
Selling and marketing		3,150			2,899			2,819
General and administrative		9,512			10,110			9,450
Other income		(20	)		(13	)		(190	)
		13,355			13,991			12,534
Operating income (loss) from continuing operations		5,317			5,385			(968	)
Financial expenses		(947	)		(2,094	)		(2,121	)
Financial income		897			1,988			1,701
Gain from dilution of interests in affiliated company		-			-			240
Income (loss) from continuing operations before taxes on income		5,267			5,279			(1,148	)
Taxes on income (tax benefit)		1,041			2,090			(335	)
Net income (loss) from continuing operations after taxes on income		4,226			3,189			(813	)
Share in results of affiliated company and impairment of share in affiliated company		1,025			(3,756	)		331
Net income (loss) from continuing operations		5,251			(567	)		(482	)
Net loss from discontinued operations, net of tax		(2,429	)		(1,147	)		(548	)
Net income (loss) attributable to TAT Technologies Ltd. shareholders	$	2,822		$	(1,714	)	$	(1,030	)

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,
	2013			2012			2011
Basic and diluted income (loss) per share
Net income (loss) from continuing operations per share attributable to controlling interest	$	0.60		$	(0.06	)	$	(0.05	)
Loss from discontinued operations per share attributable to controlling interest		(0.28	)		(0.13	)		(0.07	)
	$	0.32		$	(0.19	)	$	(0.12	)
Weighted average number of shares outstanding
Basic		8,799,237			8,808,075			8,815,003
Diluted		8,808,920			8,808,075			8,815,003

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

U.S dollars in thousands

	Year ended December 31,
	2013		2012			2011
Net income (loss)	$	1,780	$	(1,772	)	$	(1,083	)
Other comprehensive income (loss):
Foreign currency translation adjustments		668		209			(819	)
Unrealized loss on marketable securities, net of tax		-		-			(11	)
Total other comprehensive income (loss)		668		209			(830	)
Comprehensive income (loss)	$	2,448	$	(1,563	)	$	(1,913	)
Comprehensive loss (income) attributable to non-controlling interest		842		(12	)		261
Comprehensive income (loss) attributable to shareholders	$	3,290	$	(1,575	)	$	(1,652	)

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 EQUITY

U.S dollars in thousands, except share data

	TAT Technologies Ltd. Shareholders
	Share capital							Accumulated
	Number of shares issued		Amount		Additional paid-in capital			other comprehensive income (loss)			Treasury shares			Retained earnings			Non-controlling interest			Total equity
BALANCE AT JANUARY 1, 2011		9,073,043		2,790		64,439			(414	)		(2,018	)		23,262			3,052			91,111
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2011:
Net loss		-		-		-			-			-			(1,030	)		(53	)		(1,083	)
Foreign currency translation		-		-		-			(614	)		-			-			(205	)		(819	)
Adjustment on marketable securities		-		-		-			(8	)		-			-			(3	)		(11	)
Share based compensation income		-		-		(37	)		-			-			-			-			(37	)
BALANCE AT DECEMBER 31, 2011		9,073,043		2,790		64,402			(1,036	)		(2,018	)		22,232			2,791			89,161
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2012:
Net loss		-		-		-			-			-			(1,714	)		(58	)		(1,772	)
Foreign currency translation		-		-		-			139			-			-			70			209
Dividend distributed		-		-		-			-			-			(2,500	)		-			(2,500	)
Purchase of  treasury shares		-		-		-			-			(70	)		-			-			(70	)
Share based compensation expenses		-		-		8			-			-			-			-			8
BALANCE AT DECEMBER 31, 2012		9,073,043	$	2,790	$	64,410		$	(897	)	$	(2,088	)	$	18,018		$	2,803		$	85,036
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2013:
Net income (loss)		-		-		-			-			-			2,822			(1,042	)		1,780
Foreign currency translation		-		-		-			468			-			-			200			668
Share based compensation expenses		-		-		3			-			-			-			-			3
Exercise of options		6,666		2		41			-			-			-			-			43
BALANCE AT DECEMBER 31, 2013		9,079,709	$	2,792	$	64,454		$	(429	)	$	(2,088	)	$	20,840		$	1,961		$	87,530

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,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) attributable to TAT Technologies Ltd. shareholders	$	2,822		$	(1,714	)	$	(1,030	)
Net loss from discontinued operations		2,429			1,147			548
Income (loss) from continuing operations		5,251			(567	)		(482	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,859			1,906			2,618
Exchange differentials of loans		23			16			(19	)
Write down of inventory		67			-			2,500
Impairment of goodwill, intangible assets and other long lived assets		-			-			2,965
Gain on sale of property and equipment		(20	)		(12	)		(190	)
Loss (gain) from change in fair value of derivatives		(27	)		(399	)		372
Interest from short-term bank deposits and restricted deposits		(11	)		(48	)		-
Provision for doubtful accounts		17			258			31
Share in results of affiliated company and impairment of share in affiliated company		(1,025	)		3,756			(331	)
Gain from dilution of interests in affiliated company		-			-			(240	)
Share based compensation expenses (income)		3			8			(37	)
Liability in respect of employee rights upon retirement		286			396			(86	)
Deferred income taxes, net		71			1,712			(863	)
Changes in operating assets and liabilities:
Amounts due to (from) related parties, net		(63	)		711			(674	)
Increase in trade accounts receivable		(1,001	)		(979	)		(1,717	)
Decrease in other accounts receivable, prepaid expenses and other		1,195			266			1,161
Decrease (increase) in inventories, net		659			(2,908	)		(2,021	)
Increase (decrease) in trade accounts payable		278			581			(82	)
Increase (decrease) in other accounts payable and accrued expenses		(417	)		1,197			(1,498	)
Increase (decrease) in other long-term liabilities		58			(2	)		-
Net cash provided by operating activities		7,203			5,892			1,407
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of  marketable securities		-			1,900			50
Funds in respect of employee rights upon retirement		(48	)		(457	)		103
Proceeds from sale of property and equipment		51			50			217
Purchase of property and equipment		(2,240	)		(2,147	)		(2,953	)
Investment in short-term deposit		-			(10,000	)		-
Proceeds released from restricted deposits		2,307			947			1,822
Net cash provided by (used in) investing activities	$	70		$	(9,707	)	$	(761	)

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,
	2013			2012			2011
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term loans	$	(2,286	)	$	(776	)	$	(3,021	)
Proceeds from long-term loans received		-			-			674
Dividend paid		-			(2,500	)		-
Repayments of short-term loans		(719	)		(4,542	)		(796	)
Short-term credit received from a bank		26			627			2,645
Repurchase of treasury shares		-			(70	)		-
Exercise of options		43			-			-
Net cash used in financing activities		(2,936	)		(7,261	)		(498	)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Cash provided by operating activities of discontinued operations		685			2,054			148
Cash provided by (used in) investing activities of discontinued operations		(31	)		(226	)		272
Cash used in financing activities of discontinued operations		(304	)		(285	)		(351	)
Effect of exchange rate changes on cash and cash equivalents of discontinued operations		164			90			(29	)
Net cash provided by discontinued operations		514			1,633			40
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,851			(9,443	)		188
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		17,786			27,229			27,041
CASH AND CASH EQUIVALENTS AT END OF YEAR		22,637			17,786			27,229
LESS – CASH AND CASH EQUIVALENT OF DISCONTINUED OPERATIONS AT END OF YEAR		2,823			2,309			676
CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS AT END OF YEAR	$	19,814		$	15,477		$	26,553

Supplementary information on investing activities not involving cash flows:
Purchase of property and equipment on credit	$	590		$	-		$	-
Supplemental disclosure of cash flow information:
Interest paid	$	(89	)	$	(209	)	$	(184	)
Income taxes paid	$	(961	)	$	(813	)	$	(966	)
Income taxes refunds	$	1,383		$	780		$	1,793

The accompanying notes are an integral part of the consolidated financial statements.

F - 11

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 services and products to the commercial and military aerospace and ground defense industries. Together with its subsidiaries, 100% held, Limco-Piedmont Inc. (“Limco-Piedmont”), 70% held, Bental Industries Ltd. (“Bental”) (with respect to the sale of the entire interest in Bental see note 1(d) and 4) and 100% held, TAT Gal Inc. (“TAT Gal”) hereinafter collectively referred to as the “Group”, it is principally engaged in the following activities:

· Design, development, manufacture and sale of a broad range of heat transfer equipment and solutions;

· Remanufacture, overhaul and repair of heat transfer equipment;

· Maintenance, repair and overhaul of auxiliary power units, landing gears and related components;

· Design, development and manufacture of aviation and flow control accessories including fuel components, secondary power systems, and various instrumentation and electronic assemblies;

· Design, development and manufacture of environmental control and cooling systems; and

· Production and development of precision electric motion systems, mainly earmarked for the defense industries.

The products developed, repaired, and maintained by the Group are primarily used for airborne systems on commercial and military aircrafts as well as for defense ground systems. The principal markets of TAT are in Israel, Europe and the United States.

As of December 31, 2013, Limco-Piedmont holds 100% of Limco-Airepair Inc. (“Limco”), of Piedmont Aviation Component Services LLC. (“Piedmont”) and holds, through Piedmont, 29.36% in First Aviation Services Inc. (“FAvS”), a world-wide service provider to the aerospace industry and a one-stop-shop for maintenance, repair and overhaul services (for propellers and landing gear) for the General Aviation Industry.

b. TAT’s shares are listed on both the NASDAQ (TATT) and Tel-Aviv stock exchange.

c. In October 2012 two lenders to TAT’s then controlling shareholders, KMN Industries and TAT Industries (herein “Controlling Shareholders”), filed separate petitions to the court to enforce certain liens granted to such lenders by each of the Controlling Shareholders. Such liens consisted of KMN Industries’ holdings of an approximately 80% ownership interest in TAT Industries (which in turn owned approximately 43% of the issued share capital of TAT) and KMN Industries’ direct holdings in TAT (which represented approximately 10% of the issued share capital of TAT). On December 18, 2012 the court appointed permanent receivers on behalf of the two lenders mentioned above for the purpose of jointly realizing the liens granted to such lenders. On March 15, 2013 the receivers of TAT’s shares initiated a bid process for the sale of such shares. On August 7, 2013 the receivers informed TAT that a transaction for the sale of 4,732,351 Ordinary shares of TAT, constituting 53.8% of TAT’s outstanding Ordinary shares as of the date of the transaction, closed after receiving all required approvals and transfer of the agreed consideration by FIMI Israel Opportunity FIVE, Limited Partnership and FIMI Opportunity V, L.P. (“FIMI Funds”).

F - 12

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 1 - GENERAL (CONT)

d. On February 18, 2014 TAT entered into an agreement to sell its entire interest in Bental, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5,000, reflecting an impairment of $3,319 (out of which $2,323 attributed to controlling interest), which is reported in Income (loss) from discontinued operations in the consolidated statement of operations for the year ended December 31, 2013 (see also note 4).

The Company determined Bental met the criteria for held for sale and discontinued operations as of December 31, 2013.

NOTE 2 -           SIGNIFICANT ACCOUNTING POLICIES

Accounting principles

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), applied on a consistent basis, unless otherwise indicated below.

a. 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: revenue recognition, recoverability of inventory, provision for doubtful accounts, impairment of goodwill, intangible assets and long lived assets, impairment of investment in affiliated company, contingencies, provision for taxes and the realizability of deferred tax assets.

F - 13

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 -           SIGNIFICANT ACCOUNTING POLICIES (CONT)

b. Functional currency

The majority of the TAT’s revenues are generated in U.S. dollars ("dollars") and a substantial portion of TAT’s costs are incurred in dollars. In addition, a significant portion of the TAT’s financing has been obtained in dollars. Accordingly, the dollar is the currency of the primary economic environment in which TAT operates and accordingly its functional and reporting currency is the dollar.

Limco’s and Piedmont’s (“U.S. subsidiaries”) revenues are generated in dollars and its costs are incurred in dollars. In addition, the U.S. subsidiaries financing has been obtained in dollars. Accordingly, the dollar is the currency of the primary economic environment in which the U.S. subsidiaries operate and accordingly its functional and reporting currency is the dollar.

Most of Bental’s revenues are generated in New Israeli Shekel ("NIS") and a substantial portion of Bental’s costs are incurred in NIS. In addition, Bental’s financing has been obtained in NIS. Accordingly, the NIS is the currency of the primary economic environment in which Bental operates and accordingly its functional and reporting currency is the NIS. For Bental whose functional currency has been determined to be the NIS, assets and liabilities are translated at year-end exchange rates, and statement of operations items are translated at average exchange rates prevailing during the year. Resulting translation differences are recorded as a separate component of accumulated other comprehensive income (loss) in equity. Although Bental has been accounted for as a discontinued operation, the currency impact of its business is not removed from other comprehensive income (loss).

Monetary accounts maintained in currencies other than the dollar are re-measured using the representative foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of the transaction. The effects of foreign currency re-measurement are recorded in financial income (expenses), net.

c. Principles of consolidation

The consolidated financial statements include the accounts of TAT and its subsidiaries. In these financial statements, “subsidiaries” are companies over which TAT has over 50% voting control and the financial statements of which are consolidated with those of the Company.

Intercompany balances and transactions, including profits from intercompany sales not yet realized outside the Group, have been eliminated upon consolidation. Non-controlling interests are included in equity.

F - 14

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

d. Cash and Cash equivalents

All highly liquid investments, which include short-term bank deposits and money market accounts, 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.

e. Short-term bank deposits

Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits are in Dollars and bear interest at an average annual rate of 0.60%.

f. Restricted deposits

Restricted deposits primarily consisted of cash deposits which secured a guarantee provided by the Group to an affiliated company and a loan provided to the Company by a financial institution; see note 14(f)(5) for additional information. Classification of restricted deposits as current or non-current assets takes into consideration the expected release date.

g. Accounts receivable-trade, 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 an allowance for doubtful accounts. Accounts outstanding longer than their original contractual payment terms are considered past due. The Group determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Group’s previous loss history from such customers, customer’s current ability to pay its obligation to TAT and the condition of the general economy and the industry as a whole. The Group writes-off accounts receivable when they become uncollectible. Payments subsequently received on such receivables are credited against earnings. The allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection.

F - 15

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

h. Inventories

Inventories are measured at the lower of cost or market.

Cost of inventories is determined as follows:

Raw materials and parts	-	On the basis of actual cost or standard cost.
Work in progress and Finished goods	-	On the basis of actual cost or standard cost which takes into account materials, labor and other direct and indirect manufacturing costs, or identifiable direct costs.

Since the Group sells products and services related to airplane accessories (heat transfer equipment, defined in note 1, APU's, landing gears etc.) 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 estimated market value based upon assumptions for future demand and market conditions.

i. 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	25
Machinery and equipment	4 - 10 (mainly 10)
Motor vehicles	6 - 7
Office furniture and equipment	3 - 17 (mainly 7)
Software	3

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.

j. Grants from Office of the Chief Scientist of Israel ("OCS"):

Grants received from the OCS for approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and included as a deduction from research and development expenses.  Due the fact that the Company is defined as "Traditional Industry Company", under the OCS regulations, these grants are non-royalty bearing.

F - 16

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

k. Investment in Company Accounted for using the Equity Method

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. Significant influence is presumed to exist when the Group holds between 20% to 50% of an affiliated company’s voting instruments.

The Group reviews this investment for impairment whenever events indicate the carrying amount may not be recoverable. See note 3(b).

l. Impairment of long-lived assets

Long-lived assets, including definite life intangible assets, held and used by an entity 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 8 and 9).

m. Treasury Shares

Company shares held by the Company are presented as a reduction of equity at their cost to the Company.

F - 17

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

n. 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.

Revenues from the sale of products are recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, provided the collection of the resulting receivable is reasonably assured, the price is fixed or determinable and no significant obligation exists. The Group does not grant a right of return.

Revenues from multi-year, fixed price contracts for OEM customers are recognized when a product is shipped (and title passed) to the customer. Management provides for losses as soon as a loss is expected for the remaining portion of such contracts. For the years ended December 31, 2013, 2012 and 2011, no losses have been recognized for such fixed price contracts.

Revenues from MRO services are recognized when services are completed and the item is shipped back to the customer.

Revenues from some maintenance contracts are recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract. The Group estimates the costs that are expected to be incurred based on its experience with the aggregate costs incurred and to be incurred on contracts of this nature. The costs incurred related to the maintenance contracts are not incurred on a straight-line basis, as the timing to provide the maintenance services is dependent on when parts under these contracts require maintenance. Therefore, the Group accrues revenue as costs are incurred. These revenues are then compared to actual results and adjusted to either deferred revenue for results greater than historical estimates or recognized in those cases of performance less than historical estimates.  These accounts are reviewed on a timely basis and adjusted (if required) based on cost structures.

Revenues from royalties from sales of products developed with the Group's intellectual property, technology and technical assistance are recognized when the related sales are made.

o. Shipping and handling costs

Shipping and handling costs billed to customers are included in revenue. The cost of shipping and handling products is included in costs of revenues.

F - 18

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

p. 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.

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 the product is shipped. The Group periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

q. Research and development

Research and development costs, net of grants, are charged to expenses as incurred.

r. Fair value measurement

The Group measures fair value and discloses fair value measurements for financial and non-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.

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.

F - 19

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

s. Concentrations of credit risk

Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents 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 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.

t. 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 necessary, to reduce deferred tax assets to their estimated realizable value, see note 17(i).

Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting or, if not related to an asset or liability for financial reporting, according to the expected reversal dates of the specific temporary differences.

Taxes which would apply in the event of disposal of investments in 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.

Following the recognition of Bental as held for sale and discontinued operations as of December 31, 2013, the Company computed deferred tax asset derived from estimated loss for tax purposes, incurred in the sale of its entire interest in Bental. For such capital loss the Company provides valuation allowance as it cannot predict its future realization.

The Group records deferred taxes related to its share in results of its affiliated company.

F - 20

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

t. Income taxes (cont)

With regard to dividends distributable from the income of non-Israeli subsidiaries: as the Group intends to permanently reinvest retained earnings and has no intention to declare dividends out of such earnings in the foreseeable future it does not record deferred taxes in respect of taxes that would have been paid in such event.

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 17(b)), 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 the Company and TAT’s Israeli subsidiary are measured and reflected in NIS and for TAT’s U.S. subsidiaries are measured and reflected in dollars. As explained in (b) above, the consolidated financial statements are presented in 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 income tax expense. Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance sheet date.

F - 21

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

u. Held for sale classification and Discontinued operations

A business is reported as held for sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying value of the business exceeds its estimated fair value, a loss is recognized.

Assets and liabilities related to a business classified as held for sale are segregated in the consolidated balance sheet in the period in which the business is classified as held for sale.

Operations of a business are reported as discontinued operations if the business is classified as held for sale, the operations and cash flows of the business have been or will be eliminated from our ongoing operations as a result of a disposal transaction and we will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in discontinued operations in the consolidated statement of operations for current and prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

Depreciation is not recorded on assets of a business while it is classified as held for sale.

At December 31, 2013, held for sale assets and liabilities consisted of Bental, the OEM of Electric Motion Systems operating segment, and its results of operations are presented as discontinued operations in the consolidated statement of operations (see also note 4).

F - 22

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 -           SIGNIFICANT ACCOUNTING POLICIES (CONT)

w. Basic and diluted net Earnings per share

Earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted earnings (loss) per share includes the potential effect of stock options outstanding during the year, in accordance with ASC 260 "Earnings per Share", using the treasury stock method.

x. Share-based compensation

The Group applies ASC 718 "Stock Based Compensation" with respect to employees 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 Group estimates forfeitures based on historical experience and anticipated future conditions.

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. For an award with performance conditions that has a graded vesting schedule, compensation cost is recognized upon meeting such conditions, using the accelerated method over the requisite service period for the entire award.

The total share-based compensation expenses (income) recognized in the years ended December 31, 2013, 2012 and 2011 in the statements of operations were $3, $8 and $(37), respectively.

y. Comprehensive income (loss)

Comprehensive income (loss), net of related taxes where applicable, includes, in addition to net income (loss): (i) currency translation adjustments; and (ii) unrealized holding gains and losses on available-for-sale securities.

F - 23

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT)

z. 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.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

aa. Reclassifications:

Certain comparative amounts previously reported as cash and cash equivalents have been reclassified to accounts payable and accounts receivable.

ab. Recently Issued Accounting Principles

In February 2013, the FASB issued accounting standard update ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts  Reclassified Out of Accumulated Other Comprehensive Income. Previously, information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income had been presented in separate places throughout the financial statements. ASU No. 2013-02 requires entities to present this information in one centralized disclosure in the financial statements; however, it emphasized that there is no change in the current requirements for reporting net income or other comprehensive income in financial statements. The adoption of ASU No. 2013-02 did not have a material effect on Company’s consolidated financial statements.

F - 24

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 3 -           INVESTMENT IN AN AFFILIATED COMPANY

a. Acquisition of stocks of FAvS

On December 4, 2009, the Company, through its subsidiary Piedmont, signed an investment agreement with FAvS. According to the agreement Piedmont was issued 288,334 shares of Class B Common stock of FAvS representing 37% of FAvS' then share capital and $ 750 of FAvS Preferred stocks (entitled to cash dividends at an annual rate of 12% payable quarterly or to additional Preferred stocks at an annual rate of 15%) in return for Piedmont's propeller and parts businesses.

On the date of the above mentioned transaction, FAvS also signed an agreement to purchase all the assets and liabilities of Aerospace Turbine Rotables ("AeTR"). AeTR specializes in renovation and repair of landing gear, safety equipment and hydraulic and electrical components for corporate, regional and military aircraft. Piedmont also provided a guarantee for a period of one year (later renewed for additional periods until finally released on March 2013 as described further below) of up to $ 7,000 with respect to FAvS' debt in connection with the acquisition of AeTR (see also note 14(e)).

On October 1, 2010, Piedmont agreed to extend the guarantee for $6,600, by renewing the guarantee to the lender of FAvS. The renewed guarantee was for a period of 15 months that ended on December 31, 2011, and Piedmont was also granted a second lien on the assets of FAvS to secure the repayment obligations of FAvS in the event that the letter of credit is drawn upon. Piedmont also entered into an inter creditor agreement with the lender to FAvS which subordinated Piedmont’s claims if the letter of credit is drawn upon to the obligations of FAvS to the lender.

FAvS' shares are quoted over the counter (OTC) at the PINKSHEET stock market (PINKSHEET: FAVS.PK). FAvS' share value as of December 31, 2013, 2012 and 2011 was $6.60, $7.0 and $5.45, respectively. The Company believes that the share value does not reflect the fair value of FAvS' share, due to very low trading volume in FAvS' shares that do not comprise an active market.

A commercial dispute existed between Piedmont and FAvS relating to the propeller maintenance business which had been contributed to FAvS by Piedmont, as part of the transaction discussed above.  The commercial dispute began in April 2010 when a customer of the propeller maintenance business requested reimbursement from FAvS for damages to certain propellers. FAvS then sought reimbursement from Piedmont for such amounts.

In order to settle the commercial dispute that existed between TAT’s subsidiary, Piedmont and FAvS, on June 30, 2011, Piedmont and FAvS entered into a Settlement Agreement and Release (the “Settlement Agreement”). Pursuant to the Settlement Agreement, each party fully released the other party and acknowledged that the settlement was a compromise of disputed claims and was not to be construed as an admission of liability or wrongdoing.  In addition, each party agreed not to disparage the other and Piedmont paid an aggregate amount of $1,400 to FAvS (which amount had been fully reserved during 2010).

F - 25

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 3 -           ACQUISITION (CONT)

a. Acquisition of stocks of FAvS (cont)

Simultaneously with the execution of the Settlement Agreement, the Chief Executive Officer and controlling stockholder of FAvS (“FAvS CEO”), purchased 166,113 shares of Class A Common Stock of FAvS at a price of $18.06 per share, for an aggregate amount of $3,000, while diluting Piedmont’s interest in FAvS from 36.6% to 30.3% (29.36% as of December 31, 2013). In addition, Piedmont agreed to extend its guarantee to the bank debt incurred by FAvS to fund the AeTR transaction through June 30, 2013 and to continue to provide a letter of credit to secure such guarantee.  The amortization schedule for such debt was revised so that no amortization will occur until June 30, 2012. Thereafter the debt will amortize at the rate of $200 per month. On March 18, 2013, the guarantee was released with the completion of the transaction, as described further below.

The Stockholders Agreement initially entered into in 2009 between Piedmont and FAvS CEO was also amended to delete the reciprocal drag along rights and to provide that Piedmont may designate one member to the Board of Directors of FAvS (rather than the two members provided in the original agreement). Finally, the Rights Agreement entered into in 2009 between Piedmont and FAvS was amended so that Piedmont’s right to approve certain material corporate actions by FAvS has been limited to the right to approve contracts or agreements with affiliates of FAvS. The amendment also provided that the approval of Piedmont would not be required if FAvS seeks to raise additional capital from FAvS CEO as long as the consideration that was paid by FAvS CEO was not less than the consideration that would have been paid by a third-party in an arms-length transaction and would have been a fair, equitable and reasonable consideration under the circumstances.

In connection with the Settlement Agreement and the dilution in Piedmont’s interest in FAvS, the Company recorded, on June 30, 2011, a gain in the amount of $240 related to the $3,000 capital investment in FAvS by FAvS CEO which was at a higher share price than recorded at Piedmont books.

In June 2012, FAvS entered into another transaction with FAvS CEO, pursuant to which FAvS borrowed $3,000 from FAvS CEO, secured by a third lien on the assets of FAvS. The loan bears interest at 10% and in addition FAvS CEO was issued warrants to purchase shares of Class A Common Stock of FAvS, representing 15% of FAvS post-exercise shareholders’ equity, at an exercise price of $7.00 per share. Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT’s investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of a third party valuation. Based on the results of this test, the Company determined that its investment in FAvS was impaired by $3,300. The impairment was due to a decline in FAvS’ profitability margins and future forecasted sales levels.

F - 26

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 3 -           ACQUISITION (CONT)

a. Acquisition of stocks of FAvS (cont)

On March 18, 2013, FAvS closed a transaction according to which it sold the majority of the stock of API, one of its subsidiaries, for a total purchase price of $16,500, out of which $15,900 were used to pay-off the outstanding balance of FAvS’ Revolving Line of Credit as of the transaction date. The sale resulted in FAvS retaining a 3% equity interest in the API business. The transaction resulted in a loss from discontinued operations on FAvS books and a write-down of the API business of $11,500 (the “Write Down”) which is included in the FAvS loss for the year ended December 31, 2012. As mentioned above, on June 30, 2012, as a result of certain indications of impairment, the Company recorded an impairment charge of $3,300 in its investment in FAvS (which approximates its share in the said Write-Down). The Company also recorded its share in the losses of FAvS for the year ended on December 31, 2012 in the amount of $456. As such, no additional impairment was required to be recorded by Piedmont at the time of the closing of the sale of API. Simultaneously with the transaction, FAvS paid-off its Term Loan in the amount of $4,000 on March 18, 2013, thereby releasing the guarantee issued to the lending bank by the Piedmont. Accordingly the restricted deposit associated with the above guarantee, was released as well as of March 18, 2013.

b. Financial information

The FAvS audited consolidated financial statements as of December 31, 2012, which were signed on March 20, 2013, included a restatement for their 2011 consolidated financial statements for the correction of errors in its previously reported amounts.

Company's management reviewed the restatement and its effect on the consolidated financial statements of the Company and found it to be immaterial to the Company’s financial statements for all periods reported. Accordingly, no restatement was recorded in the Company's consolidated financial statements.

Condensed financial information from FAvS consolidated balance sheets as of December 31, 2013 and 2012:

	December 31,
	2013		2012
Current assets	$	10,179	$	31,090
Long-term assets		8,954		9,742
Total assets		19,133		40,832
Current liabilities		6,522		31,476
Long-term liabilities		4,471		4,196
Total liabilities	$	10,993	$	35,672

F - 27

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 3 -           ACQUISITION (CONT)

b. Financial information (cont)

Condensed financial information from FAvS consolidated statements of operations for each of the three years in the period ended December 31, 2013:

	Year ended December 31,
	2013			2012			2011
Net sales	$	23,445		$	21,579		$	20,515
Gross profit		6,182			9,202			8,626
Loss from continuing operations		(341	)		(1,476	)		630
Net income (loss)		3,158			(12,979	)		(94	)
Income (loss) attributable to common stockholders	$	2,821		$	(13,271	)	$	(345	)

A reconciliation of the share in results of affiliated company and impairment of share in affiliated company for each of the years ended December 31, 2013, 2012 and 2011:

	Year ended December 31,
	2013		2012			2011
Share in income (loss) related to common stockholders	$	837	$	(653	)	$	192
Share in income related to preferred stock		187		197			139
Impairment of  in affiliated company		-		(3,300	)		-
Gain from dilution of interests in affiliated company		-		-			240
Net income (loss)	$	1,024	$	(3,756	)	$	571

F - 28

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 4 -           HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

On February 18, 2014 TAT entered into an agreement to sell its entire interest in Bental, the OEM of Electric Motion Systems operating segment, constituting 70% of Bental’s issued and outstanding share capital, to Bental Investments Agshah Ltd. (“Bental Investments”), for an aggregate consideration of $5 million, reflecting an impairment of $3,319 (out of which $2,323 attributed to controlling interest), which is reported in Income (loss) from discontinued operations in the consolidated statement of operations for the year ended December 31, 2013. In addition the Company recorded a loss from discontinued operations of $152 for the year ended on December 31, 2013 (out of which $106 attributed to controlling interest).

The impairment amount is based on the selling price, which is categorized as level 3 measurement.

Closing of the transaction is expected to take place within the next several weeks.

The following table summarizes the components of assets and liabilities held-for-sale in the consolidated balance sheet as of December 31, 2013:

	December 31,
	2013
Assets:
Cash and cash equivalents	$	2,823
Trade accounts receivable		4,067
Other accounts receivable and prepaid expenses		196
Inventories, net		2,983
Funds in respect of employee right upon retirement		778
Deferred income taxes		29
Property, plant and equipment, net		2,402
Assets of businesses held for sale		13,278
Less: impairment		(3,319	)
Total assets held for sale	$	9,959
Liabilities:
Trade accounts payables	$	946
Other accounts payable and accrued expenses		1,109
Long-term loans, net of current maturities		248
Liability in respect of employee rights upon retirement		1,070
Deferred income taxes		55
Total liabilities held for sale	$	3,428

F - 29

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 4 -           HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS (CONT)

The following are amounts related to Bental included in net loss from discontinued operations:

	Year ended December 31,
	2013			2012			2011
Revenues	$	9,589		$	10,008		$	11,658
Loss before taxes on income (tax benefit)	$	(148	)	$	(191	)	$	(158	)
Loss from discontinued operations, net of tax ($5, $3 and $19 in 2013, 2012 and 2011, respectively)	$	(3,471	)	$	(1,205	)	$	(601	)
Loss from discontinued operations attributable to non-controlling interest		1,042			58			53
Loss from discontinued operations attributable to TAT Technologies Ltd. shareholders	$	(2,429	)	$	(1,147	)	$	(548	)

F - 30

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 5 -           AVAILABLE-FOR-SALE - MARKETABLE SECURITIES

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Fair Value
Available-for-sale:
Money Market	$	1,136	$	-	$	1,136

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Fair Value
Available-for-sale:
Money Market	$	3,341	$	-	$	3,341

NOTE 6 -           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 measured at fair value on a recurring basis, consisted of the following types of instruments:

	December 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money Market	$	1,136	$	-	$	-	$	1,136

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Money Market	$	3,341	$	-	$	-	$	3,341
Derivatives		-		27		-		27
Total	$	3,341	$	27	$	-	$	3,368

The carrying amounts of financial instruments, include cash and cash equivalents, short-term bank deposits, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their generally short maturities.

The fair values of long-term liabilities were estimated by using level 3 inputs based on discounted future cash flows, using the rate currently available for liabilities of similar terms and maturity. The carrying amount of the Group's long-term liabilities approximates their fair value since interest rate reflects current market rates.

F - 31

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 6 -           FAIR VALUE MEASUREMENT (CONT)

Non-Recurring Fair Value Measurements

As for the fair value measurement related to the impairment of Bental as of December 31, 2013, see note 4.

The following table presents the Group’s assets measured at fair value on a non-recurring basis for the year ended December 31 2012:

			Fair value measurements using
	As of December 31, 2012		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total losses for the year ended December 31, 2012
Goodwill (1) (*)	$	-	$	-	$	-	$	-	$	1,015
Investment in affiliated company (2)	$	1,264	$	-	$	-	$	1,264	$	3,300

(*) Excluding discontinued operations for the year ended on December 31, 2012

(1) During the second quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System reporting unit and accordingly performed interim goodwill impairment testing as of June 30, 2012, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill for this reporting unit, with the assistance of a third party valuation firm. Based on the results of this test, the Company determined that the entire balance of goodwill included in this reporting unit was impaired and recorded an impairment charge of $1,015.

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

Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT’s investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of a third party valuation firm. Based on the results of this test the Company determined that its investment in FAvS was impaired by $3,300. The impairment was due to a decline in FAvS’ profitability margins and future forecasted sales levels.

F - 32

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 7 - INVENTORIES, NET

Inventories are composed of the following:

	December 31,
	2013 (*)		2012
Raw materials and components	$	9,648	$	12,321
Work in process		14,044		16,145
Spare parts		4,742		3,897
Finished goods		961		668
	$	29,395	$	33,031

(*) Excluding held for sale assets at December 31, 2013

Inventories are net of reserve for slow moving.

Write down of inventory (as mentioned below) is in the amount of $1,147 and $1,430 at December 31, 2013 and 2012, respectively.

During the year ended December 31, 2011, the Company recorded a write down of inventory in the amount of $2,500 attributable to inventory of the MRO services for aviation components segment. The write down was due to management’s estimation of the continued decline in future forecasted sales levels and decline in profitability margins in certain product lines in this operating segment, which were lower than previously anticipated, resulting from the weakness in these areas of business, and was recorded under cost of revenues.

In 2013, 2012 and 2011, approximately $350, $1,892 and $1,501, respectively, of inventory previously written-down were used or sold in the course of providing MRO services.

F - 33

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 8 -           PROPERTY, PLANT AND EQUIPMENT, NET

Composition of assets, grouped by major classifications, is as follows:

	December 31,
	2013 (*)		2012
Cost:
Land and buildings	$	5,582	$	6,929
Machinery and equipment (1)		34,696		36,849
Motor vehicles		418		676
Office furniture and equipment		1,559		2,293
Software		1,166		1,166
		43,421		47,913
Less: Accumulated depreciation		32,274		35,003
Depreciated cost	$	11,147	$	12,910

(*) Excluding held for sale assets at December 31, 2013

(1) The cost is net of investment grants received by Bental in the amount of $274 as of December 31, 2012.

Depreciation and amortization expenses amounted to $1,859, $1,906 and $2,618 for the years ended December 31, 2013, 2012 and 2011, respectively (depreciation and amortization expenses do not include impairment charges).

During the year ended December 31, 2011, the Company recorded impairment of property, plant and equipment in the amount of $1,865, attributable to certain property and equipment items of the MRO services for aviation components segment, based on estimations of the fair value of these assets. The impairment charge was recorded under the cost of revenues item in the consolidated statements of operations.

Liens on property, plant and equipment are discussed at note 14(f).

F - 34

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 9 -           GOODWILL AND INTANGIBLE ASSETS

a. Intangible assets:

	December 31,
	2013			2012
License for service center
Cost	$	2,050		$	2,050
Accumulated amortization and impairment charges		(2,050	)		(2,050	)
Amortized cost	$	-		$	-

Amortization expenses amounted to $539 for the year ended December 31, 2011 (amortization expenses do not include impairment charges).

For the year ended December 31, 2011, due to decrease in the anticipated profit margins the Company recorded an impairment charge for its intangible assets in the total amount of $1,398, under cost of revenues. This amount is comprised of impairment charge in the amount of $1,100 (the entire asset was written off) in connection with the "Authorized service center" intangible asset at the MRO services for Aviation Components operating segment and $298 (the entire asset was written off) in connection with the ‘Customer Relations’ intangible asset at its OEM of Electric Motion Systems operating segment (see also note 6(2)).

F - 35

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 9 -           GOODWILL AND INTANGIBLE ASSETS (CONT)

b. Impairment Assessments

During the quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System reporting unit as of June 30, 2012, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill for this reporting unit, with the assistance of a third party valuation firm. Based on the results of this test, the Company determined that the entire balance of goodwill included in this reporting unit was impaired and recorded an impairment charge of $1,015.

The Company determined the fair value of the OEM of Electric Motion Systems reporting unit using the discounted cash flows method. The material assumptions used for 2012 annual test were five years of projected net cash flows (in accordance with the Company’s budget), a discount rate of 17.72% and a long-term growth rate of 2.0%. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses.

During the year ended December 31, 2011, the Company determined under the first step of its annual test that the fair value of the OEM of Electric Motion Systems reporting unit is greater than its carrying amount. Based on the results of this test the Company determined that the goodwill related to the said reporting unit was not impaired.

In 2011, the fair value of the OEM of Electric Motion Systems reporting unit exceeded its carrying value by approximately $100, or 1.1% and thus was at risk of failing step one of the goodwill impairment test, and was therefore at risk of a future impairment in the event of unfavorable changes in the forecasted cash flows or the key assumptions used in the analysis, including the weighted average cost of capital (discount rate) and growth rates utilized in the discounted cash flow analysis.

The Company determined the fair value of the OEM of Electric Motion Systems reporting unit using the discounted cash flows method. The material assumptions used for 2011 annual test were three years of projected net cash flows (in accordance with the Company’s budget), a discount rate of 18% and a long-term growth rate of 1.95%. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses.

F - 36

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 10 -        OTHER BALANCE SHEETS SUPPLEMENTALS

a. Other accounts receivable and prepaid expenses:

	December 31,
	2013 (*)		2012
Deferred tax asset	$	1,589	$	2,122
Government authorities		1,154		1,424
Prepaid expenses		498		831
Income receivables and grants		-		33
Derivatives		-		27
Amounts due from related parties		5		54
Other		68		96
	$	3,314	$	4,587

(*) Excluding held for sale assets at December 31, 2013

b. Other account payable and accrued expenses:

	December 31,
	2013(*)		2012
Employees and payroll accruals	$	3,077	$	3,358
Accrued expenses (**)		732		1,757
Government authorities		483		673
Advances from customers		840		731
Warranty provision		229		276
Accrued royalties		336		268
Deferred tax liability		40		126
Amounts due to related parties		-		112
Other accrued expenses		78		106
	$	5,815	$	7,407

(*) Excluding held for sale assets at December 31, 2013

(**) Includes $750 royalties payable to a supplier in the MRO business, at December 31, 2013, following a reconciliation of an audit.

F - 37

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 11 - TRANSACTIONS WITH RELATED PARTIES

a. Transactions with TAT Industries:

	Year ended December 31,
	2013		2012		2011
Management fees (1)	$	29	$	50	$	50
Lease expenses (2)	$	424	$	416	$	408

(1) According to the agreement between TAT and TAT Industries, TAT Industries will pay the Company an annual management fee in the amount of $50. The management fees are recorded as a reduction of general and administration expenses. Such services provided to TAT Industries until the purchase of TAT’s shares by FIMI Funds on August 7, 2013 (see also note 1).

(2) During 2000, TAT entered into a lease agreement with TAT Industries, pursuant to which the Company leases from TAT Industries approximately 344,000 square feet, including 90,000 square feet of manufacturing, office and storage space, for a period of 24 years and eleven months for an annual rental fee which is subject to revaluation every fifth year by a real estate appraiser, with an additional incremental payment of 2% per year.

In 2010, following a revaluation by a real estate appraiser, the rental fee was increased to $400 per year with an additional incremental payment of 2% per year. The rental fee will be revaluated again in 2015 (the "Next Revaluation"). The Company's Audit Committee has reapproved the said agreement until the Next Revaluation.

b. Balances with related parties:

	December 31,
	2013		2012
TAT Industries - current asset (1)	$	-	$	54
FAVS - current asset		5		-
Total asset	$	5	$	54
Bental Non-controlling interest - current liability	$	-	$	(60	)
FAVS - current liability		-		(29	)
Isal Amlat Investment (1993) Ltd.		-		(23	)
Total liability	$	-	$	(112	)

(1) Results from certain expenses incurred by TAT Industries and borne by the Company. The debt bears interest at the rate equal to the interest rate agreed between TAT Industries and its lending banks.

F - 38

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 11 - TRANSACTIONS WITH RELATED PARTIES (CONT)

c. Transactions with related parties:

	Year ended December 31,
	2013		2012		2011
Management fees to shareholders (see item e below)	$	-	$	359	$	400

d. Bental is engaged in various agreements with the Non-controlling interest and other related parties for the rental, maintenance and other services provided to it, in connection with its plant and operations. Total amount paid by Bental for these services in 2013, 2012 and 2011 was $432, $505 and $526, respectively.

e. In March 2012, the audit committee and the board of directors of TAT approved a new three-year management agreement with Isal Amlat Investment (1993) Ltd. (“Isal Amlat”) commencing as of February 8, 2012 (the "New Management Agreement"). Each of TAT and Isal Amlat shall be entitled to terminate the New Management Agreement subject to a prior written notice of 4 months. Pursuant to the New Management Agreement, in consideration of the management services provided by Isal Amlat, TAT pays Isal Amlat  management fees in a total annual amount of NIS 1,500,000 (approximately $400), linked to the Consumer Price Index to be paid on a monthly basis, plus VAT. In addition, Isal Amlat is entitled to repayment of expenses actually borne as part of providing the management services. The audit committee and board of directors of the Company will examine on a yearly basis, the management services actually provided to the Company, and shall examine whether a material change has occurred justifying the update of the management fees and/or the conditions of the New Management Agreement. The New Management Agreement was approved by the shareholders of TAT on June 28, 2012.

On August 21, 2012, the board of directors of TAT approved, following an approval of TAT’s audit committee, a change to the New Management Agreement with Isal Amlat, effective from such date according to which the scope of the services provided by Isal Amlat to TAT were reduced and the annual management fees were also reduced by a total amount of NIS 570,000 (approximately $150 - the “reduced amount”).

Total amount paid by TAT for the management services in 2012 and 2011, was $359 and $397, respectively.

In addition, the Company received management services from a private company (“Management company”) controlled by Mr. Nathan Galili (“Galili”), CEO of KNM Industries Ltd. (a private company through which Isal Amlat indirectly holding control in the Company). The management services will consist of a half-time of Galili, which value is more than the reduced amount, and will additionally include its services as active chairman of Bental. For those services the Company will pay the Management company annual management fees equal to the reduced amount, in addition to NIS 7,000 (approximately $2, plus VAT), as a monthly remuneration for travelling expenses to Bental. In addition, if during the service period or within a twelve month period from the end of the service period the Company will sell its holding in Bental, for more than $6,600 (“low threshold”), then the Management company will be eligible for a bonus which will be determined as follows:

2% out of the 1st million above the low threshold, the Company will receive for its holding in Bental, plus an additional 3% out of the 2nd million above the low threshold the Company will receive for its holding in Bental, plus an additional 5% out of the 3rd million above the low threshold the Company will receive for its holding in Bental. It is clarified that in any event the amount of the bonus shall not exceed $100.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 11 - TRANSACTIONS WITH RELATED PARTIES (CONT)

Such management services will be provided until February 8, 2015 (the end of term of the new management agreement with Isal Amlat). Each of the parties (TAT and the Management company) may terminate the agreement with a prior written notice of four months.

On January 27, 2013, TAT informed Isal Amlat that no management services had been provided by Isal Amlat to TAT during the preceding months, and that TAT decided to immediately terminate the Management Agreement. At that date TAT ceased paying management fees.

On February 8, 2013, Mr. Galili informed TAT on the termination of the engagement with TAT, effectively immediately while management fees will be paid throughout June 8, 2013 at the end of the four-month notice period.

f. On June 14, 2010, TAT and Bental signed a management services agreement. TAT agreed to provide Bental with various services including investor relations, business development, marketing and advertising consulting, legal services and the appointing of TAT personnel in Bental board of directors. The agreement was effective since January 1, 2010 and the annual management fees were in the amount of $120. Such management fees were paid until June 30, 2013, following which the extent of such services reduced significantly together with the intent of the Company to sell its entire interest in Bental (see also note 4).

g. In December 2009, Piedmont provided a guarantee for a period of one year up to $7,000 in respect of FAvS' debt taken in connection with the acquisition of AeTR. As of December 31, 2012, the guarantee amount is $4,600 (such guarantee was released on March 18, 2013, see also note 3(a)).

h. On September 7, 2011, TAT received a loan from Bental for the total amount of NIS 2.5 million (approximately $700), to be repaid in whole at the end of a 24 month period (the “Term”). The principal amount bears interest of Prime + 1% payable on a quarterly basis and may be repaid at any time during the term upon TAT’s discretion. Simultaneously with such loan, Bental received a loan from an Israeli bank for similar amount under similar terms and conditions. Such loan amount was repaid by TAT to Bental on September 8, 2013, which in turn Bental made, on the same date, an on time repayment of the loan in the total amount of NIS2.5 million (approximately $693)

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 12 -        SHORT TERM BANK CREDIT AND LONG TERM LOANS

a. Terms of the long-term loans and balances:

		Interest Rate
	Currency of loan	December 31, 2013			Years of Maturity		December 31, 2013
Current maturities of long-term loan (2)	$		2.50%-3.50	%		2009-2014	$	884

		Interest Rate
	Currency of loan	December 31, 2012			Years of Maturity		December 31, 2012
Long-term loan (1)	NIS		5.25	%		2012-2014	$	523
Long-term loan (2)	$		2.50%-3.50	%		2009-2014		2,477
Long-term loan (3)	NIS	Prime + 1		%		2013		670
								3,670
Less - current maturities (1)								(290	)
Less - current maturities (2)								(1,594	)
Less - current maturities (3)								(670	)
							$	1,116

(1) The original loan was received by Bental in 2009 from an Israeli bank in the amount of $1,400 to be repaid in quarterly installments over a five year period, commencing 2010.  On June 30, 2010, the remaining balance of the original loan, in the amount of $1,185, was repaid and a new loan in the same amount was taken. This new loan bears annual fixed interest of 5.25% and will be repaid until August 2014 in quarterly installments. The loan balance as of December 31, 2013 and 2012 was $248 (presented as part of the liabilities held for sale) and $523, respectively (with regard to covenants related to such loan see note 14(f)(3)).

(2) Loans received by TAT from an Israeli bank in a total amount of $6,250 out of which $5,000 were received during year 2008 and additional $1,250 were received during year 2009. The loans amount was to be repaid in four annual installments commencing 2011. These loans bear quarterly interest of Libor + 3.5% and Libor + 1.85%, respectively. Through November, 2012 TAT prepaid $3,775, following which the remaining balance was $2,477. In September, 2011, TAT reached agreement with its lending bank to adjust certain financial covenants related to the said loans it was failing to meet at the time. On May 1, 2013, the Company made a payment of $1,593 in accordance with its payment schedule following which the remaining balance was $884. As of December 31, 2013 the Company met all financial covenants related to such loans (see also note 14(f)(2)).

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 12 -        SHORT TERM BANK CREDIT AND LONG TERM LOANS (CONT)

(3) On September 7, 2011, Bental received a loan from an Israeli bank in a total amount of NIS2.5 million (approximately $700), to be repaid in full at the end of a 24 month period (the “Term”). The principal amount bears interest of Prime + 1% payable on a quarterly basis and may be repaid at any time during the term upon Bental’s discretion. On September 8, 2013 Bental made an on time repayment of the loan in the total amount of NIS2.5 million (approximately $693) (see also note 11(h)).

Group provided certain guarantees and covenants to secure its long-term loans, see note 14(e) and 14(f).

b. As of December 31, 2013 TAT's short-term bank credit balance amounted to $26.

c. Line of credit

On November 15, 2011, Limco-Piedmont renewed its line of credit with a U.S bank for an additional 21 month period ending on August 31, 2013 (not renewed further in 2013), for borrowings of up to $10,000 under certain conditions. $5,000 of this amount will stand for Limco and $5,000 will stand for Piedmont. The line of credit bears interest of Libor + 1.5%, and its utilization is subject to compliance with financial covenants agreed between the parties. As of December 31, 2012, approximately $688 of the total line of credit was utilized by Limco and Piedmont. In addition, as of December 31, 2012 Limco-Piedmont met all financial covenants related to such line of credit (see also note 14(f)(1)).

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 13 - LONG-TERM EMPLOYEE-RELATED OBLIGATIONS

Severance pay:

TAT’s and Bental’s (the "Israeli companies") liability for severance pay, for their Israeli employees, is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date. The liability is presented on the undiscounted basis. The Israeli companies record an expense for the net increase in its severance liability.

TAT's liability for all of its Israeli employees is fully covered for by monthly deposits with severance pay funds, insurance policies, Mivtahim Social Insurance Institution Ltd. ("Mivtahim"). The liability covered by deposits with Mivtahim is irrevocably transferred to Mivtahim. Accordingly, neither the amounts accumulated with Mivtahim, nor the corresponding liabilities for severance pay are reflected in the consolidated balance sheet.

The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash surrender value of these policies and includes profits (or loss) accumulated through the balance sheet date.

Severance pay expenses for TAT were $555, $495 and $425 for the years ended December 31, 2013, 2012 and 2011, respectively.

Limco-Piedmont sponsors a 401(K) profit sharing plan covering substantially all of its employees. The plan permits the employer to contribute a discretionary amount for a plan year, which the employer designates a qualified non-elective contribution. Contributions to plan by Limco-Piedmont were $253, $209 and $188 for the years ended December 31, 2013, 2012 and 2011, respectively.

The Group (excluding discontinued operation) expects to contribute approximately $820 in 2014 to the pension funds and insurance companies in respect of their severance and pension pay obligations.

The Israeli companies are required to make severance payment 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 sheets under “Employee rights upon retirement.” The liability is recorded as if it were payable at each balance sheet date on an undiscounted basis.

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 “Liability in respect of employee rights upon retirement.” These policies are the Company's assets. However, under employment agreements and subject to certain limitations, any policy may be transferred to the ownership of the individual employee for whose benefit the funds were deposited. In the years ended

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 13 - LONG-TERM EMPLOYEE-RELATED OBLIGATIONS (CONT)

In accordance with the current employment agreements with certain employees, the Israeli companies make regular deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee’s rights upon retirement. The Israeli companies are fully relieved from any severance pay liability with respect to each such employee after they make 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 Israeli Companies balance sheets, as the amounts funded are not under the control and management of the Israeli companies and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies (the “Contribution Plans”).

The amounts of severance payments, actually paid to retired employees, by TAT were $226, $26 and $23 for the years ended December 31, 2013, 2012 and 2011.

TAT expect to pay $1,868 in future benefits to their employees during 2014 to 2022 upon their normal retirement age - see breakdown below. 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 companies before their normal retirement age.

Year	Amount
2014	$	282
2015		189
2016		261
2017		198
2018		248
Thereafter (through 2023)		800
	$	1,978

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 14 -        COMMITMENTS AND CONTINGENT LIABILITIES

a. Commissions arrangements:

The group is committed to pay marketing commissions to sale agents at a range of 1% to 12% of total sales contracts which were received through promotion and distribution carried out by them. Commission expenses were $781, $670 and $579 for the years ended December 31, 2013, 2012 and 2011, respectively. The commissions were recorded as part of the selling and marketing expenses.

b. Royalty commitments:

(1) TAT is committed to pay royalties to third parties through 2013, of ranging between 9% to 17% of sales of products developed by the third parties. Royalty expenses were $177 and $202 for the years ended December 31, 2013 and 2012, respectively. The royalties were recorded as part of the cost of revenues.

(2) Limco-Piedmont is committed to pay royalties to a third party, ranging between 3% to 5% of sales of products purchased from the third party, after deducting related costs incurred by Limco-Piedmont. That third party is the exclusive manufacturer of the products for which Limco-Piedmont provide MRO services. In addition, Limco-Piedmont is committed to pay said third party royalties, ranging between 1.5% to 10% of sales of additional products exclusively manufactured by the third party. Royalty expenses were $400, $232 and $201 for the years ended December 31, 2013, 2012 and 2011, respectively. The royalties were recorded as part of the cost of revenues.

(3) Bental is committed to pay royalties to the Israeli government on proceeds from the sales of products, in the research and development of which the Israeli government participated by way of grants. Under the terms of Bental’s funding from the Office of the Chief Scientist, royalty payments are computed on the portion of sales from such products at a rate of 2% and 3.5%. The commitment to the Chief Scientist is limited to the amount of the received participation (U.S. dollar linked), with the addition of an annual interest rate based on Libor. As of December 31, 2012 the total amount of royalty bearing grants due by Bental to the Chief Scientist was approximately $86.

c. 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 2017. The monthly rental expense ranges from approximately $3.5 to $8. Certain leases contain renewal options as defined in the agreements. Lease expense (excluding related parties) totaled $215, $233 and $239 for the years ended December 31, 2013, 2012, and 2011 respectively.

TAT leases its factory from TAT Industries until 2020; (related party rent expense of $424 for the year ended December 31, 2013, see also note 11(a)).

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 14 -        COMMITMENTS AND CONTINGENT LIABILITIES (CONT)

c. Lease commitments (cont):

As of December 31, 2013, future minimum rental payments under non-cancelable operating leases are as follows:

Year	Amount
2014	$	636
2015		646
2016		623
2017		534
2018		468
2019 and thereafter		964
Total	$	3,871

d. Legal claims contingencies

(1) For details about the settlement of the commercial dispute between Piedmont and FAvS See note 3(a).

(2) On November 29, 2011, a Factoring company ("the plaintiff"), filed a claim with the magistrates court in Tel-Aviv against the Company, Bental and ten others ("the respondents"), jointly and severally, for the amount of NIS6,151 thousand (approximately $1,620). The plaintiff's case against the Company and Bental is based on invoices that were presented to the plaintiff by supplier of the Company and Bental (“the supplier”), by virtue of assignment of rights, which were originally issued to the Company and Bental by the supplier for certain alleged services. On February 5, 2012, the Company and Bental filed for its statement of defense, in which it denied the plaintiff's claims and clarified that it acted according to the deed of assignment of rights, and that the invoices neither represent nor reflect real transactions and/or real services which were rendered. The Company and Bental and their legal advisor are of the opinion that their exposure due to the claim filed is not probable and thus no provision was recorded in regard of that claim of December 31, 2013.

e. Guarantees:

(1) In order to secure TAT's liability to the Israeli customs, the Company provided a bank guarantee in the amount of $241. The guarantee is linked to the consumer price index and is valid until December 2014.

(2) See also note 14(f) for restricted cash deposit against certain loans and guarantees.

(3) See also note 11(g) for details of a guarantee provided by Piedmont in respect of FAvS’ debt. As of December 31, 2012, the amount of this guarantee was $4,600 (such guarantee was released on March 18, 2013, see also note 3(a)).

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT)

f. Covenants and liens on assets:

1) In connection with its line of credit, Limco-Piedmont was obligated to meet minimal borrowing base and certain financial covenants. The utilization of the credit line was subject to compliance with the following financial covenants as agreed with the lending U.S bank:

(i) Tangible net worth of not less than $51,500 (on August 20, 2012 concluded with the U.S bank to set this covenant at $49,500). As of December 31, 2012 Limco-Piedmont’s tangible net worth was $51,533;

(ii) Total liabilities to tangible net worth ratio of less than 1.0. As of December 31, 2012 Limco-Piedmont’s leverage was 0.18; and

(iii) Net financial assets of not less than $10,000. As of December 31, 2012 Limco-Piedmont’s net financial assets amount was $20,667.

Accordingly, as of December 31, 2012 Limco-Piedmont met all financial covenants (such credit line not renewed further in 2013 – see also note 12(c)).

2) In order to secure bank loans in the remaining amount of $884 as of December 31, 2013, TAT granted a specific lien on Bental's shares held by TAT - see also note 12(a)(2)). In addition, TAT is obligated to meet certain covenants, all of which have been met.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT)

f. Covenants and liens on assets (cont):

3) In order to secure bank loans in the amount of $1,185 (remaining balance of $248 as of December 31, 2013) , Bental granted floating liens on all of its property and assets, fixed lien on its unpaid share capital and goodwill and first priority liens on its property, plant and equipment, checks and other trading instruments. In addition, Bental is obligated to certain covenants including:

(i) Bental’s debt to EBITDA ratio will be less than 3.0. As of December 31, 2013 and 2012 the ratio was (7.2) and (2.4), respectively; and

(ii) Bental’s tangible shareholders’ equity will not be less than NIS 20 million (approximately $5,760) and not less than 30% of its total assets. As of December 31, 2013 and 2012 Bental’s tangible shareholders’ equity was NIS 34.0 million (approximately $9,789) and NIS 34.8 million (approximately $9,335), representing 74% and 70%, respectively of its total assets.

Accordingly, as of December 31, 2013, Bental met all financial covenants as agreed.

4) A lien on Bental Approved Enterprise has been registered in favor of the State of Israel (see note 17(b) below).

5) In order to secure the guarantee Piedmont provided to FAvS as mentioned on note 11(g), Piedmont granted a lien on a bank deposit in the amount of $2,300, which is recorded as restricted deposit in the balance sheet as of December 31, 2012. Such guarantee and restricted deposit were released on March 18, 2013(see also note 3(a)).

NOTE 15 -        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.

b. Treasury purchase plan

TAT’s Board of Directors approved a stock repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934.  The plan was for a period of 6 months and provided for the purchase of shares in an aggregate amount of up to $500. Such plan replaced and superseded a prior repurchase plan approved by TAT’s Board of Directors on February 21, 2012. On November 21, 2012, the term of such stock repurchase plan ended. As of such date, the Company had purchased 16,433 shares for approximately $70 (average of $4.29 per share) constituting less than 0.1% of TAT’s issued shares.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 15 -        SHAREHOLDERS' EQUITY (CONT)

The repurchased shares became dormant as defined in the Israeli Companies Law.

A reconciliation of opening and closing balances of the number of ordinary shares outstanding is presented below:

	2013		2012			2011
Balance outstanding at beginning of year		8,798,570		8,815,003			8,815,003
Purchase of treasury shares		-		(16,433	)		-
Exercise of options		6,666		-			-
Balance outstanding at end of year		8,805,236		8,798,570			8,815,003

c. Stock option plans:

(1) On August 14, 2008, TAT's Board of Directors approved the grant of 65,477 unregistered options in three Series A, B and C to its Chief Executive Officer. Each option of Series A, B and C vests over two, three and four years commencing May 19, 2008, respectively, and expires three years after vesting. Each Series A, B and C option can be exercised into one Ordinary share NIS 0.9 par value, for an exercise price of $6.15 (adjusted for dividend distribution and other equity changes as defined in the option grant terms). Alternatively, the Chief Executive Officer can opt to receive TAT's Ordinary shares based on the value of the appreciation over the exercise price.

The weighted average fair value of stock options granted at the grant date, is $2.69, $2.9 and $3.15, for Series A, B and C, respectively, based on Black-Scholes option-pricing model.

Following the resignation of Mr. Fledel, the Company’s Chief Executive Officer on December 7, 2011 the 21,825 unvested stock options forfeited and the remaining 43,652 stock options expired on March 6, 2012. As result, the Company recorded for the year ended December 31, 2011 an income from the expiration of such options, in the total amount of $37.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 15 -        SHAREHOLDERS' EQUITY (CONT)

c. Stock option plans (cont)

(2) 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 380,000 options to purchase Ordinary shares, 0.9 NIS par value, of the Company to senior executives and certain members of the Board of Directors, at an exercise price of $6.5 per share. The Options vest over a three-year period (one-third each year), the vesting of 50% of the Options is subject, in addition, to certain minimum shareholders' equity during a period of 4 years from the grant date, unless the optionee is no longer employed by the Company, in which case the options will be considered forfeited within 30 days. On August 21, 2012, pursuant to the 2012 Plan, TAT’s Board of Directors approved the grant of 330,000 Options, which were granted on October 4, 2012.

The fair value of the Company’s stock options granted under the 2012 plan for the year ended December 31, 2012 was estimated using the following assumptions:

	2012
Expected stock price volatility	41.57% - 43.4%
Expected option life (in years)	2.23 - 3.23
Risk free interest rate	0.23% - 0.32%
Dividend yield	9.8%

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.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 15 -        SHAREHOLDERS' EQUITY (CONT)

d. Stock option plans (cont)

(3) The following table is a summary of the activity of TAT's stock Option plan:

	Year ended December 31,
	2013
	Number of options			Weighted average exercise price
Outstanding at the beginning of the year		285,000		$	6.50
Granted		-			-
Expired		-			-
Forfeited		(133,334	)		6.50
Exercised		(6,666	)		6.50
Outstanding at the end of the year		145,000		$	6.50
Exercisable options		24,167		$	6.50

The weighted-average grant-date fair value of options granted in 2012 was $0.19. The aggregate intrinsic value for the options outstanding as of December 31, 2013, 2012 and 2011 was $212, $0 and $0, respectively.

Compensation expenses (income) attributable to outstanding stock options were $3, $8 and $(37) for the years ended December 31, 2013, 2012 and 2011, respectively. Compensation expense is recognized in the statement of income as an operating expense based on the fair value of the option over the requisite service period. As of December 31, 2013 and 2012 total unrecognized compensation cost related to nonvested Share based compensation arrangements granted under the Company's 2012 plan was $17.8 and $46.9, respectively. That cost is expected to be recognized over a weighted-average period of 1.04 years.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 15 -        SHAREHOLDERS' EQUITY (CONT)

e. Market Maker for TAT shares traded in Tel Aviv Stock Exchange

On August 15, 2011, TAT entered into a Market Making agreement for its shares traded on the Tel Aviv Stock Exchange (TASE) with Harel Finance Trade & Securities Ltd. for the purpose of improving liquidity of TAT shares. The agreement is for a 12 month period, subject for TASE’s approval. The agreement will be automatically extended in 12 month periods, unless otherwise terminated by either of the parties giving 30 days notice or in accordance with certain regulatory circumstances. TAT will pay an immaterial fee in connection with the said agreement.

f. Dividends

On April 22, 2012, TAT’s Board declared a cash dividend in the total amount of $2.5 million (approximately NIS 9.4 million), or $0.283 per share (approximately NIS 1.065 per share), for all of the shareholders of TAT. The dividend was paid on May 17, 2012 to shareholders of record on May 3, 2012.

g. Accumulated other comprehensive loss

As of December 31, 2013, the entire amount of accumulated other comprehensive loss consists of amounts derived from foreign currency translation and is related to Bental.

NOTE 16 -        EARNINGS (LOSS) PER SHARE (“EPS”)

Basic and diluted earnings (loss) 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,
	2013			2012			2011
Numerator for EPS:
Net income (loss) from continuing operations	$	5,251		$	(567	)	$	(482	)
Net loss from discontinued operations, net of tax		(2,429	)		(1,147	)		(548	)
Denominator for EPS:
Weighted average shares outstanding – basic		8,799,237			8,808,075			8,815,003
Dilutive shares		9,683			-			-
Weighted average shares outstanding – diluted (*)		8,808,920			8,808,075			8,815,003
EPS attributable to controlling interest:
Basic and diluted
Net income (loss) from continuing operations	$	0.60		$	(0.06	)	$	(0.05	)
Loss from discontinued operations	$	(0.28	)	$	(0.13	)	$	(0.07	)

(*) Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 - TAXES ON INCOME

a. Measurement of taxable income under the Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustments Law”)

In accordance with the Inflationary Adjustments Law, the results for tax purposes have been measured through 2007, and reflected in real terms in accordance with the changes in the Israeli Consumer Price Index (CPI).  Under the Inflationary Adjustments Law (Amendment No. 20, 2008, (“the amendment”), that was enacted in the Israeli Parliament on February 26, 2008, the provisions of the Inflationary adjustments law will no longer apply to the Company and Bental in 2008 and thereafter. The amendment specifies transitional provisions regarding the discontinuance of the provisions of the Inflationary adjustments law that have applied to the Company and Bental through the end of 2007.

b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law"):

Some facilities of the Israeli companies in Israel have been granted approved enterprise status under the above law.

The main tax benefits available are:

In respect of income derived from the approved enterprise, the Israeli companies were entitled to reduced tax rates during a period of up to seven years from the year in which such enterprise first earn taxable income (limited to twelve years from commencement of production or fourteen years from the date of approval, whichever is earlier).

Income derived from the approved enterprise is tax exempt during the first two years of the seven year tax benefit period as above, and is subject to a reduced tax rate not exceeding 25% during the remaining years of benefits.

In the event of distribution of a cash dividend from income which was tax exempt as above, the Company and Bental would have to pay the 25% tax in respect of the amount distributed. Company has policy not to distribute cash dividends from such exempt income. As of December 31, 2013, the Company had accumulated a total amount of approximately $9,700 of exempt income (out of which $7,750 relates to Bental which determined as discontinued operation as of December 31, 2013).

Conditions for the entitlement of benefits

The above mentioned benefits were subject to the fulfillment of the terms specified in the Law, the related regulations and the approval plans as specified above. Failure to fulfill these terms might result the cancellation of the tax benefits (all or some), in which case the Israeli companies will be required to repay all benefits including interest and fines. Management estimates that the Israeli companies comply with all terms as mentioned above.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 - TAXES ON INCOME (CONT)

b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law") (cont):

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 current 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 10% in areas in Israel that are designated as Development Zone A and 15% elsewhere in Israel during 2011-2012, 7% and 12.5%, respectively, in 2013-2014, and 6% and 12%, respectively, thereafter. Income derived by a Preferred Company from a ‘Special Preferred Enterprise’ (as defined in the Approved Enterprise) would enjoy further reduced tax rates for a period of ten years of 5% in Zone A and 8% elsewhere. As with dividends distributed from taxable income derived from an Approved Enterprise or Benefiting Enterprise during the applicable benefits period, dividends distributed from Preferred Income would be subject to a 15% tax (or lower, if so provided under an applicable tax treaty), which would generally be withheld by the distributing company. While the Company may incur additional tax liability in the event of distribution of dividends from tax exempt income generated from its Approved and Benefiting Enterprises, no additional tax liability will be incurred by the Company in the event of distribution of dividends from income taxed in accordance with the 2011 Amendment.

Under the transitional provisions of the 2011 Amendment, the Company and Bental 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 Benefiting Enterprises while waiving benefits provided under the legislation prior to the 2011 Amendment.

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 20% (instead of 15%). In addition, tax rates under the Preferred Enterprise were also raised effective as of January 1, 2014 to 9% in Zone A and 16% elsewhere (instead of the 6% and 12%, respectively).

Bental is located in area in Israel that is designated as Development Zone A and as such entitled to reduce tax rates of 10% during 2011-2012, 7% in 2013, and 9% in 2014 and thereafter.

TAT is located in area in Israel that is designated as elsewhere and as such entitled to reduce tax rates of 15% during 2011-2012, 12.5% in 2013, and 16% in 2014 and thereafter.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 - TAXES ON INCOME (CONT)

c. Corporate tax rate in Israel

The statutory rate of the Israeli corporate tax is as follows: 2013 and 2012 - 25%, 2011- 24%. In July 2009, the "Knesset" (Israeli Parliament) passed the Law for Economic Efficiency (Amended Legislation for Implementing the Economic Plan for 2009 and 2010), 2009, which prescribed, among others, an additional gradual reduction in the rates of the Israeli corporate tax and real capital gains tax starting 2011.

On December 6, 2011, the Knesset (Israel's Parliament) passed a law for changing the tax burden (Legislative Amendments), which cancels, among others, the gradual reduction in the corporate tax rates in Israel. In addition, the corporate tax in Israel was increased to 25% from 2012 and thereafter.

On July 30, 2013, the Israeli Parliament (the Knesset) approved the second and third readings of the Economic Plan for 2013-2014 (“Amended Budget Law”) which consists, among others, of fiscal changes whose main aim is to enhance long-term collection of taxes. These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%.

The effect of the abovementioned change on the financial statements is immaterial.

d. U.S. subsidiaries   U.S. subsidiaries are taxed based on federal and state tax laws. The statutory tax rate for 2013, 2012, and 2011 was 38%.

e. Tax assessments

TAT’s income tax assessments are considered final through 2011. In 2013, a tax assessment for the years 2008 through 2011 was finalized by the Israeli tax authorities.

Bental income tax assessments are considered final through 2009.

Limco-piedmont income tax assessments are considered final through 2009.

TAT-GAL which was incorporated in 2008 has not received final tax assessment yet.

F - 55

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 -        TAXES ON INCOME (CONT)

f. 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,
	2013			2012			2011
Income (loss) before taxes on income (tax benefit) as reported in the statements of income	$	5,267		$	5,279		$	(1,148	)
Statutory tax rate in Israel		25	%		25	%		24	%
Theoretical taxes on income (tax benefit)	$	1,317		$	1,320		$	(276	)
Increase (decrease) in taxes on income resulting from:
Tax adjustment for foreign subsidiaries subject to a different tax rate		453			434			(73	)
Reduced tax rate on income derived from "Preferred Enterprises" plans		(255	)		(143	)		103
Change in enacted tax rates		34			-			-
Exempt income		-			(4	)		(10	)
Valuation allowance		294			499			-
Tax in respect of prior years		(342	)		(83	)		(24	)
Permanent differences		(460	)		67			(55	)
Taxes on income (tax benefit) as reported in the statements of income (loss)	$	1,041		$	2,090		$	(335	)

g. Income (loss) before taxes on income (tax benefit) is comprised as follows:

	Year ended December 31,
	2013		2012		2011
Domestic (Israel)	$	1,942	$	2,046	$	1,547
Foreign (United States)		3,325		3,233		(2,695	)
	$	5,267	$	5,279	$	(1,148	)

F - 56

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 -        TAXES ON INCOME (CONT)

h. Taxes on income (tax benefit) included in the statements of income:

	Year ended December 31,
	2013			2012			2011
Current:
Domestic (Israel)	$	160		$	282		$	373
Foreign (United States)		334			295			213
		494			577			586
Deferred:
Domestic (Israel)		15			115			245
Foreign (United States)		874			1,481			(1,142	)
		889			1,596			(897	)
Previous years:
Domestic (Israel)		(209	)		(45	)		(71	)
Foreign (United States)		(133	)		(38	)		47
		(342	)		(83	)		(24	)
	$	1,041		$	2,090		$	(335	)

F - 57

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 - TAXES ON INCOME (CONT)

i. 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,
	2013			2012
Deferred tax assets (liabilities):
Allowance for doubtful accounts	$	47		$	133
Unrealized gains		146			131
Provisions for employee benefits		277			270
Inventory		920			1,171
Other temporary differences		199			417
Deferred tax assets - short-term- other accounts receivables	$	1,589		$	2,122
Goodwill and intangible assets	$	671		$	884
Property, plant and equipment		18			707
Provisions for employee benefits and other temporary differences		38			64
Tax credits carryforward		447			274
Capital and state tax losses carryforward		3,306			1,823
Net operating losses carryforward		419			606
Other		23			-
Deferred tax assets, before valuation allowance – Long-term		4,922			4,358
Valuation allowance		(3,306	)		(1,823	)
Deferred tax assets, net – long-term	$	1,616		$	2,535
Other temporary differences deferred tax liabilities – short-term- other accounts receivable	$	(40	)	$	(126	)
Property, plant and equipment and intangible assets		(1,003	)		(1,457	)
Other		(55	)		(33	)
Deferred tax Liabilities - Long-term	$	(1,058	)	$	(1,490	)

As of December 31, 2013, TAT did not provide a valuation allowance in respect of deferred tax assets, since management currently believes that it is more likely than not that the deferred tax asset will be realized in the future. For capital losses and certain state tax losses, incurred by the U.S. subsidiaries, the Company provides valuation allowance as it cannot predict its future realization.

F - 58

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 17 - TAXES ON INCOME (CONT)

The following table summarizes the changes in the valuation allowance for deferred tax assets:

Balance, January 1, 2011	$	200
Addition charged to expenses		(16	)
Balance, December 31, 2011		184
Addition charged to expenses		1,639
Balance, December 31,2012		1,823
Addition charged to expenses		1,483
Balance, December 31,2013	$	3,306

TAT does not intend to distribute earnings of a foreign subsidiary aggregating up to approximately $11,400 (tax earnings and profits) as of December 31, 2013, and accordingly, no deferred tax liability has been established relative to these earnings. If such profits and earnings are distributed by cash dividend, it would be taxed at tax rate applicable to such distribution (25%) and an income tax liability of up to approximately $2,850 would be incurred as of December 31, 2013.

TAT does not intend to distribute tax-exempt earnings deriving from Approved Enterprise aggregating approximately $9,700 as of December 31, 2013, and accordingly, no deferred tax liability has been established related to these earnings. If such tax-exempt income is distributed by cash dividend (including a liquidation dividend), it would be taxed at the reduced corporate tax rate applicable to such profits (25%) and an income tax liability of up to approximately $2,425 would be incurred as of December 31, 2013 (See also note 17(b)).

j. A reconciliation of the beginning and ending amount of unrecognized provision is as follows:

	Amount
Balance at January 1, 2011	$	84
Exchange rate differences		2
Balance at December 31, 2011		86
Exchange rate differences		(2	)
Balance at December 31, 2012		84
Exchange rate differences		6
Utilization upon assessment		(90	)
Balance at December 31, 2013	$	-

Unrecognized tax benefits, mainly of a long-term nature, at December 31, 2013, 2012 and 2011 amounted to $(84), $(2) and $2, respectively. All of the above amounts of unrecognized tax benefits would affect the effective tax rate if recognized.

F - 59

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 18 - SEGMENT INFORMATION

a. Segment Activities Disclosure:

TAT operates under four segments: (i) Original Equipment Manufacturing or “OEM” of Heat Management Solutions (ii) Heat Transfer Services and Products (iii) Maintenance, Repair and Overhaul or “MRO” services for Aviation Components and (iv) OEM of Electric Motion Systems.

- OEM of Heat Management Solutions primarily includes the design, development, manufacture and sale of (i) 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; (ii) environmental control and cooling systems on board aircraft and for ground applications; and (iii) a variety of other electronic and mechanical aircraft accessories and systems such as pumps, valves, power systems and turbines.

- Heat Transfer Services and Products primarily includes the maintenance, repair and overhaul of heat transfer equipment and in a lesser extent, the manufacturing of certain heat transfer products. TAT’s Limco subsidiary operates an FAA certified repair station, which provides heat transfer MRO services and products for airlines, air cargo carriers, maintenance service centers and the military.

- MRO services for Aviation Components primarily includes the maintenance, repair and overhaul of APUs, landing gear and other aircraft components. TAT’s Piedmont subsidiary operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

- OEM of Electric Motion Systems primarily includes the design, development, manufacture and sale of a broad range of electrical motor applications for airborne and ground systems.

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.

TAT evaluates segment performance based on revenue and operating income. The operating income reported in TAT's segments excludes other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported consolidated earnings. 

On February 18, 2014 TAT entered into an agreement to sell its entire interest in Bental, the OEM of Electric Motion Systems operating segment, constituting 70% of Bental’s issued and outstanding share capital (for additional information see note 4).

F - 60

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 18 - SEGMENT INFORMATION (CONT)

b. Segments statement operations disclosure:

The following financial information is the information that management uses for analyzing the segment results. The figures are presented in consolidated method as presented to management.

The following financial information is a summary of the operating income of each operational segment:

	Year ended December 31, 2013
	OEM of Heat Management Solutions			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Consolidated
Revenues
Sale of products and services	$	27,326		$	29,796	$	22,429		$	-		$	-		$	79,551
Intersegment revenues		3,812			111		-			-			(3,923	)		-
Total revenues		31,138			29,907		22,429			-			(3,923	)		79,551
Cost of revenues		24,141			21,600		19,224			-			(4,086	)		60,879
Gross profit		6,997			8,307		3,205			-			163			18,672
Research and development		415			298		-			-			-			713
Selling and marketing		1,520			1,145		485			-			-			3,150
General and administrative		3,158			3,093		3,261			-			-			9,512
Other expense (income)		(20	)		-		-			-			-			(20	)
Operating income (loss)		1,924			3,771		(541	)		-			163			5,317
Financial expense, net		-			-		-			(50	)		-			(50	)
Income before taxes on income															$	5,267

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 18 -        SEGMENT INFORMATION (CONT)

b. Segments statement operations disclosure (cont)

	Year ended December 31, 2012
	OEM of Heat Management Solutions			OEM of Electric Motion Systems			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Adjustment to the consolidated financial statements			Consolidated
Revenues
Sale of products and services	$	27,944		$	10,008		$	27,529	$	22,442		$	-		$	-		$	(10,008	)	$	77,915
Intersegment revenues		3,088			-			180		-			-			(3,268	)		-			-
Total revenues		31,032			10,008			27,709		22,442			-			(3,268	)		(10,008	)		77,915
Cost of revenues		23,105			8,043			19,671		19,044			-			(3,281	)		(8,043	)		58,539
Gross profit		7,927			1,965			8,038		3,398			-			13			(1,965	)		19,376
Research and development		581			157			414		-			-			-			(157	)		995
Selling and marketing		1,476			527			1,049		374			-			-			(527	)		2,899
General and administrative		3,530			1,377			3,270		3,310			-			-			(1,377	)		10,110
Other expense (income)		(13	)		21			-		-			-			-			(21	)		(13	)
Operating income (loss)		2,353			(117	)		3,305		(286	)		-			13			117			5,385
Financial expense, net		-			-			-		-			(106	)		-			-			(106	)
Income before taxes on income																					$	5,279

F - 62

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 18 - SEGMENT INFORMATION (CONT)

b. Segments statement operations disclosure (cont)

	Year ended December 31, 2011
	OEM of Heat Management Solutions			OEM of Electric Motion Systems			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Adjustment to the consolidated financial statements			Consolidated
Revenues
Sale of products and services	$	25,993		$	11,658		$	27,600	$	20,146		$	-		$	-		$	(11,658	)	$	73,739
Intersegment revenues		4,027			-			3		-			-			(4,030	)		-			-
Total revenues		30,020			11,658			27,603		20,146			-			(4,030	)		(11,658	)		73,739
Cost of revenues		22,662			9,388			20,173		17,882			-			(4,009	)		(9,388	)		56,708
Write down of inventory and impairment charges of  long lived assets		-			-			-		5,465			-			-			-			5,465
Gross profit		7,358			2,270			7,430		(3,201	)		-			(21	)		(2,270	)		11,566
Research and development		455			331			-		-			-			-			(331	)		455
Selling and marketing		1,202			619			1,026		591			-			-			(619	)		2,819
General and administrative		3,789			1,499			3,035		2,626			-			-			(1,499	)		9,450
Other expense (income)		(190	)		21			-		-			-			-			(21	)		(190	)
Operating income (loss)		2,102			(200	)		3,369		(6,418	)		-			(21	)		200			(968	)
Financial expense, net		-			-			-		-			(420	)		-			-			(420	)
Income before taxes on income																					$	(1,388	)

F - 63

TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 18 - SEGMENT INFORMATION (CONT)

c. The following financial information identifies the assets to segment:

	Year ended December 31, 2013
	OEM of Heat Management Solutions		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	45,518	$	28,806	$	18,137	$	16,419	$	108,880
Depreciation and amortization (*)		991		603		265		-		1,859
Expenditure for segment assets (*)		992		664		584		-		2,240

	Year ended December 31, 2012
	OEM of Heat Management Solutions		OEM of Electric Motion Systems		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	34,315	$	12,707	$	27,093	$	18,473	$	16,354	$	108,942
Depreciation and amortization (*)		974		-		735		197		-		1,906
Expenditure for segment assets (*)		1,047		-		756		344		-		2,147

	Year ended December 31, 2011
	OEM of Heat Management Solutions		OEM of Electric Motion Systems		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	34,055	$	13,941	$	27,464	$	21,068	$	19,783	$	116,311
Depreciation and amortization (*)		1,139		-		758		721		-		2,618
Expenditure for segment assets (*)		924		-		638		1,391		-		2,953
Goodwill		-		1,042		-		-		-		1,042

 (*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 19 - ENTITY-WIDE DISCLOSURE

a. Total revenues and long-lived assets - by geographical location were as follows:

	Year ended December 31,
	2013				2012				2011
	Total revenues (**)		Long-lived assets (*)		Total revenues (**)		Long-lived assets		Total revenues (**)		Long-lived assets
Sale of products
Israel	$	6,248	$	5,748	$	9,147	$	8,417	$	8,218	$	8,528
United states		18,016		-		16,475		-		21,495		-
France		5,482		-		4,604		-		3,264		-
Rest of Europe		2,292		-		1,966		-		2,507		-
Other		2,326		-		4,071		-		1,353		-
	$	34,364	$	5,748	$	36,263	$	8,417	$	36,837	$	8,528

	Year ended December 31,
	2013				2012				2011
	Total revenues		Long-lived assets		Total revenues		Long-lived assets		Total revenues		Long-lived assets
Services
Israel	$	612	$	-	$	468	$	-	$	384	$	-
United states		27,639		5,399		25,648		4,493		25,416		4,325
Netherland		1,553		-		3,303		-		4,378		-
Rest of Europe		7,658		-		4,624		-		3,875		-
Other		7,725		-		7,609		-		2,849		-
	$	45,187	$	5,399	$	41,652	$	4,493	$	36,902	$	4,325

(*) Excluding held for sale assets at December 31, 2013

(**) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

b. Major Customers

No single customer accounted for 10% or more of Group's total net revenue in any year presented.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 20 -        SELECTED STATEMENTS OF INCOME DATA

	Year ended December 31,
	2013			2012			2011
Financial income (expenses), net (*):
Financial income:
Foreign currency gains	$	661		$	1,294		$	1,108
Derivatives		27			399			352
Tax refund		95			53			71
Interest on cash equivalents, short-term bank deposits and others		114			242			172
		897			1,988			1,703
Financial expenses (*):
Bank charges		(77	)		(71	)		(74	)
Interest on short-term loans		(18	)		(98	)		(98	)
Interest on long-term loans		(66	)		(120	)		(148	)
Foreign currency losses		(786	)		(1,376	)		(1,149	)
Derivatives		-			(321	)		(642	)
Others		-			(108	)		(12	)
		(947	)		(2,094	)		(2,123	)
	$	(50	)	$	(106	)	$	(420	)

(*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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TAT TECHNOLOGIES LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 21 -        SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION

	Warranty provision			Allowance for Doubtful Accounts
Balance, as of January 1, 2011		341			2,419
Additions		169			31
Utilization		(222	)		-
Write-offs, net of recoveries		-			(2,260	)
Balance, as of December 31, 2011		288			190
Additions		196			258
Utilization		(208	)		-
Write-offs, net of recoveries		-			(72	)
Balance, as of December 31, 2012	$	276		$	376

Additions		186			17
Utilization		(190	)		-
Write-offs, net of recoveries		-			(270	)
Less: Held for sale		(43	)		-
Balance, as of December 31, 2013	$	229		$	123

NOTE 22 -        SUBSEQUENT EVENTS

a.  On March 19, 2014, subsequent to the balance sheet date, TAT’s board of directors declared a cash dividend in the total amount of $2,000 (approximately NIS6.97 million), or $0.23 per share (approximately NIS0.79 per share), for all of the shareholders of TAT. The dividend will be paid to shareholders of record on April 21, 2014. TAT will pay the dividend on May 7, 2014.

b.  On March 19, 2014, pursuant to the 2012 stock option Plan, TAT’s Board of Directors approved the grant of 195,000 Options, at an exercise price of $8.79 per share, to senior executives.

F - 67

EX-1.2

Exhibit 1.2

THE COMPANIES ORDINANCE

COMPANY LIMITED BY SHARES

AMENDED ARTICLES OF ASSOCIATION

Of

TAT TECHNOLOGIES LTD

INTERPRETATION

1. In these Articles the words standing in the first column of the table next hereinafter contained shall bear the meanings set opposite them respectively in the second column thereof, if not inconsistent with the subject or context:

Words	Meanings
The Company	The above-named Company.
Companies Ordinance	The Companies Ordinance (new version) 1983 ("The Companies Ordinance ") as amended and as amended from time to time including any law or statute replacing it.
The Companies Law or The Israeli Companies Law	The Israeli Companies Law 5759-1999 ("The Companies Law") as amended and as amended from time to time including any law or statute replacing it.
The Statutes	The Companies Ordinance and/or The Companies Law and/or The Securities Law and/or every other Law for the time being in force and affecting the Company.
These Articles	These Articles of Association or as shall be altered from time to time by the General Meeting of the shareholders of the Company.
The Office	The registered office for the time being of the Company.
The Seal	The rubber stamp of the Company.
The Securities Law	The Israeli Securities Law 5728-1968 ("The Securities Law") as amended from time to time including any law or statute replacing it.
Month	Gregorian month.
The Record Date	The record date as determined pursuant to the provision of Article 55(a) of these Articles
Writing	Printing, lithography, photography, and any other mode or modes of representing or reproducing words in a visible form.
Special Resolution	In accordance with the Companies Ordinance, decision of 75% of the General Meeting of the shareholders of the Company.

Words importing the singular only shall include the plural, and vice versa.

Words importing the masculine gender shall include the feminine gender; and words importing person shall include corporations.

Subject as aforesaid, any words or expressions defined in the Statutes shall, except where the subject or context forbids, bear the same meanings in these Articles.

The Regulations in Table "A" in Schedule II to the Companies Ordinance shall not apply to the Company

THE PURPUSE OF THE COMPANY

2. The Company may engage in any lawful occupation.

THE LIABILTY OF SHAREHOLDERS

3. The liability of the shareholders is limited, as determined in the Companies Law. For this purpose, each shareholder is responsible for repayment of the nominal value of shares. In the event that the Company issued shares in exchange for lower nominal value, the responsibility of each shareholder will be limited to the repayment of the amortized amount of the consideration for each share assigned to him as aforesaid.

NON-PRIVATE COMPANY

4. The Company is a non-private company; consequently:

(a) No limitations will apply to the transfer of its shares;

(b) The number of shareholders is unlimited;

(c) The company may issue to the public shares, debentures or any other securities.

5. The share capital of the company is 9,000,000 (Nine Million) New Israeli Shekels, divided into 10,000,000 (Ten Million) Ordinary Shares of a nominal value of 0.9 New Israeli Shekel (NIS 0.9) each, all ranking pari-passu.

SHARES

6. Subject to these Articles or to the terms of any resolution creating new shares, the unissued shares from time to time shall be under the control of the Board of Directors, who shall have the power to allot shares or otherwise dispose of them to such persons, on such terms and conditions, and either at par or at a premium, or, subject to the provisions of the Statues, at a discount, and at such times, as the Board of Directors may think fit, and the power to give to any person the option to acquire from the Company any shares, either at par or at a premium, or, subject as aforesaid, at a discount, during such time and for such consideration as the Board of Directors may think fit.

7. If two or more persons are registered as joint holders of any share, any one of such persons may give effectual receipts for any dividends or other moneys in respect of such share.

8. No person shall be recognized by the Company as holding any share upon any trust, and the Company shall not be bound by or required to recognize any equitable, contingent, future, or partial interest in any share or any right whatsoever in respect of any share other than an absolute right to the entirety thereof in the registered holder.

9. Every member shall be entitled without payment to receive after allotment or registration of transfer (unless the conditions of issue provide for a longer interval) one certificate under the Seal for all the shares registered in his name, specifying the number and denoting numbers of the shares in respect of which it is issued and the amount paid up thereon. Provided that in the case of joint holders the Company shall not be bound to issue more than one certificate to all the joint holders, and delivery of such certificate to one of them shall be sufficient delivery to all. Every certificate shall be signed by one Director and countersigned by the Secretary or some other person nominated by the Directors for the purpose.

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10. If any share certificate shall be defaced, worn out, destroyed or lost, it may be renewed on such evidence being produced, and such indemnity (if any) being given as the Directors shall require and (in case of defacement or wearing out) on delivery up of the old certificate, and in any case on payment of such sum not exceeding NIS 5 (Five New Israeli Shekels) as the Directors may from time to time require.

11. [Deleted]

12. [Deleted]

13. [Deleted]

CALLS ON SHARES

14. No member shall be entitled to receive any dividend or to exercise any privileges as a member until he shall have paid all calls for the time being due and payable on every share held by him, whether alone or jointly with any other person, together with interest and expenses (if any). The shareholders who are entitled to a dividend shall be the holders of shares on the date of the resolution regarding the dividend or on a later date if a later date is prescribed in such resolution.

15.

(a) If under the conditions of the issuance of shares there is no fixed date for the payments due therefor, the Directors may from time to time make such calls upon the members in respect of all moneys then unpaid on shares possessed by them and every member will pay the sum demanded of him at the place and time appointed by the Directors, provided that fourteen days notice as to the place and date of payment was served on him. The Directors may revoke or postpone any call.

(b) A call shall be deemed to have been made at the time when the Resolution of the Directors authorizing such call was passed.

(c) The joint holders of a share shall be jointly and severally liable for the payment of all calls and installments in respect thereof.

(d) If before or on the day appointed for payment thereof, a call or installment payable in respect of a share is not paid, the holder or allottee of the share shall pay interest on the amount of the call or Installment at such rate not exceeding the debitory rate prevailing at the largest Israeli commercial bank on the day appointed for the payment referred to, as the Directors shall fix, from the day appointed for payment thereof to the time of actual payment, but the Directors may waive payment of such interest wholly or in part.

16.

(a) Any sum which by the terms of allotment of a share is made payable upon allotment or at any fixed date, whether on account of the amount of the share or by way of premium, shall for all purposes of these Articles be deemed to be a call duly made, and payable on the date fixed for payment, and in case of non-payment the provisions of these Articles as to payment of interest and expenses, forfeiture and the like, and all other relevant provisions of these Articles shall apply as if such sum were a call duly made and notified as hereby provided;

(b) The Directors may at the time of allotment of shares make arrangements on the issue of shares for a difference between the holders of such shares in the amount of calls to be paid and in the time of payment of such call.

17. The Directors may, if they think fit, receive from any member willing to advance the same, all or any part of the monies due upon his shares beyond the sums actually called up thereon; and upon the moneys so paid in advance, or so much thereof as exceeds the amount for the time being called up on the shares in respect of which such advance has been made, the Directors may pay or allow such interest as may be agreed by them and the Company.

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TRANSFER OF SHARES

18. No transfer of shares shall be registered unless a proper writing or instrument of transfer (in any customary form or any other form satisfactory to the Board of Directors) has been submitted to the Company (or its transfer agent), together with the share certificate(s) and such other evidence of title as the Board of Directors may reasonably require. Until the transferee has been registered in the Register of Members in respect of the shares so transferred, the Company may continue to regard the transferor as the owner thereof.

19. The Directors may refuse, without giving any reasons therefor, to register any transfer of shares where the Company has a lien on the share, constituting the subject matter of the transfer, but fully paid-up shares may be transferred freely and such transfers do not require the approval of the Directors.

All instruments of transfer shall remain in the custody of the Company but any such instrument which the Directors refused to register shall be returned to the person from whom it was received, if such request be made by him.

20. The Transfer Records and the Register of Members and Debenture Holders (if any) and Debenture Stock Holders (if any) and other securities (if any) of the Company may be closed during such time as the Directors may deem fit, not exceeding in the aggregate, thirty days in each year. To avoid any doubts, the determination of a Record Date shall not constitute nor be deemed as a closing of the above records or registers.

TRANSMISSION OF SHARES

21. In the case of the death of a member, or a holder of a debenture, the survivor or survivors, where the deceased was a joint holder, and the executors and/or administrators and/or the legal heirs of the deceased where he was a sole or only surviving holder, shall be the only persons recognized by the Company as having any title to his shares or his debentures, but nothing herein contained shall release the estate of a deceased joint holder form any liability in respect of any share or any debenture jointly held by him.

22. Any person who becomes entitled to a share or a debenture in consequence of the death or bankruptcy of any member, may, upon producing such evidence of title as the Directors shall require, with the consent of the Directors, be registered himself as holder of the share or the debenture or, subject to the provisions as to transfers herein contained, transfer the same to some other person.

23. A person entitled to a share or a debenture by transmission shall be entitled to receive, and may give a discharge for, any dividends or interest or other moneys payable in respect of the share or debenture, but he shall not be entitled in respect of it to receive notices of, or to attend or vote at meetings of the Company, or, save as aforesaid, to exercise any of the rights or privileges of a member or a holder of a debenture unless and until he shall become a member in respect of the share or a holder of the debenture.

FORFEITURE OF SHARES

24. If any member fails to pay the whole or any part of any call or installment of a call on or before the day appointed for the payment thereof, the Directors may at any time thereafter, during such time as the call or installment or any part thereof remains unpaid, serve a notice on him, or on the person entitled to the share by transmission requiring him to pay such call or installment, or such part thereof as remains unpaid, together with any expenses incurred by the company by reason of such non-payment.

25. The notice shall name a further day (not earlier than the expiration of thirty days from the date of the notice) on or before which such call or installment, or such part as aforesaid, and all interest and expenses that have accrued by reason of such non-payment, is to be made, and shall state that In the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made will be liable to be forfeited.

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26. If the requisitions of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors to that effect. A forfeiture of shares shall include all dividends in respect of the shares not actually paid before the forfeiture, notwithstanding that they shall have been declared.

27. Notwithstanding any such forfeiture as aforesaid, the Directors may, at any time before the forfeited share has been otherwise disposed of, annul the forfeiture upon the terms of payment of all call and interest due upon and expenses incurred in respect of the shares and upon such further terms (if any) as they shall see fit.

28. Every share which shall be forfeited shall thereupon become the property of the Company and may be either cancelled or sold or re-allotted or otherwise disposed of either to the person who was before forfeiture the holder thereof, or entitled thereto, or to any other person, upon such terms and in such manner as the Directors shall think fit.Each Forfeited share that hasn’t been sold or canceled, will become dormant Share, as defined in the Israeli Companies law, and will not confer any rights, so long that such shares is owned by the Company.

29. A member whose shares have been forfeited shall, notwithstanding, be liable to pay to the Company all calls made and not paid on such shares at the time of forfeiture, and interest thereon to the date of payment, in the same manner in all respects as if the shares had not been forfeited and to satisfy all (if any) the claims and demands which the Company might have enforced in respect of the shares at the time of forfeiture, without any deduction or allowance for the value of the shares at the time of forfeiture.

30. The forfeiture of a share shall involve the extinction at the time of forfeiture of all interest in and all claims and demands against the Company in respect of the share, and all other rights and liabilities incidental to the share as between the member whose share is forfeited and the Company, except only such of those rights and liabilities as are by these Articles expressly saved, or as are by the Statutes given or imposed in the case of past members.

31. A sworn declaration in writing that the declarant is a Director of the Company, and that a share has been duly forfeited in pursuance of these Articles and stating the date upon which it was forfeited, shall, as against all persons claiming to be entitled to the share adversely to the forfeiture thereof, be conclusive evidence of the facts therein stated, and such declaration, together with the receipt of the Company for the consideration (if any) given for the share on the sale or disposition thereof, and a certificate of proprietorship of the share under the Seal delivered to the person to whom the same is sold or disposed of, shall constitute a good title to the share, and such person shall be registered as the holder of the share and shall be discharged from all calls made prior to such sale or disposition, and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any act, omission or irregularity relating to or connected with the proceedings in reference to the forfeiture, sale, re-allotment or disposal of the share.

LIEN

32. The Company shall have a first and paramount lien upon all shares (which are not fully paid up) registered in the name of any member, either alone or jointly with any other person, for his debts, liabilities and engagements, whether solely or jointly with any other person, to or with the Company, whether the period for the payment, fulfillment or discharge thereof shall have actually arrived or not, and such lien shall extend to all dividends from time to time declared in respect of such shares; but the Directors may at any time declare any share to be exempt wholly or partially from the provisions of this Article.

33. The Directors may sell the shares subject to any such lien at such time or times and in such manner as they shall think fit, but no sale shall be made until such time as the moneys in respect of which such lien exists, or some part thereof, are or is presently payable, or the liability or engagement in respect of which such lien exists is liable to be presently fulfilled or discharged, and until a demand and notice in writing stating the amount due or specifying the liability or engagement and demanding payment or fulfillment or discharge thereof and giving notice of intention to sell in default shall have been served on such member, or the persons (if any) entitled by transmission to the shares, and default in payment, fulfillment or discharge shall have been made by him or them for fourteen days after such notice.

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34. The net proceeds of such sale shall be applied in or towards satisfaction of the amount due to the Company, or of the liability or engagement, as the case may be, and the balance (if any) shall be paid to the member or the person (if any) entitled by transmission to the shares so sold.

35. Upon any such sale (i.e., following forfeiture or foreclosing on a lien for and the bona fide use of the powers granted with respect thereto) the Directors may enter the purchaser's name in the Register as holder of the shares and the purchaser shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

SHARE WARRANTS TO BEARER

36.

(a) The Company may, subject to the provisions of the Statutes, with respect to fully paid up shares, issue warrants (hereinafter called "share warrants"), stating that the bearer is entitled to the shares therein specified and may provide by coupons or otherwise for the payment of dividends on the shares included in such warrants. The Directors may determine and from time to time vary, the conditions upon which share warrants shall be issued, and in particular the conditions upon which a new share warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or upon which a share warrant may be surrendered, and the name of the bearer entered in the Register in respect of the shares therein specified. The bearer of a share warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of such share warrant. No new share warrant or coupon shall be issued in the place of one which has been lost or destroyed unless it shall have been established to the satisfaction of the Directors that the same has been lost or destroyed.

(b) A share warrant shall entitle the bearer to the shares included in it, and such shares shall be transferred by the delivery of the share warrant and the provisions of these Articles with respect to transfer and transmission of shares shall not apply thereto.

(c) The bearer of a share warrant may at any time deposit the warrant at the Office or at any other place, if any, indicated by the Directors, and after the expiration of two clear days from the time of deposit, and so long as the warrant remains so deposited, the depositor shall have the same right of signing a requisition for calling a meeting of the Company, and of attending and voting and exercising the other privileges of a member at any meeting held, as if his name was inserted in the Register as the Holder of the shares included in the deposited warrant. Not more than one person shall be recognized as depositor of a share warrant. Upon prior notice in writing of two days the Company shall return to the depositor the share warrant deposited by him.

(d) Subject as otherwise expressly provided herein, no person shall, as bearer of a share warrant, sign a requisition for calling a Meeting of the Company, or attend, or vote, or exercise any other privilege of a member at a Meeting of the Company and said person shall not be entitled to receive any notices from the Company. But the bearer of a share warrant shall be a member of the Company and entitled in all other respects to the same privileges and advantages as if he were named in the Register as the holder of the shares included in the warrant.

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ALTERATIONS OF CAPITAL

37. The General Meeting of the shareholders of the Company may from time to time:

(a) Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; or

(b) Cancel any shares not taken or agreed to be taken by any person; or

(c) Divide its share capital or any part thereof into shares of smaller amount than is fixed by its Articles of Association by sub-division of its existing shares or any of them, subject, nevertheless, to the provisions of the Statutes, and so that as between the resulting shares, one or more of such shares may by the Resolution by which such sub-division is effected be given any preference or advantage as regards dividend, capital, voting or otherwise over the others or any other shares; or

(d) Reduce its share capital and any capital redemption reserve fund in any way that may be considered expedient and, in particular exercise all or any of the powers conferred by Section 151of the Companies Ordinance, or any statutory modification thereof.

38. The Company may, subject to applicable law, issue redeemable shares and redeem the same

INCREASE OF CAPITAL

39. The General Meeting of the shareholders of the Company may from time to time , whether all the shares for the time being authorized shall have been issued or all the shares for the time being issued shall have been fully called up or not, increase its share capital by the creation of new shares; such new capital to be of such amount and to be divided into shares of such respective amounts and (subject to any special rights for the time being attached to any existing class of shares) to carry such preferential, deferred or other special rights (if any) or to be subject to such conditions or restrictions (if any) in regard to dividend, return of capital, voting or otherwise as the General Meeting deciding upon such increase directs.

40. Except so far as otherwise provided by or pursuant to these Articles or by the conditions of issue, any new share capital shall be considered as part of the original ordinary share capital of the Company, and shall be subject to the same provisions of these Articles with reference to the payment of calls, lien, transfer, transmission, forfeiture and otherwise as the original share capital.

BORROWING POWERS

41. The Board of Directors may from time to time, in its discretion, cause the Company to borrow or secure the payment of any sum or sums of money for the purposes of the Company, and may secure or provide for the repayment of such sum or sums in such manner, at such times and upon such terms and conditions in all respects as it thinks fit, and, in particular, by the issuance of bonds, perpetual or redeemable debentures, debenture stock, or any mortgages, charges, or other securities on the undertaking, or, the whole or any part of the property of the Company, both present and future, including units uncalled or called but unpaid capital for the time being.

GENERAL MEETINGS

42. An Annual General Meetings shall be held at least once in every calendar year at such time, not being more than fifteen months after the holding of the last preceding Annual General Meeting and at such place as may be determined by the Directors. Such Annual General Meetings shall be called "Ordinary Meetings" and all other General Meetings of the Company shall be called "Extraordinary Meetings". The Annual General Meeting shall receive and consider the Directors' Report, the Profit and Loss Account and Balance Sheet, shall elect Directors, appoint Auditors and transact any other business which under these Articles or by the Statutes are to be transacted at a General Meeting of the Company.

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43.  In accordance with the Israeli Companies Law and subject to the provisions of the Statutes, as may be from time to time in effect, the Directors may, whenever they think fit, and upon a demand of two directors or one quarter of the directors in office at that time or upon demand of one or more shareholders, holding at least five percent (5%) of the issued shares and one percent (1%) of the voting rights or holding five percent (5%) of the voting rights in the Company (hereinafter: "the Requisitionists") , shall convene an Extraordinary Meeting, in the manner hereinafter mentioned, to such members as are, under the provisions of these Articles, and particularly under the provisions of article 53(a), entitled to receive notice from the company. Any such requisition must state the objects for which the meeting is to be called, be signed by the Requisitionists, and must be deposited at the office. Such requisition may consist of several documents in like form, each signed by one or more requisitionists. If the Directors do not, within twenty-one days from the date of the deposit of such requisition, proceed to convene a Meeting, the party demanding the convening of the meeting, and, in the case of shareholders, that portion of them that has more than half of their voting rights, may convene the meeting themselves, provided that the meeting shall not take place more than three months after the said demand is submitted, and in accordance with the Companies Law.

Subject to the provisions of the Statutes as may be from time to time in effect, the agenda of the General Meeting will be determined by the Board and it will include also topics which are required to be converted at an Extraordinary Meetings as mentioned above. Also, one or more shareholder, holding one percent (1%) of the voting rights in a General Meeting, may request that the Board include topics on the agenda of a General Meeting, provided that such topics are suitable to be discussed at a General Meeting.

44.

(a) Subject to the provisions of the Statutes as may be from time to time in effect, and the provisions herein, the Company will publish a notice regarding the General Meeting specifying the place, the day and the hour of meeting and in the case of special business the general nature of such business, shall be given in the manner hereinafter mentioned, to such members as are, under the provisions of these Articles, entitled to receive notices from the Company.

(b) Subject to the provisions of the Statutes as may be from time to time in effect, whenever the Board of Directors is required to convene an Extraordinary Meetingit shall convene such meeting within twenty-one days' on the date designated in the notice provided that the meeting date will be no later than thirty-five days from the date of publication of the notice. Notices shall be given by post or by personal delivery to every registered shareholder of the Company, entitled to receive notice from the Company under the provisions of these Articles, and particularly under the provisions of article 53(a), to his address as described in the Register of Members of the Company or such other address as designated by him in writing for this purpose. Provided that the accidental omission to give such notice to or the non-receipt of such notice by any such member shall not invalidate any resolution passed or proceeding had at any such meeting. And, with the consent of all the members for the time being entitled to receive notices of meetings, a meeting may be convened upon a shorter notice or without notice and generally in such manner as such members may approve. Such consent may be given at the meeting or retrospectively after the meeting.

(c) Notice with respect to any General Meeting shall be regarded proper and sufficient if it specifies in a general manner the general nature of the matter to be transacted at the General Meeting, or, without making the procedure hereinafter set forth mandatory, if it specifies that the draft of the resolution to be proposed to the General Meeting is available for inspection at a designated place during a designated time period.

PROCEEDINGS AT GENERAL MEETINGS

45. No business shall be transacted at any General Meeting unless a quorum is present when the meeting proceeds to business. The quorum at any shareholders Meeting shall be two members present in person or by proxy, holding or representing at least one third of the total voting rights in the Company on the Record Date.

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46. If within half an hour from the time appointed for the holding of a General Meeting a quorum is not present, the meeting, shall stand adjourned to the same day in the next week at the same time and place or any time and hour as the Directors shall designate and state in a notice to the members, and if, at such adjourned meeting, a quorum is not present within half an hour from the time appointed for holding the meeting, two members present in person or by proxy shall be a quorum.

47. The Chairman (if any), chosen as such among the Directors, shall preside at every General Meeting, but if there shall be no such Chairman or if at any meeting he shall not be present within fifteen minutes after the time appointed for holding the same, or shall be unwilling to act as Chairman, the members present shall choose a Director, or, If no Director be present, or if all the Directors present decline to take the Chair, they shall choose a member present to be Chairman of the meeting.

48. The Chairman may, with the consent of any meeting at which a quorum is present, and shall, if so directed by the meeting, adjourn any meeting from time to time and from place to place as the meeting shall determine. Whenever a meeting is adjourned pursuant to the provisions of this Article for seven days or more, notice of the adjourned meeting shall be given to the members entitled to receive notice from the Company under the provisions of these Articles, and particularly under the provisions of article 55(a), in the same manner as in the case of an original meeting. Save as aforesaid, no member shall be entitled to any notice of an adjournment or of the business to be transacted at an adjourned meeting. No business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting from which the adjournment took place.

VOTES OF MEMBERS

49. Subject to the provisions of Statutes as may be from time to time in effect, all resolution by any General Meeting of the company, , including but not limited to amendment of the Memorandum of Association of the Company or these Articles, shall be deemed adopted if approved by the holders (in aggregate) of the majority votes represented at such general meeting and participating in the vote (excluding any abstaining votes) in person or by proxy.

50. At all General Meetings, a resolution put to a vote at the meeting shall be decided on a show of hands,  and a declaration by the Chairman of the meeting that a resolution has been carried, or has been carried unanimously or by a particular majority, or lost, or not carried by a particular majority, shall be conclusive, and an entry to that effect in the Minute Book of the Company shall be conclusive evidence thereof, without proof of the number or proportion of the votes recorded in favor of or against such resolution. As mentioned below, votes may be given also by proxy.

51. [Deleted]

52. [Deleted]

53. Subject to the provisions of the Statutes, as may be from time to time in effect:

(a) The Board of Directors may fix a Record Date to determine the shareholders entitled to notice of and/or to vote at any meeting of shareholders or any adjournment thereof (the "Meeting"), which Record Date shall not precede the date upon which the resolution fixing the Record Date is adopted by the Board of Directors, and which Record Date shall not be more than twenty one (21) nor less than four (4) days before the date of the Meeting. Notwithstanding the above, in a Meeting that the agenda includes also topics listed in Section 87(a) to the Israeli Companies Law, the Record Date shall not be more than forty days (40) nor less than twenty eight (28) days before the Meeting unless allowed otherwise by the Statutes.. The Record Date for determining shareholders entitled to notice of or to vote at the meeting shall be at the close of business on the day next preceding the day on which such board meeting is held. A determination of shareholders of record entitled to notice or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; providing, however that the Board of Directors may fix a new Record Date to the adjournment meeting.

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(b) Every member shall have one vote for each share of which he is the holder.

54. If any member be a lunatic, idiot, or non compos mentis, he may vote by his committee, receiver, curator bonis or other legal curator and such last mentioned persons may give their votes either personally or by proxy.

55. If two or more persons are jointly entitled to a share, then in voting upon any question the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other registered holders of the share, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.

56. Votes may be given either personally or by proxy. A proxy does not need to be a member of the Company.

57.

(a) The instrument appointing a proxy shall be in writing in the usual common form, or such form as may be approved by the Directors, and shall be signed by the appointor or by his attorney duly authorized in writing, or, if the appointor is a corporation, the corporation shall vote by its representative, appointed by an instrument duly signed by the corporation.

(b) [Deleted]

58. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or transfer of the share in respect of which the vote is given unless an intimation in writing of the death, revocation or transfer shall have been received at the Office before the commencement of the meeting or adjourned meeting at which the proxy is used.

59. The instrument appointing a proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power of attorney, shall be deposited at the Office or at such other place or places, whether in Israel or elsewhere, as the Directors may from time to time either generally or in a particular case or class of cases prescribe, at least forty-eight hours before the time appointed for holding the meeting or adjourned meeting at which the person named in such instrument proposes to vote; otherwise the person so named shall not be entitled to vote in respect thereof; but no instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution.

60. Subject to the provisions of the Statutes, a resolution in writing signed by all the members, in person or by proxy, for the time being entitled to vote at General Meeting of the Company shall be as valid and as effectual as a resolution adopted by a General Meeting duly convened, held and constituted for the purpose of passing such resolution.

61. A member will be entitled to vote at the Meetings of the Company by several proxies appointed by him, provided that each proxy shall be appointed with respect to different shares held by the appointing member. Every proxy so appointed on behalf of the same member shall be entitled to vote as he sees fit.

62. No person shall be entitled to vote at any General Meeting (or be counted as a part of the quorum thereof) unless all calls then payable by him in respect of his shares in the Company shall have been paid.

DIRECTORS

63. The Board of Directors of the Company shall consist of such number of Directors as may be fixed from time to time by an Ordinary Resolution of a General Meeting, provided it shall not be less than two, including external directors, or more than eleven. As long that the Company is a public company, corporation cannot be nominated as a director in the Company.

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64. The Directors shall be elected at the Annual General Meeting of the Company and shall hold office until the close of the succeeding Annual General Meeting. Should no Directors be elected at the Annual General Meeting, the Directors holding office at the time such meeting was convened shall continue to hold their office. Directors whose term of office expired may be re-elected.

65. [Deleted]

66. Director's term will begin on the date of his appointment - as stated by the General Meeting, but the General Meeting may set a date later than the date of the General Meeting as the start date for appointment as a Director of the Company.

67. Subject to the provisions of the Companies Law, the Directors in their capacity as such, shall be entitled to receive remuneration and reimbursement of expenses incurred by them in the course of carrying out their duties as Directors.

68. The office of a Director shall be vacated, ipso facto, under the circumstances set forth in the Statures.

69. Subject to the provisions of the Statutes, no Director shall be disqualified by virtue of his office from holding any office, or, deriving any profit from any other office in the Company or from any company in which the Company shall be a shareholder or otherwise interested, or from contracting with the Company as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered Into by or on behalf of the Company in which the Director shall in any way be interested, be avoided, nor shall any Director be liable to account to the Company for any profit arising from any such office or realized by any such contract or arrangement by reason only of such Director's holding that office or of the fiduciary relations thereby established, but the nature of his interest must be disclosed by him at the meeting of the Board of Directors at which the contract or arrangement is first considered, if his interest then exists, or, in any other case, at the first meeting of the Board of Directors after the acquisition of his Interest.

After such disclosure of personal interest, the Director shall not be entitled to participate and vote as a Director in the set Board of Directors meeting regarding any contract or arrangement in which he is interested as aforesaid except for contracts or arrangements according to Article 271 of the Israeli Companies Law. The Director who has a personal interest, may be present to explain the contract or arrangement, if the Chairman of the Board, determines that he is required to do so. However, if a majority of the Directors have personal interest, all the members of the Board of Directors shall be entitle to participate and vote in the aforementioned Board of Directors meeting and such transaction will have to be further subject to the approval of the shareholders of the Company. A general notice that a Director is a member of any firm or company and is to be regarded as interested in all transactions with that firm or company shall not be a sufficient disclosure under this Article and every Director shall give a special notice relating to any particular transaction with such firm or company.

70. The Company may from time to time at a General Meeting, increase or decrease the number of Directors subject always to Article 63.

71. In the event of one or more vacancies in the board of Directors, the continuing Directors may continue to act as long as the Board of Directors consists of at least more than three Directors. However, in the event that the remaining Directors are less than three Directors, the remaining Director or Directors may not be permitted to act only for convening a General Meeting for the purpose of the election of new Directors

72. Subject to the provisions of the Statutes, the Directors may at any time and from time to time appoint any other person as a Director, whether to fill a casual vacancy or to add to their number. Any Director so appointed shall hold office until the first General Meeting convened after such appointment and may be re-elected.

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73. Subject to the provisions of the Statutes, the Company may at a General Meeting remove any Director from office before the expiration of his term of office and appoint another Director in his stead, provided that the removed Director shall be given a reasonable opportunity to present his case to the General Meeting. The person so appointed shall hold office only for such period as the person in whose stead he was appointed would have held office had he not been removed.

74. As long that the Company is a public company according to the Israeli Companies Law, the Company shall have at least two external directors, as defined in the Israeli Companies Law, at least one of whom must be a director with accounting and financial expertise, and the rest have professional qualifications, as defined in the regulations promulgated under Section 240 of the Israeli Companies Law.

PRESIDENTS

75. The Board of Directors may from time to time appoint one or more persons as President or Presidents of the Company whether for a fixed term or without any limitation of time and the Board of Directors may from time to time remove or discharge him or them from office (subject to the provisions of any agreement between any such person and the Company) and appoint another or others in his or their place or places.

76. The Directors may from time to time appoint one or more Vice Presidents for certain functions, to carry out duties delegated to him (them) by the President.

77. Subject to the provisions of the Statutes, the Directors may from time to time confer upon and delegate to a President then holding office such authorities and duties of the Board of Directors as they may deem fit, and they may delegate such authorities for such period and for such purposes and subject to such conditions and restrictions which they consider advantageous, and they may delegate such authorities with or without waiving the authorities of the Directors with respect thereto and their being in lieu of their authorities, in whole, or in part, and they may from time to time revoke, cancel and alter such authorities in whole or in part.

78. Subject to the provisions of the Statutes, as may be from time to time in effect, the remuneration of a President shall be approved by the Company's compensation committee, the Directors and the shareholders meeting in a special majority, as defined and required according to the Israeli Companies law, taking into consideration any agreement between him and the Company, and it may be in whole or in part, in the form of wages or commissions or profit sharing or a combination thereof.

79. [Deleted]

80. Subject to the provisions of the Statutes, the Company may elect the same person as its President and its Board of Directors chairman.

DIRECTOR'S ACTS AND AUTHORITIES

81. The powers and the duties of the Board of Directors shall be as prescribed by the Companies Law, subject to the provisions of these Articles and any regulation or resolution consistent with these Articles adopted from time to time by the Company in General Meeting, provided, however, that no such regulation or resolution shall invalidate any prior act done by or pursuant to a decision of the Board of Directors which would have been valid if such regulation or resolution had not been adopted.

82. Subject to the provisions of the Statutes, the Directors may meet together for the dispatch of the business of the Company and they may postpone their meetings and otherwise regulate them as they shall deem fit. A Director may call a meeting of the Board of Directors at any time. The quorum for the dispatch of business by the Board of Directors shall be determined by the Directors and if not so determined shall be the majority of the Directors.

83. A resolution in writing signed or otherwise approved by all the Directors then in office shall be as valid and as effectual as a resolution adopted by the Board of Directors at a meeting of the Board of Directors duly convened and held, provided that all the directors who are entitled to participate in such resolution and to vote on it, agreed not to convene the same matter.

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84. Subject to the provisions of the Statutes, every Director shall be entitled to be represented and to vote at any meeting of the Board of Directors by another Director or by another person appointed by him (not a corporation), who shall act as his alternate for one meeting or for another specified period or until notice be given of the cancellation of the appointment. In order to be nominated, the alternate Director must be eligible to be appointed as a Director according to the Israeli Companies law. Each alternate Director shall have the number of votes equivalent to the number of Directors who appointed him as alternate and if he himself is a Director he shall have such number of votes in addition to his own vote. The appointment of an alternate shall be made in writing. A Director may appoint two alternates. However, if the two alternates of the same Director shall be present at the Board of Directors' meeting, only one of them shall have the right to vote thereat. It shall be noted that the appointment of an alternate Director to the Board, does not relieve the nominating Director from his responsibility as a Director.

85. A Director being at any time absent from Israel shall be entitled during such time to a seven day notice of any Meetings of the Board of Directors, provided he notified the Company of an address to which such notice should be sent. Such notice should be sent by fax, e-mail, telex, cable or telecopier.

86.

(a) The Board of Directors will elect a Chairman for their meeting and fix the term of his office, and unless otherwise decided, the Chairman shall be elected annually. In the event that a Chairman was not elected and if the Chairman should fail to be present at a meeting 15minutes after the time set for its convening, the remaining Directors shall elect one of those present to be Chairman of the meeting.

(b) All questions that arise at meetings of the Board of Directors shall be decided by a majority of votes. In the case of an equality bf votes, the Chairman of the meeting shall have a further or casting vote.

87. Any meeting of the Board of Directors, at which a quorum is present, shall have the authority to exercise all or part of the authorities, powers of attorney and discretion invested at such time in the Directors or regularly exercised by them,

88. Subject to the provisions of the Statutes, the Board of Directors may delegate their authorities in whole or in part to committees as they shall deem fit and they may from time to time revoke such delegation. Any committee so created, must, in exercising the authorities granted to it, adhere to all the instructions of the Board of Directors given from time to time.

The meetings and proceedings of any such committee comprised of two or more members shall be governed by the provisions of these Articles regulating the meetings of the Board of Directors in so far as appropriate thereto unless the provisions of the Companies Law or the Board of Directors shall otherwise regulate the meetings of such a committee (hereinafter: "Committee of the Board of Directors").

89. All acts done bona fide at any meeting of the Board of Directors, or of a Committee of the Board of Directors or by any person(s) acting as Director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the appointment of the participants in such meeting or any of them or any person(s) acting as aforesaid, or that they or any of them or any person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.

90. The Board of Directors and each Committee of the Board of Directors shall cause proper Minutes to be kept of the following:

(a) The names of all the Directors present at any meeting of the Board of Directors and at any meeting of a Committee of the Board of Directors;

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(b) All resolutions and proceedings of General Meetings of the Company, Board of Directors' meetings and Committee of the Board of Directors' meetings.

Any Minutes as aforesaid, if purporting to be signed by the Chairman of the meeting or by the Chairman of the next succeeding meeting, shall constitute prima facie evidence of the matters recorded therein. The minutes shall be kept for a period of seven (7) years from the date of the relevant meeting.

91. Subject to the provisions of the Statutes, all bona fide acts carried out at any meeting of the Board of Directors held in Israel or thereafter as a result therefrom shall be valid notwithstanding the fact that a Director who was absent from Israel at the time of the meeting did not receive a notice with respect to its convening.

BRANCH REGISTERS

92. Subject to and in accordance with the provisions of the Statutes and to all orders and regulations issued thereunder, the Company may cause branch registers to be kept in any place outside Israel as the Board of Directors may think fit, and, subject to all applicable legal requirements, the Board of Directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.

SECRETARY

93. The Board of Directors may from time to time appoint a Secretary to the Company as it deems fit and may appoint a temporary Assistant-Secretary who shall act as Secretary for the term of his appointment.

RIGHTS OF SIGNATURE - STAMP AND SEAL

94.

(a) Authorization to sign on behalf of the Company and thereby bind it shall be made and granted from time to time by the Board of Directors. The Company shall have at least one rubber stamp. The Company shall be bound by the signature of the aforesaid appointees if appearing together after its stamp or imprinted name (e.g. cheques).

(b) The Board of Directors may provide for a seal. If the Board of Directors so provide, it shall also provide for the safe custody thereof. Such seal shall not be used except by the authority of the Board of Directors and in the presence of the person(s) authorized to sign on behalf of the Company, who shall sign every instrument to which such seal is affixed.

DIVIDENDS

95. Subject to the provisions of the Statutes, and subject to any preferential, deferred, qualified or other rights, privileges or conditions attached to any special class of shares, with regard to dividends, the profits of the Company available for dividend and resolved to be distributed, shall be applied in payment of dividends upon the shares of the Company in proportion to the amount paid up or credited as paid up per the nominal value thereon respectively, otherwise than in advance of calls. Unless not otherwise specified in the conditions of issuing of the shares, all dividends with respect to shares which were not fully paid up within a certain period, for which dividends were paid, shall be paid proportionally to the amounts paid or credited as paid on the nominal value of the shares during any portion of the abovementioned period (Pro-Rata Temporis).

96. The Company's Board of Directors, subject to any restrictions contained in the Statutes, may declare and pay dividend, either in the form of cash or stock, to its shareholders according to their rights and interests in the profit and may fix the time for payment.

97. [Deleted]

98. A transfer of shares shall not pass the right to any dividend declared thereon after such transfer and before the registration of the transfer.

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99. Notice of the declaration of any dividend, shall be given to the holders of registered shares in manner hereinafter provided.

100. Subject to the provisions of the Statutes, unless otherwise directed, any dividend may be paid by cheque or warrant, sent through the post to the registered address of the member or person entitled, or in the case of joint registered holders to that one of them first named in the register in respect of the joint holding. Every such cheque shall be made payable to the order of the person to whom it is sent. The receipt of the person whose name, at the date of the declaration of the dividend, appears on the register of members as the owner of any share, or in the case of joint holders, of any one of such joint holders, shall be a good discharge to the Company of all payments made in respect of such share. All dividends unclaimed for one year after having been declared may be invested or otherwise used by the Directors for the benefit of the Company until claimed. No unpaid dividend or interest shall bear interest as against the Company

PAYMENT IN SPECIE AND CAPITALIZATION OF PROFITS

101. Subject to the provisions of the Statutes, upon declaration by the Board of Directors a dividend may be paid, wholly or partly, by the distribution of specific assets of the Company or by distribution of paid up shares, debentures, debenture stock or any other securities of the Company or of any other companies or in any one or more of such ways.

102. Subject to the provisions of the Statutes, upon the recommendation of the Board of Directors, approved by Ordinary Resolution of the Company, the Company -

i. may cause any moneys, investments, or other assets forming part of the undivided profits of the Company, standing to the credit of a reserve fund, or to the credit of a reserve fund for the redemption of capital, or in the hands of the Company and available for dividends, or representing premiums received on the issuance of shares and standing to the credit of the share premium account, to be capitalized and distributed among such of the shareholders as would be entitled to receive the same if distributed by way of dividend and in the same proportion, or to be distributed only to a certain part of the shareholders, while not distributed to other shareholders as will be decided by the General Meeting on the footing that they become entitled thereto as capital, or may cause any part of such capitalized fund to be applied on behalf of such shareholders in paying up in full, either at par or at such premium as the resolution may provide, any unissued shares or debentures or debenture stock or any other securities of the Company which shall be distributed accordingly, or in payment, in full or in part, of the uncalled liability on any issued shares or debentures or debenture stock; and –

ii. may cause such distribution or payment to be accepted by such shareholders in full satisfaction of their interest in the said capitalized sum. When distributing shares for capitalized profits all members shall receive shares of one class - whether such class existed prior thereto or was created therefor; or, every shareholder shall receive shares of the same class which conferred upon him the right to receive shares from the capitalization of profits, or of any other class or a combination of several classes of shares - in accordance with the approval of the General Meeting.

103. [Deleted]

104. For the purpose of giving full effect to any resolution under Articles 100and 101the Board of Directors may settle any difficulty which may arise in regard to the distribution as it thinks expedient, and, in particular may fix the value for distribution to any members upon the footing of the value so fixed or determine that fractions of less nominal value than one New Israeli Shekel may be disregarded in order to adjust the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific assets with trustees upon such trusts for the persons entitled to the dividend or capitalized fund as may seem expedient to the Board of Directors.

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ACCOUNTS

105. The Board of Directors shall cause accurate books of account to be kept in accordance with the provisions of the Statutes and of any other applicable law. Such books of account shall be, kept at the Registered Office of the Company, or at such other place or places as the Board of Directors may think fit, and they shall always be open to inspection by all Directors. Subject to the provisions of the Statutes no member, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as conferred by law or authorised by the Board of Directors or by Ordinary Resolution of the Company.

106. At least once in every fiscal year the accounts of the Company shall be audited and the correctness of the profit and loss account and balance sheet certified by one or more duly qualified auditors.

107. The appointment, authorities, rights and duties of the auditor(s) of the Company, shall be regulated by the applicable law.

NOTICES

108. Subject to the provisions of the Statutes:

(a) Any notice or other document may be served by the Company upon any member either personally or by sending it by prepaid registered mail (air mail if sent to a place outside Israel) addressed to such member at his address as described in the Register of Members or such other addresses as he may have designated in writing for the receipt of notices and other documents together with publication in two daily newspapers published in Israel. Any written notice or other document shall be deemed to have been served forty-eight (48) hours after it has been posted (seven (7) days if sent to a place, or posted at a place outside Israel), or when actually received by the addressee if sooner than forty-eight (48) hours or seven days, as the case may be, after it has been posted, or when actually tendered in person, to such member (or to the Secretary or the President), provided, however, that such notice or other document as mentioned above may be sent by cablegram or telex and confirmed by registered mail as aforesaid, and such notice shall be deemed to have been given twenty-four (24)hours after such cablegram or telex has been sent or when actually received by such member (or by the Company), whichever is earlier. If a notice is, in fact, received by the addressee, it shall be deemed to have been duly served when received, notwithstanding that it was defectively addressed or failed, in some respect, to comply with the provisions of this Article.

(b) Unless otherwise specified in bearer share warrants, the holders of such warrants shall not be entitled to receive notice of any General Meeting of the Company, and the Company is under no obligation to give notice of General Meetings to a person entitled to a share by virtue of Its delivery to him, unless he is duly registered as a member.

(c) All notices to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Members, and any notice so given shall be sufficient notice to the holders of such share.

(d) Any member whose address is not described in the Register of Members, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company.

(e) Any notice or other document served upon or sent to any member by publication in accordance with these Articles shall, notwithstanding that he be then deceased or bankrupt, and whether the Company has notice of his death or bankruptcy or not, be deemed to be duly served or sent in respect of any shares held by him (either alone or jointly with others) until some other person is registered in his stead as the holder or joint holder of such shares, and such service or sending shall be a sufficient service on or sending to his heirs, executors, administrators or assigns and all other persons (if any) interested in such share.

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(f) Where a given number of days notice or notice extending over any period is required to be given, the day of service shall be counted in such number of days or other period.

(g) To avoid any doubts, the entitlement of a member to receive any notice relating to convening meeting of shareholders under these Articles shall be as determined in article 53(a).

RECONSTRUCTION

109. Subject to the provisions of the Statutes, on any sale of the undertaking of the Company, the Directors, or the liquidators on a winding-up, may, if authorized by, accept fully paid or partly paid up shares, debentures or securities of any other company, whether Israeli or foreign, either then existing or to be formed, for the purchase in whole or in part of the property of the Company, and the Directors (if the profits of the Company permit), or the liquidators (on a winding-up), may distribute such shares, or securities, or any other property of the Company, amongst the members, without realization, or vest the same In trustees for them, and any may provide for the distribution or appropriation of the cash, shares, or other securities, benefits, or property, otherwise than in accordance with the strict legal rights of the members as contributories of the Company, and for valuation of any such securities or property at such price and in such manner as the meeting may approve, and all holders of shares shall be bound to accept and shall be bound by any valuation or distribution so authorized, and waive all rights in relation thereto, save only In the event that the Company is proposed to be or is in the course of being wound up, such statutory rights (if any) under the provisions of the Statutes as are incapable of being varied or excluded by these presents.

INDEMNITY AND INSURANCE

110.

(a) Subject to the provisions of the Statutes, the Company is authorized to indemnify its Directors and other Office Holders (collectively "the Officers"), as this term is defined under section 1 of the Companies Law, to the fullest extent permitted by the Companies Law, for any liability, payment or expense as detailed below, imposed on the Officers or expended by them due to an action (or omission) performed by the Officers in their capacity as Officers of the Company.

(b) The Company may indemnify Officers retrospectively   for debts or expenses imposed on such Officer due to an act done by virtue of his being an Officer in the Company:

(1) A monetary liability imposed on an Officer in favor of another person by a judgment, including a compromise judgment or an arbitration decision that was approved by a court;

(2) Reasonablelegalexpenses, including attorney's fees, (i) expended by the Officer as a result of an investigation or proceeding instituted against the Officer by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the Officer and either (A) concluded without the imposition of any monetary liability in lieu of criminal proceedings or (B) concluded with the imposition of a monetary liability in lieu of criminal proceedings but relates to a criminal offense that does not require proof of criminal intent, or (ii) expended by the Officer in respect of any monetary sanction;

(3) A monetary obligation imposed on the Officer 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 Securities Law.

(4) Expenses expended by the Officer, 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 Securities Law or in respect to any monetary sanction.

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(5) Reasonablelegalexpenses, including attorneys fees, which the Officer incurred or with which he was charged by the Court, in a proceeding brought against him by the Company, in its name or by another person, or in a criminal prosecution in which he was found innocent, or in a criminal prosecution in which he was convicted of an offense that does not require proof of criminal intent;

(6) Any other liability, payment or expense which the Company may indemnify its Officers under the Statues.

 The Company may undertake in advance to indemnify its Officers in any one of the following situations:

(1) A monetary liability imposed on an Officer in favor of another person by a judgment, including a compromise judgment or an arbitration decision that was approved by a court provided that such undertaking be limited to types of events that in the opinion of the Board of Directors can be foreseen at the time of granting the undertaking to indemnify, and to a sum determined by the Board of Directors as reasonable in the circumstances of the case.

(2) A provision permitting the company to indemnify its Officer for debts or expenses stated in articles 110(b)(2)-(6) above.

In any event, the total amount of indemnification that the Company will pay (in addition to amounts received from an insurance company, if any) to all officers of the Company, in aggregate, shall not exceed, in all circumstances, more than 25% the company's shareholders' equity, according to the Company's latest consolidated financial statements, prior to the date that the indemnity is paid.

(c) Subject to the provisions of the Companies Law, the Company may enter into an agreement for the insurance of Officers responsibility for any liability that will be imposed on the officers due to an action (or omission) performed by the Officers in their capacity as Officers of the Company, in each of the following:

(1) A breach of duty of care to the Company or to any other person;

(2) Breach of fiduciary duty to the Company, on condition that the Officer acted in good faith and had reasonable grounds to assume that the act would not cause the Company any harm;

(3) A monetary obligation that will be imposed on the Officer to the benefit of another person.

(4) A monetary obligation imposed on the Officer 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 Securities Law.

(5) Expenses expended by the Officer, including reasonable litigation expenses, and including attorney's fees, in respect of any proceeding under chapters H-3, H-4 or I-1 of the Securities Law or in respect any monetary sanction.

(d) Subject to the provisions of the Companies Law, the Company is authorized to procure insurance for or indemnify any person whom is not an Officer, including, without limitations, any employee, agent, consultant or contractor of the Company

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WINDING ־ UP

111. If the Company shall be wound up, whether voluntarily or otherwise, the liquidators may with the sanction of an Extraordinary Resolution divide among the members in specie any part of the assets of the Company, and may, with like sanction, vest any part of the assets of the Company in trustees upon such trusts, for the benefit of the members, as the liquidators with like sanction shall think fit. The resolution sanctioning any such division may also sanction a division otherwise than in accordance with the legal rights of the members and may confer special rights on any class of member, but in case any resolution shall be passed sanctioning any division otherwise than in accordance with the legal rights of the members, any member who would be prejudiced thereby shall have a right to dissent, and, ancillary rights, as if such resolution were a Special Resolution passed pursuant to Section 334of the Companies Ordinance.

112. The Company may donate reasonable sums to worthy causes, even if such donations are not within the scope of business consideration, as the Board or the President of the Company shall deem fit from time to time.

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EX-4.8

Exhibit 4.8

Executives & Directors Compensation Policy

I. OVERVIEW

1. Definitions

Company	TAT TECHNOLOGIES LTD.
Law	The Israeli Companies Law 5759-1999 and any regulations promulgated under it, as amended from time to time.
Amendment 20	Amendment to the Law which was entered into effect on December 12, 2012.
Compensation Committee	A committee appointed in accordance with section 118A of the Law.
Office Holder	Director, CEO, any person filling any of these positions in a company, even if he holds a different title, and any other excutive  subordinate to the CEO, all as defined in section 1 of the Law.
Executive	Office Holder, excluding a director.
Terms of Office and Employment	Terms of office or employment of an Executive or a Director, including the grant of an exemption, an undertaking to indemnify, indemnification or insurance, separation package, and any other benefit, payment or undertaking to provide such payment, granted in light of such office or employment, all as defined in section 1 of the Law.
Total Cash Compensation	The total annual cash compensation of an Executive, which shall include the total amount of: (i) the annual base salary; and (ii) the On Target Cash Plan.
Equity Value	The value of the total annual Equity Based Components, valued using the same methodology utilized in each annual financial statement of the Company.
Total Compesation	The Total Cash Compensation and the annual Equity Value.

2. General

2.1. This compensation policy ("the Policy"), was formulated during an internal process conducted at the Company in compliance with the provision of Amendment 20, and is based on the Company's will to properly balance between its will to reward Office Holders for their achievements and the need to ensure that the Total Compensation is in line with the Company's benefit and overall strategy over time.

2.2. The purpose of the Policy is to set guidelines for the compensation manner of the Company's Officer Holders. The Company's management and its Board of Directors deem all of the Office Holders of the Company as partners in the Company's success and consequently, derived a comprehensive view with respect to the Company's Office Holders' Compensation. This document presents the indices that derived from the principles of the formulated Policy, as specified hereunder.

2.3. It is hereby clarified that no statement in this document is intended to vest any right to the Office Holders to whom the principles of the Policy apply, or to any other third party, and not necessarily will use be made of all of the components and ranges presented in this Policy.

2.4. The indices presented in the Policy are intended to prescribe an adequately broad framework that shall enable the Compensation Committee and Board of Directors of the Company to formulate a personal Compensation Plan for each office Holder or a particular compensation component according to individual circumstances (including unique circumstances) and according to the Company's needs, in a manner that is congruent with the Company's benefit and the Company's overall strategy over time.

2

2.5. The Policy is intended to align between the importance of incentivizing Executives to reach personal targets and the need to assure that the overall compensation meets our Company's long term strategic performance and financial objectives. The policy provides our Compensation Committee and our Board of Directors with adequate measures and flexibility, to tailor each of our Executive's compensation package based, among others, on geography, tasks, role, seniority, and capability.

2.6. The Policy shall provide the Board of Directors with guidelines for exercising discretion under the Company’s equity plans.

3. Principles of the Policy

3.1. The Policy shall guide the Company’s management, Compensation Committee and Board of Directors with regard to the Office Holders' compensation.

3.2. The Policy shall be reviewed from time to time by the Compensation Committee and the Board of Directors, to ensure its compliance with applicable laws and regulations as well as market practices, and its conformity with the Company’s targets and strategy. As part of this review, the Board of Directors will analyze the appropriateness of the Policy in advancing achievement of its goals, considering the implementation of the Policy by the Company during previous years.

3.3. Any proposed amendment to the Policy shall be brought up to the approval of the Shareholders of the Company and the Policy as a whole shall be re-approved by the Shareholders of the Company at least once every three years, or as otherwise required by Law. However, to the extent permitted by law, if the shareholders shall oppose approving the Policy, the Compensation Committee and Board of Directors shall be able to approve the Policy, after having held another discussion of the Policy and after having determined, on the basis of detailed reasoning, that, notwithstanding the opposition of the shareholders, the adoption of the Policy is for the benefit of the Company.

3

3.4. The compensation of each Office Holder shall be subject to mandatory or customary deductions and withholdings, in accordance with the applicable local laws.

II. Executive Compensation

4. When examining and approving Executives’ Terms of Office and Employment, the Compensation Committee and Board members shall review the following factors and shall include them in their considerations and reasoning:

4.1. Executive’s education, skills, expertise, professional experience and specific achievements.

4.2. Executive’s role and scope of responsibilities and in accordance with the location in which such Executive is placed.

4.3. Executive’s previous compensation.

4.4. The Company’s performance and general market conditions.

4.5. The ratio between Executives' compensation, including all components of the Executives' Terms of Office and Employment, and the salary of the Company’s employees, in particular with regard to the average and median ratios, and the effect of such ratio on work relations inside the Company, as defined by the Law.

The annual Total Compensation (or annualized, for other than a full time position) of the Company's CEO, active Chairman1 and Executive in terms of full time position shall not exceed 15 times, 30 times and 15 times, respectively, the average annual salary and the median annual salary of the Company's employees.

4.6. Comparative information, as applicable, as to former Executives in the same position or similar positions, as to other positions with similar scopes of responsibilities inside the Company, and as to Executives in peer companies. The peer group for the purpose detailed below shall include not less than 4 public companies listed on the Tel Aviv Stock Exchange ("TASE") similar in parameters such as total revenues, market cap, industry and number of employees. The comparative information, as applicable, shall address the base salary, target cash incentives and equity and will rely, as much as possible, on reputable industry surveys.

1 Should one be appointed.

4

Attached as Appendix A is the comparative information with respect to the Active Chairman and the CEO of the Company, that was presented to the Compensation Committee and Board of Directors when approving this Policy.

The Company may use such updated comparative information in the event a new Executive is offered a Total Compensation exceeding 25% of its predecessor in the Company.

5. The compensation of each Executive shall be composed of, some or all, of the following components:

5.1. Fixed components, which shall include, among others: base salary and benefits as may be customary under local customs.

5.2. Variable components, which may include: cash incentives and equity based compensation.

5.3. Separation package;

5.4. Directors & Officers (D&O) Insurance, indemnification and exemption; and

5.5. Other components, which may include: change in control, relocation benefits, special bonus, etc.

5

6. Our philosophy is that our Executives’ compensation mix shall comprise of, some or all, of the following components: annual base salary, performance-based cash incentives and long-term equity based compensation, all in accordance with the position and responsibilities of each Executive, and taking into account the purposes of each component, as presented in the following table:

Compensation Component	Purpose	-Compensation Objective Achieved
Annual base salary	Provide annual cash income based on the level of responsibility, individual qualities, past performance inside the Company, past experience inside and outside the Company.	●	Individual role, scope and capability based compensation
		●	Market competitiveness in attracting Executives.
Performance-based cash incentive compensation	Motivate and incentivize individual towards reaching Company, department and   individual's periodical and long-term goals and targets.	●	Reward periodical accomplishments
		●	Align Executive’ objectives with Company, department and individual's objectives
		●	Market competitiveness in attracting Executives
Long-term equity-based Compensation	Align the interests of the individual with the Shareholders of the Company, by creating a correlation between the Company’s success and the value of the individual holdings	●	Company performance based compensation
		●	Reward long-term objectives
		●	Align individual's objectives with shareholders’ objectives

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7. The compensation package shall be reviewed with each Executive at least once a year, or as may be required from time to time.

8. Fixed compensation

Base Salary:

8.1. The base salary shall be determined in accordance with the criterias and considerations as detailed in Section 4 above and shall be approved by the Compensation Committee.

8.2. The base salary shall not be automatically linked.

8.3. The maximum monthly base salary for an Office Holder shall be as follows:

Executive Level	Maximum
Active Chairman	NIS 75K (for 35% of a full time position and a proportion of this amount to a different percentage of services).
CEO	NIS 120K (for a full time position)
Other Executives	NIS 60K (for a full time position)

The above maximum base salary shall be examined annualy.

Any deviation from the detailed above with regard to the CEO and/or Active Chairman, shall be brought for the approval of the Compensation Committee, the Board of Directors and the General Meeting of the Company prior to entering into a binding agreement (unless specified otherwise in the Law).

A deviation exceeding 15% of the detailed above with regard to an Executive (excluding CEO and Active Chairman) shall be brought for the approval of the Compensation Committee and the Board of Directors prior to entering into a binding agreement.

Without derogating from the above, a maximum annual raise of up to 5% with regard to an Executive's base salary in a particular year, excluding variable compensation, shall not be deemed a material change of his/her terms of employement, and therefore, shall require the approval of the Compensation Committee only.

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In the event an Office Holder provides services to the Company as an independent contractor or via a management company controlled by said Office Holder, and get paid through the issuance of an invoice, then for all purposes in this policy, the base salary for such an Office Holder shall be extracted from actual payment based on normal rate of employment cost.

8.4. In order to ensure allignment of all components of the Total Compensation, the desired range between such components, in terms of full time position for a given year of Executives in the Company is detailed below:

Executive Level	Fixed compensation, base salary and additional benefits	Variable Compensation
		Performance based cash incenstive compensation	Long term equity based compensation
Active Chairman	60%-90%	10%-40% for the mix of Performance based cash incentive and Equity based compensation
CEO	60%-90%	10%-40% for the mix of Performance based cash incentive and Equity based compensation
Directors	90%-100%	0%-10%
Other Executives	60%-90%	10%-40% for the mix of Performance based cash incentive and Equity based compensation

The ratios in the above table represent the desired optimal combination of compensation, but the actual ratio may vary according to the performance of the Company in a given year. For example, in a year that an annual bonus was not given or a reduced annual bonus was given, ​​the ratio between the fixed compensation and the total compensation ought to be higher than indicated in the above table.

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Benefits:

8.5. Benefits granted to Executives shall include any mandatory benefit under applicable law, as well as, part or all, of the following components:

8.5.1. Pension plan/ Executive insurance as customary.

8.5.2. Benefits which may be offered as part of the general employee benefits package (such as: pension fund, study fund) in accordance with the local practice of the Company.

8.5.3. An Executive will be entitled to sick days and other special vacation days (such as recreation days), as required under local standards and practices.

8.5.4. An Executive will be entitled to vacation days, in correlation with the Executive’s seniority and position in the Company (generally up to [30] days annualy), and subject to the minimum vacation days requirements per country of employment as well as  the local national holidays.

8.5.5. Reasonable expenses, including vehicle, daily newspaper, cellphone and meals.

9. Variable Components

9.1. When determining the variable components as part of an Executive's compensation package, the contribution of the Executive to the achievement of the Company’s goals, revenues, profitability and other key performance indicators ("KPIs") shall be considered, taking into account Company and department’s long term perspective and the Executive’s position.

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9.2. Variable compensation components shall be comprised of (i) cash components which shall be mostly based on measurable criteria; and (ii) equity components, all taking into consideration periodical and a long term perspective.

9.3. The Board of Directors shall have the absolute discretion to reduce or cancel any cash incentive.

Cash Incentives

9.4. Variable Cash Incentive Plan

9.4.1. The Compensation Committee and Board of Directors may adopt, from time to time, a Cash Incentive Plan, which will set forth for each Executive targets which form such Executive's on target Cash payment (which shall be referred to as the “On Target Cash Plan”) and the rules or formula for calculation of the On Target Cash Plan payment once actual achievements are known.

9.4.2. The Compensation committee and Board of Directors may include, inter- alia, in the On Target Cash Plan predetermined thresholds and caps, to corelate an Executive’s On Target Cash Plan payments with actual achievements.

9.4.3. The annual On Target Cash Plan actual payment for the Active Chairman, the CEO and other Executives in a given year shall be capped as determined by our Board of Directors, but in no event shall exceed the ratio set forth in the table in clause 8.4 above.

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9.4.4. The CEO, Active Chairman and other Executives' individual On Target Cash Plan may be composed based on the mix of  (i) the Company Target (as defined below); (ii) Personal KPI; and (iii) Personal Evaluation. The weight to be assigned to each of the components per each of the executives shall be as set forth in the table below.

	Active Chairman	CEO	CFO	Other Executives
Company Target	100%	80% - 90%	70% - 80%	70% - 80%
Personal KPI	NONE	NONE	10%	10%
Personal Evaluation	NONE	0%-20%	0%-20%2	0%-20%3

The Company’s Key Performance Index (KPI) shall be determined in accordance with the following pre-determined targets: (1) Sales budget, in accordance with the Company’s annual budget; (2) Gross Profit, in accordance with the Company’s budget; and (3) EBITDA, in accordance with the Copany’s annual budget ("the Company Target").

With regard to each one of the Company's measurable targets, reference points shall be determined in terms of numerical values, so that compliance with the precise numerical target as determined in the On Target Cash Plan shall constitute compliance with 100% of the target, and also, numerical values shall be determined which will constitute the lower threshold for compliance with the target. The actual rate of compliance with the targets shall be calculated in accordance with the said reference points.

It is clarified that failure to comply with the minimum threshold of at least 75% of a specific target shall not entitle the Executive to payment of a bonus in respect of the said target. In the event of compliance at a rate of 75% or more with a specific target, the annual On Target Cash Plan shall be calculated in accordance with a key (i.e. Linear, Steps, etc.) which shall determine – in relation to the point of compliance with the target – the amount of the bonus in terms of a percentage of the Executive annual base salary, all as shall be set forth in the On Target Cash Plan. In this respect, the Compensation Committee and the Board of Directors shall have the right to determine a higher (but not lower) entitltlement threshold.

2 Despite the ratios determined above and subject to amendment of the Companies Law and/or the Companies Regulations and/or Orders, in a way that allows to determine in a compensation policy that with regard to an office holder who is not a director nor a CEO, a compensation policy may determine cash variable component to be paid, partially or in full, according to immeasurable criteria taking into account the office holder's contribution to the company – the company shall be entitled to approve to deputy CEO's in the Company performance based or bonuses according to the CEO's personal evaluation in a rate of up to 100% of the total performance based compensation to which the deputy CEO's may be entitled to, if at all.

3  See note 3 above.

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The annual bonus shall be paid to the office Holder in the following manner:

- 80% of the amount of the annual bonus will be paid following the approval by the Board of Directors of the Company, of the financial statements of the relevant year (“Current Year Bonus”).

- 20% of the amount of the annual bonus shall be deferred by one year, and shall be paid following the approval by the Board of Directors of the Company of the financial statements of such year (“Deferred Bonus”).

The Office Holder's eligibility to the payment of the Deferred Bonus shall be subject to the following cumulative conditions: (i) the Company recorded a positive net profit for the following year; and (ii) the Office Holder had not ceased to provide services to the Company during the year in which the Deferred Bonus is paid resulting from one of the followings: (a) the Office Holder had not terminated the engagement with the Company; or (b) the Company had not terminated the engagement with the Office Holder for "Cause" (as defined in section 9.4.12 below) .

For the avoidance of doubt, it is hereby clarified that the payment of the Deferred Bonus shall be in addition to any payment of compensation to which the Office Holder shall be entitled with respect to the relevant following year, and the payment of the Deferred Bonus shall not have any effect on the manner of calculation of the compensation for the relevant following year.

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With regard to the Company's Executives, excluding its Active Chairman and the CEO, their Personal KPIs for the On Target Cash Plan shall be determined annualy by the Compensation Committee and the Board of Directors and in accordance with two or more key targets specifically relevant for each Executive  ("the Personal Target"). Such targets may include compliance with the Company's budget, operational efficiency, inventory management, new sales, existing customers, financial management, collection, etc.

With regard to each one of the Personal measurable targets, reference points shall be determined in terms of numerical values, so that compliance with the precise numerical target as determined in the On Target Cash Plan shall constitute compliance with 100% of the target, and also, numerical values shall be determined which will constitute the lower threshold for compliance with the target. The actual rate of compliance with the targets shall be calculated in accordance with the said reference points.

It is clarified that failure to comply with the minimum threshold of at least 75% of a specific target shall not entitle the Executive to payment of a bonus in respect of the said target. In the event of compliance at a rate of 75% or more with a specific target, the annual On Target Cash Plan shall be calculated in accordance with a key (i.e. Linear, Steps, etc.) which shall determine – in relation to the point of compliance with the target – the amount of the bonus in terms of a percentage of the Executive annual base salary, all as shall be set forth in the On Target Cash Plan.

9.4.5. Personal evaluation: the Company's CEO shall present his personal evaluation of Executive reporting to the CEO to the Company's Compensation Committee and to the Board of Directos. This evaluation shall relate, inter alia, to nonfinancial indices, including the Executive's long term contribution and his/her long term performance. The CEO's personal evaluation shall be presented to the Compensation Committee and to the Board of Directors by the Chairman of the Board, according to the evaluation principles set above with relation to all other Executives.

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9.4.6. It is hereby clarified that the aggregate weight to be assigned to all three of the aforesaid categories in a cash incentives formula shall be 100%.

The breakdown of the targets in each measurable category and the relative weight of each of the measurable categories shall be tailored to each Executive individually, no later than approval of the Company's annual consolidated audited financial reports, depending on the seniority of the Executive and the organizational division to which the Executive is assigned or that is under his purview.

It is hereby clarified, that a maximum change of 10% of the relative weight of each of the measurable categories shall not be deemed a material change in the terms of employement.

9.4.7. In the event that the Company's strategic targets shall be amended by the Board of Directors during a particular year and/or there is a change to the Executive’s responsibilities and/or scope of employment  - the Board of Directors shall have the authorization to determine whether, and in which manner, such amendment shall apply to the On Target Cash Plan.

9.4.8. The Board of Directors will be authorized to define certain events as exceptional and extra-ordinary to the Company’s ordinary course of business, in which case the compensation committee will have the ability to adjust their impact when calculating any of the Company’s targets and Personal KPI.

9.4.9. The entitlement to the On Target Cash Plan in respect of a particular year shall be conferred on an Executive where such Executive rendered services or was employed with the Company for a period of at least 6 months during that particular year - and the amount thereof shall be relative to the period of employment with the Company during that particular year.

9.4.10. In the event of termination of the relationship following "Cause" as defined below, such Executive shall not be entitled to any payments in accordance with his/her On Target Cash Plan which have not yet been paid prior to the date of said termination, unless otherwise determined by the Board of Directors.

"Cause" means the following: termination due to: (i) an Executive's conviction of, or plea of guilty or nolo contendere to, a felony (ii) performance by an Executive of an illegal act, dishonesty, or fraud which could cause significant economic injury to the Company; (iii) an Executive's insubordination, refusal to perform his or her duties or responsibilities for any reason other than illness or incapacity or materially unsatisfactory performance of his or her duties for the Company; (iv) continuing willful and deliverate failure by the Executive to perform the Executive's duties in any material respect, provided that the Executive is given notice and an opportunity to effectuate a cure as determined by the Company; or (v) an Executive's willful misconduct with regard to the Company that could have a material adverse effect on the Company.

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9.4.11. For the avoidance of doubt, it is hereby clarified that payments under the On Target Cash Plan shall not be deemed to be a salary, for all intents and purposes, and it shall not confer any social rights.

9.4.12. The Company will include in its year-end filings (i.e. Annual 20F), with respect to the Active Chairman and the CEO, an explanation as to how their On Target Cash Plan was calculated, including: their predetermined Company Targets, Personal KPI and Personal Evaluation for that particular year; the mix and weights; and the extent of achieving them.

Equity Based Compensation

9.5. The Company may grant its Executives, from time to time, equity based compensation, which may include any type of equity, including, without limitation, any type of shares, options, restricted share units (RSUs), share appreciation rights, restricted shares or other shares based awards(“Equity Based Components”), either under the Company's existing 2012 Stock Option Plan or future equity plan (as may be adopted by the Company), and subject to any applicable law.

9.6. The Company believes that it is not in its best interest to limit the exercise value of Equity Based Components.

9.7. Equity Based Components for Executives shall be in accordance with and subject to the terms of our existing or future equity plan and shall vest in installments throughout a period which shall not be shorter than 3 years with at least a 1 year cliff, taking into account adequate incentives in a long term perspective.

9.8. The total yearly Equity Value granted shall not exceed with respect to the Active Chairman, the CEO and each other Executive, at the time of grant 40% of their respective annual base salary (in accordance with the table set forth in clause 8.4 above).

9.9. The maximum dilution as a result of grant of the equity based compensation to Executives shall not exceed 15%.

9.10. The terms of Equity Based Components may include provisions regarding vesting acceleration as a result of change of control and shall be limited to 50% of the then remaining unvested options which have not been vested yet.

9.11. The exercise price of the options granted shall be determined by the Company and shall not be less than the higher of (a) 5% above the average closing price of the Company's share in the 30 trading days preceding the date of the Board of Directors' approval of the equity grant; (b) 5% above the share price on the date of the grant.

9.12. In the event of the termination of the employer – employee relationship or rendering services to the Company's group during the relevant year, the grantee shall be entitled to the options which were allocated in his/her regard, where the date of entitlement in respect of the said options occurred prior to the date of the actual termination, and to exercise them into shares of the Company up until the earlier of: (1) 90 days from the date of the actual termination; (2) the expiration of their exercise period. The grantee shall be entitled to count the shares which were allocated for him only if the date of entitlement in respect thereof occurred prior to the date of the actual termination.

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9.13. In the event of the termination of the relationship following Cause– and even if the date of entitlement to the options has fallen due, in whole or in part, and they have not yet been exercised into shares, the options which have not yet been exercised prior to the expiration of the exercise period shall expire.

9.14. For the avoidance of doubt, it is hereby clarified that the annual equity compensation shall not be deemed to be a salary, for all intents and purposes, and it shall not confer any social rights.

10. Separation Package

10.1. The following criteria shall be taken into consideration when determining Separation Package: the duration of employment of the Active Chairman or the Executive, the terms of employment, the Company’s performance during such term, the Executive’s contribution to achieving the Company’s goals and revenues and the retirement’s circumstances.

10.2. Other than payments required under any applicable law, local practices, transfer or release of pension funds, manager's insurance policies, etc. - the maximum Separation Package of each Executive, CEO or the Active Chairman shall not exceed the value of 25% the Total Compensation of such an Executive, CEO or Active Chairman, respectively.

11. Notice Period in Termination

As a guideline, the notice period for the termination of an Executive shall not exceed six months or payment in lieu of such notice. During the notice period, the Executive shall be required to continue his services or employment with the Company, unless otherwise determined by the Board of Directors.

12. Others

12.1. Relocation– additional compensation pursuant to local practices and law may be granted to an Executive under relocation circumstances. Such benefits shall include reimbursement for out of pocket one time payments and other ongoing expenses, such as housing allowance, schooling allowance, car or transportation allowance, home leave visit, health insurance for executive and family, etc, all as reasonable and customary for the relocated country and in accordance with the Company's relocation practices, as shall be approved by the Compensation Committee and Board of Directors.

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12.2. Special Bonus - Our Compensation Committee and our Board of Directors may approve, from time to time, with respect to any Executive, if they deem required under special circumstances or in case of an exceptional contribution to the Company, including in cases of retention or attraction of a new Executive ("Sign On"), the grant of a onetime cash incentive, of up to 10% the Executive's annual base salary.

13. Clawback Policy

13.1. In the event of a restatement of the Company’s financial results, we shall seek reimbursement from our Office Holders of any payment made due to erroneous restated data, with regards to each Office Holder’s Terms of Office and Employment that would not otherwise have been paid. The reimbursement shall be limited to such payments made during the 3-years period preceding the date of restatement. The above shall not apply in case of restatements that reflect the adoption of new accounting standards, transactions that require retroactive restatement (e.g., discontinued operations), reclassifications of prior year financial information to conform to the current year presentation, or discretionary accounting changes.

13.2. Our Compensation Committee and Board of Directors shall be authorized to seek recovery to the extent that (i) to do so would be unreasonable or impracticable; or (ii) there is low likelihood of success under governing law versus the cost and effort involved.

III. Director Remuneration:

Our directors may be entitled to remuneration composed of cash compensation which includes annual fee and meeting participartion fee, as well as equity based compensation, as an incentive for their contribution and efforts as directors of the Company.

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14. Cash Compensation:

14.1. The Company’s non-executive directors may be entitled to receive an annual cash fee and a participation fee for each meeting in accordance with theamounts set forth in the Companies Regulations (Rules Regarding Compensation and Expense Reimbursement of External Directors) -2000 ("the Compensation Regulations"), and taking into account their definition as "expert director" according to the Compensation Regulations.

14.2. The Company’s directors may be reimbursed for their reasonable expenses incurred in connection with attending meetings of the Board of Directors and of any Committees of the Board of Directors, all in accordance with the Compensation Regulations.

15. Equity Based Compensation:

The Company’s non-executive directors, i.e. excluding external and independent, may be entitled to receive equal annual equity based compensation, which value shall not exceed at the time of grant 10% of the total annual cash fee detailed in section 13.1 above.

16. Active Chairman Compensation:

The Active Chairman may be entitled to a compensation in accordance with the criterias as detailed in Section 4, 8 and 9 above, in accordance with his/her scope of employment and relative maximum compensation. The Active Chairman's compensation shall be determined in accordance with his scope of activity, areas of responsibilities in the Company, as well as his experience and expertise. In any event, the total compensation of the Active Chairman shall not be less than the monthly compensation paid to a director in the Company.

IV. Indemnification & Insurance

17. The Office Holders shall be entitled to a directors and officers indemnification up to the maximum amount permitted by law, D&O insurance as shall be approved at the Board of Director's discretion, all in accordance with any applicable law and the Company’s articles of association.

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18. With respect to the D&O policy-

18.1. The D&O insurance may provide group insurance to the Company and its affiliates and alongside the Company's D&O it is possible that D&O of the affiliates may also be insured. In the event the D&O insurance shall provide such group insurance, the annual premium shall be relatively divided between the different companies based on the decision of the Company's management taking into account the recommendation of the Company's external insurance advisors.

18.2. The limits of liability shall not exceed USD 25 million.

18.3. The deductible in Canada and the United States shall not exceed USD 100,000 and in the rest of the world USD 80,000. In securities claims, the deductible shall not exceed USD 200,000.

18.4. The annual premium for the D&O policy shall be in accordance with market conditions. The Company shall retain the assistance of the Company's external isurance advisors in determining market conditions.

18.5. Any purchase of D&O insurance or its renewal during the term of this Policy shall not be brought to additional approval of the General Meeting provided that the Policy shall be approved by the General Meeting and that the Compensation Committee has approved that the purchased D&O insurance meet the conditions detailed above.

19. Each of our Office Holders shall be entitled to the same indemnification terms and insurance policy coverage, all as may be approved from time to time.

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EX-4.9

Exhibit 4.9

TAT Technologies Ltd.

To: Date:

___________

___________

___________

Re: Officers indemnification Undertaking

Whereas on November 14, 2013 the General Meeting of the Company resolved to amend the Articles of Association of the Company and the issuance of indemnification undertaking by the Company to its Officers and to delete its right to exempt from liability its officers;

Whereas _________________(the "Indemnitee") serves as an Officer/Director of the Company;

1. NOW, THEREFORE, in consideration of the Indemnitee's services to the Company or, at its request, to another entity, the Company hereby agree as follows:

2. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

2.1. The Company hereby undertakes to indemnify the Indemnitee to the fullest extent permitted by applicable law for any Liability and Expense that may be imposed on Indemnitee due to an act performed or failure to, act by virtue of being an Officer of the Company or any subsidiary of the Company or any entity in which Indemnitee serves as an Officer at the request of the Company either prior to or after the date hereof related to such acts and omissions described in Schedule A hereto (such Expenses and Liabilities hereinafter referred to as"Indemnifiable Liabilities"). Following is list of grounds for granting the indemnification by the Company according the applicable law and according to the company's articles of association:

2.1.1 A monetary liability imposed on Indemnitee in favor of another person by a judgment, including a compromise judgment or an arbitration decision that was approved by a court;

2.1.2 Reasonable legal expenses, including attorneys fees, expended by the Indemnitee as a result of an investigation or proceeding instituted against the Indemnitee by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the Indemnitee and either (A) concluded without the imposition of any monetary liability in lieu of criminal proceedings or (B) concluded with the imposition of a monetary liability in lieu of criminal proceedings but relates to a criminal offense that does not require proof of criminal intent, or expended by the Officer in respect of any monetary sanction;

2.1.3 A monetary obligation imposed on the Indemnitee 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 (the "Securities Law").

2.1.4 Expenses expended by the Indemnitee, 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 Securities Law or in respect to any monetary sanction.

2.1.5 Reasonable legal expenses, including attorneys fees, which the Indemnitee incurred or with which he was charged by the Court, in a proceeding brought against him by the Company, in its name or by another person, or in a criminal prosecution in which he was found innocent, or in a criminal prosecution in which he was convicted of an offense that does not require proof of criminal intent;

2.1.6 Any other liability, payment or expense which the Company may indemnify its Indemnities' under the applicable law.

2.2. The total amount of indemnification that the Company will pay (in addition to amounts received from an insurance company, if any) to all officers of the Company, in aggregate, shall not exceed, in all circumstances, more than 25% the company's shareholder's equity, according to the Company's latest consolidated financial statements, prior to the date that the indemnity is paid provided to the Company pursuant to Section 8 below.

2.3. If so requested by the Indemnitee, the Company shall advance an amount (or amounts) estimated by it to cover Indemnitee's reasonable litigation Expenses, with respect to Indemnifiable Liabilities which the Indemnitee is entitled to be indemnified under Section 2.1 above, provided that Indemnitee submits to the Company an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses,

2.4. The Company's obligation to indemnify the Indemnitee and advance Expenses in accordance with this undertaking shall be for such period as the Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding or any inquiry or investigation, whether civil, criminal or investigative, related to an Indemnifiable Liability and arising out of the Indemnitee's service in the foregoing positions, whether or not the Indemnitee is still serving in such positions.

3. GENERAL LIMITATIONS ON INDEMNIFICATION

4. If when and to the extent that the Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by the Indemnitee for all such amounts theretofore paid (unless the Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnitee should be indemnified under applicable law, in which event the Indemnitee shall not be required to so reimburse the Company until a final judicial determination is made with respect thereto as to which all rights of appeal therefrom have been exhausted or lapsed or such matter shall have been fully and finally settled by the parties) and the Company shall not be obligated to indemnify or advance any additional amounts to the Indemnitee (unless there has been a determination by acourt or competent jurisdiction that the Indemnitee would be permitted to be so indemnified under this undertaking or such matter shall have been fully and finally settled by the parties).NO WAIVER.

No waiver of any of the provisions of this undertaking shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Any waiver shall be in writing and signed by the party waiving such right.

5. SUBROGATION.

In the event of payment under this undertaking, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

6. REIMBURSEMENT.

The Company shall not be liable under this undertaking to make any payment in connection with any claim made against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy or otherwise) of the amounts otherwise indemnifiable hereunder. Any amounts paid to the Indemnitee under such insurance policy or otherwise after the Company has indemnified the Indemnitee for such Indemnifiable Liabilities shall be repaid to the Company promptly upon receipt by Indemnitee.

7. EFFECTIVENESS.

This undertaking shall be In full force and effect as of the date hereof.

8. NOTIFICATION AND DEFENSE OF CLAIM.

Promptly after receipt by the Indemnitee of notice of the commencement of any action, suit or proceeding, the Indemnitee will, if a claim in respect thereof is to be made against the Company under this undertaking, notify the Company of the commencement hereof; but the omission so to notify the Company will not relieve it from any liability which it may have to the Indemnitee otherwise than under this undertaking. With respect to any such action, suit or proceeding as to which the Indemnitee notifies the Company of the commencement thereof and without derogating from Section 2.1:

8.1. The Company will be entitled to participate therein at its own expense; and

8.2. Except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense thereof, the Company will not be liable to the Indemnitee under this undertaking for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than as provided below, The Indemnitee shall have, the right to employ his or her own counsel in such action, suit or proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Indemnitee, unless: (i) the employment of counsel by Indemnitee has been authorized by the Company; (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of such action; or (iii) the Company shall not in fact have employed counsel to assume the defense of such action; in each of which cases the fees and expenses of counsel shall be at the expense of the Company and in accordance with the terms and conditions of this Agreement. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which the Indemnitee shall have reached the conclusion specified in (ii) above.

8.3. The Company shall not be liable to indemnify the Indemnitee under this undertaking for any amounts paid in settlement of any action or claim effected without its written consent The Company shall not settle any action or claim in any manner that would impose any penalty or limitation on the Indemnitee without the Indemnitee's written consent. Neither the Company nor the Indemnitee will unreasonably withhold their consent to any proposed settlement.

9. NON-EXCLUSIVITY,

The rights of the Indemnitee hereunder shall not be deemed exclusive of any other rights the Indemnitee may have under the Company's Articles of Association or applicable law or otherwise.

10. BINDING EFFECT.

This undertaking shall bind upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company, spouses, heirs and personal and legal representatives. This undertaking shall continue in effect regardless of whether Indemnitee continues to serve as an Officer of the Company or of any other enterprise at the Company's request, provided that the claim for indemnification relates to an indemnifiable Event.

11. SEVERABILITY.

The provisions of this undertaking shall be severable in !he event that any provision hereof (including any provision within a single section, paragraph or sentence) is held fry a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law.

12. GOVERNING LAW

This undertaking shall be governed by and construed and enforced in accordance with the laws of the State of Israel without regard to its conflict of law principles.

13. TERMINATION

No supplement, modification, amendment, termination or cancellation of this undertaking shall be effective unless in writing and signed and agreed upon by the Company and the Indemnitee.

TAT Technologies Ltd.

By: _________________

SCHEDULE A

1. Negotiations, execution, delivery and performance of agreements on behalf of the Company

2. Anti-competitive acts and acts of commercial wrongdoing

3. Acts in regard of invasion of privacy including with respect to databases and acts in regard of slander

4. Acts in regard of violation of copyrights, patents, designs and any other intellectual property rights

5. Approval of corporate actions including the approval of the acts of the Company's management, their guidance and their supervision

6. Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise and care in regard of the Company's business

7. Violations of securities laws of any jurisdiction, including without limitation, fraudulent disclosure claims, and other claims relating to relationships with investors and the investment community

8. Violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations in any jurisdiction

9. Claims in connection with publishing or providing any information, including any filings with governmental authorities, on behalf of the Company in the circumstances required under applicable laws

10. Violations of any law or regulation governing domestic and international telecommunication in any jurisdiction

11. Claims in connection with employment relationships with Company's or its subsidiaries' employees.

EX-5

Exhibit 5.0

Report of Independent Registered Public Accounting Firm

The Board of Directors

First Aviation Services Inc.

We have audited the accompanying consolidated balance sheets of First Aviation Services Inc. and Subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Aviation Services Inc. and Subsidiaries as of December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Dixon Hughes Goodman LLP

Memphis, Tennessee

March 6, 2014

EX-8

Exhibit 8

List of Subsidiaries of the Registrant

We own the following significant subsidiaries:

1.  Limco-Piedmont Inc., a 100%-owned Delaware subsidiary.

2.  Limco Airepair Inc., a wholly-owned Delaware subsidiary of Limco-Piedmont Inc.

3.  Piedmont Aviation Component Services LLC, a North Carolina limited liability company, wholly-owned subsidiary of Limco-Piedmont Inc.

4.  TAT-GAL Inc., a wholly-owned California subsidiary.

5.  Bental Industries Ltd., a 70%-owned Israeli subsidiary (see Item 8 – Significant Changes, with respect to the sale of TAT's holdings in Bental Industries Ltd.)

EX-12.1

EXHIBIT 12.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Rule 13a-14(a) and 15d-14(a)

Under the Securities Exchange Act of 1934, as Amended

I, Itsik Maaravi, certify that:

1. I have reviewed this annual report on Form 20-F of TAT Technologies Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated Subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 19, 2014

/s/ Itsik Maaravi

Itsik Maaravi

Chief Executive Officer

*           The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

EX-12.2

EXHIBIT 12.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Rule 13a-14(a) and 15d-14(a)

Under the Securities Exchange Act of 1934, as Amended

I, Tiko Gadot, certify that:

1. I have reviewed this annual report on Form 20-F of TAT Technologies Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated Subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 19, 2014

/s/ Tiko Gadot

Tiko Gadot

Chief Financial Officer (Principal Accounting Officer)

*           The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

EX-13.1

EXHIBIT 13.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of TAT Technologies Ltd. (the “Company”) on Form 20-F for the period ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Itsik Maaravi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Itsik Maaravi

Itsik Maaravi

Chief Executive Officer

March 19, 2014

*           The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

EX-13.2

EXHIBIT 13.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of TAT Technologies Ltd. (the “Company”) on Form 20-F for the period ending December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tiko Gadot, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Tiko Gadot

Tiko Gadot

Chief Financial Officer (Principal Accounting Officer)

March 19, 2014

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

EX-14.1

Exhibit 14.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Registration No. 333-189758) of TAT Technologies Ltd. of our report dated March 19, 2014 relating to the financial statements, which appears in TAT Technologies Ltd.'s Annual Report on Form 20-F for the year ended December 31, 2013.

Tel-Aviv, Israel	/s/ Kesselman & Kesselman
March 21, 2014	Certified Public Accountants (Isr.)
	A member firm of PricewaterhouseCoopers International Limited

Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel,

P.O Box 50oo5 Tel-Aviv 6150001  Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il

EX-14.2

Exhibit 14.2

CONSENT OF REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-8 of TAT Technologies Ltd. of our report dated March 6, 2014, relating to the consolidated financial statements of First Aviation Services Inc. and Subsidiaries as of and for the years ended December 31, 2013 and 2012, appearing in the Annual Report on Form 20-F of TAT Technologies Ltd. for the year ended December 31, 2013.

/s/ Dixon Hughes Goodman LLP

Memphis, Tennessee

March 21, 2014

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OTHER BALANCE SHEET SUPPLEMENTALS (Tables)

12 Months Ended

Dec. 31, 2013

OTHER BALANCE SHEETS SUPPLEMENTAL [Abstract]

Schedule of Other Accounts Receivable and Prepaid Expenses

Other accounts receivable and prepaid expenses:

	December 31,
	2013 (*)		2012
Deferred tax asset	$	1,589	$	2,122
Government authorities		1,154		1,424
Prepaid expenses		498		831
Income receivables and grants		-		33
Derivatives		-		27
Amounts due from related parties		5		54
Other		68		96
	$	3,314	$	4,587

(*) Excluding held for sale assets at December 31, 2013

Schedule of Other Account Payable and Accrued Expenses

Other account payable and accrued expenses:

	December 31,
	2013(*)		2012
Employees and payroll accruals	$	3,077	$	3,358
Accrued expenses (**)		732		1,757
Government authorities		483		673
Advances from customers		840		731
Warranty provision		229		276
Accrued royalties		336		268
Deferred tax liability		40		126
Amounts due to related parties		-		112
Other accrued expenses		78		106
	$	5,815	$	7,407

(*) Excluding held for sale assets at December 31, 2013

(**) Includes $750 royalties payable to a supplier in the MRO business, at December 31, 2013, following a reconciliation of an audit.

XML

INVESTMENT IN AN AFFILIATED COMPANY (Condensed Financial Information From FAvS Consolidated Balance Sheets and Statements of Operations) (Details) (First Aviation Services, Inc. [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
First Aviation Services, Inc. [Member]
Condensed financial information, balance sheets:
Current assets	$ 10,179	$ 31,090
Long-term assets	8,954	9,742
Total assets	19,133	40,832
Current liabilities	6,522	31,476
Long-term liabilities	4,471	4,196
Total liabilities	10,993	35,672
Condensed financial information, statements of operations:
Net sales	23,445	21,579	20,515
Gross profit	6,182	9,202	8,626
Income (loss) from continuing operations	(341)	(1,476)	630
Net loss	3,158	(12,979)	(94)
Loss attributable to common stockholders	$ 2,821	$ (13,271)	$ (345)

XML

ENTITY-WIDE DISCLOSURE (Tables)

12 Months Ended

Dec. 31, 2013

ENTITY-WIDE DISCLOSURE [Abstract]

Schedule of Total Revenues and Long-lived Assets by Geographical Location

Total revenues and long-lived assets - by geographical location were as follows:

	Year ended December 31,
	2013				2012				2011
	Total revenues (**)		Long-lived assets (*)		Total revenues (**)		Long-lived assets		Total revenues (**)		Long-lived assets
Sale of products
Israel	$	6,248	$	5,748	$	9,147	$	8,417	$	8,218	$	8,528
United states		18,016		-		16,475		-		21,495		-
France		5,482		-		4,604		-		3,264		-
Rest of Europe		2,292		-		1,966		-		2,507		-
Other		2,326		-		4,071		-		1,353		-
	$	34,364	$	5,748	$	36,263	$	8,417	$	36,837	$	8,528

	Year ended December 31,
	2013				2012				2011
	Total revenues		Long-lived assets		Total revenues		Long-lived assets		Total revenues		Long-lived assets
Services
Israel	$	612	$	-	$	468	$	-	$	384	$	-
United states		27,639		5,399		25,648		4,493		25,416		4,325
Netherland		1,553		-		3,303		-		4,378		-
Rest of Europe		7,658		-		4,624		-		3,875		-
Other		7,725		-		7,609		-		2,849		-
	$	45,187	$	5,399	$	41,652	$	4,493	$	36,902	$	4,325

(*) Excluding held for sale assets at December 31, 2013

(**) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

XML

TRANSACTIONS WITH RELATED PARTIES (Other Transactions with Related Parties) (Details) In Thousands, unless otherwise specified	12 Months Ended					12 Months Ended										12 Months Ended		0 Months Ended
	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2012 Payment Guarantee [Member] USD ($)	Oct. 01, 2010 Payment Guarantee [Member] USD ($)	Dec. 04, 2009 Payment Guarantee [Member] USD ($)	Dec. 31, 2013 Shareholders [Member] USD ($)	Dec. 31, 2012 Shareholders [Member] USD ($)	Dec. 31, 2011 Shareholders [Member] USD ($)	Dec. 31, 2013 Bental Non Controlling Interest [Member] USD ($)	Dec. 31, 2012 Bental Non Controlling Interest [Member] USD ($)	Dec. 31, 2011 Bental Non Controlling Interest [Member] USD ($)	Dec. 31, 2012 Isal Amlat Investment (1993) Ltd. [Member] USD ($)	Dec. 31, 2012 Isal Amlat Investment (1993) Ltd. [Member] ILS	Aug. 21, 2012 Isal Amlat Investment (1993) Ltd. [Member] USD ($)	Aug. 21, 2012 Isal Amlat Investment (1993) Ltd. [Member] ILS	Dec. 31, 2012 Bental Industries Ltd. [Member] USD ($)	Dec. 31, 2012 Bental Industries Ltd. [Member] ILS	Sep. 08, 2013 Bental Industries Ltd. [Member] Long Term Loan Three [Member] USD ($)	Sep. 08, 2013 Bental Industries Ltd. [Member] Long Term Loan Three [Member] ILS	Sep. 07, 2011 Bental Industries Ltd. [Member] Long Term Loan Three [Member] USD ($)	Sep. 07, 2011 Bental Industries Ltd. [Member] Long Term Loan Three [Member] ILS
Related Party Transaction [Line Items]
Amount of transactions	$ 359	$ 397					$ 359	$ 400	$ 432	$ 505	$ 526	$ 400	1,500			$ 120
Amount of reduction in annual management fees														150	570
Maximum guarantee			4,600	6,600	7,000
Interest rate spread																				1.00%	1.00%
Debt instrument, variable interest reference rate																				Prime	Prime
Additional management fees owed for traveling expenses																2	7
Minimum threshold that allows management company to be eligible for bonus																6,600
The bonus percentage owed to the management company on the first million dollars earned																2.00%
The bonus percentage owed to the management company on the second million dollars																3.00%
The bonus percentage owed to the management company on the third million dollars earned																5.00%
Maximum allowable bonus that can be paid to management company																100
Original amount of debt instrument																				700	2,500
Debt term																				24 months	24 months
Repayment of related party debt																		$ 693	2,500

XML

INVESTMENT IN AN AFFILIATED COMPANY (Reconciliation of the Share in Income (Loss), Impairment of Investment in FAvS and Gain from Dilution) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Business Acquisition [Line Items]
Gain from dilution of interests in affiliated company			$ 240
First Aviation Services, Inc. [Member]
Business Acquisition [Line Items]
Share in income (loss) related to common stockholders	837	(653)	192
Share in income related to preferred stock	187	197	139
Impairment of equity method investment		(3,300)		1,813
Gain from dilution of interests in affiliated company			240
Total	$ 1,024	$ (3,756)	$ 571

XML

SHAREHOLDERS' EQUITY (Narrative) (Details) In Millions, except Per Share data, unless otherwise specified	1 Months Ended
	Apr. 30, 2012	Apr. 22, 2012 USD ($)	Apr. 22, 2012 ILS
Shareholders Equity [Line Items]
Cash dividend declared, amount		$ 2.5	9.4
Cash dividend declared, value per share		$ 0.283	1.065
Cash dividend declared, declaration date	Apr. 22, 2012
Cash dividend declared, record date	May 03, 2012
Cash dividend declared, payment date	May 17, 2012

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TAXES ON INCOME (Tables)

12 Months Ended

Dec. 31, 2013

TAXES ON INCOME [Abstract]

Schedule of Reconciliation of Tax Provisions to the Domestic and Effective Tax Rate

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,
	2013			2012			2011
Income (loss) before taxes on income (tax benefit) as reported in the statements of income	$	5,267		$	5,279		$	(1,148	)
Statutory tax rate in Israel		25	%		25	%		24	%
Theoretical taxes on income (tax benefit)	$	1,317		$	1,320		$	(276	)
Increase (decrease) in taxes on income resulting from:
Tax adjustment for foreign subsidiaries subject to a different tax rate		453			434			(73	)
Reduced tax rate on income derived from "Preferred Enterprises" plans		(255	)		(143	)		103
Change in enacted tax rates		34			-			-
Exempt income		-			(4	)		(10	)
Valuation allowance		294			499			-
Tax in respect of prior years		(342	)		(83	)		(24	)
Permanent differences		(460	)		67			(55	)
Taxes on income (tax benefit) as reported in the statements of income (loss)	$	1,041		$	2,090		$	(335	)

Schedule of Income (Loss) from Continuing Operations Before Income Tax Domestic and Foreign

Income (loss) before taxes on income (tax benefit) is comprised as follows:

	Year ended December 31,
	2013		2012		2011
Domestic (Israel)	$	1,942	$	2,046	$	1,547
Foreign (United States)		3,325		3,233		(2,695	)
	$	5,267	$	5,279	$	(1,148	)

Schedule of Components of Income Tax Provision

Taxes on income (tax benefit) included in the statements of income:

	Year ended December 31,
	2013			2012			2011
Current:
Domestic (Israel)	$	160		$	282		$	373
Foreign (United States)		334			295			213
		494			577			586
Deferred:
Domestic (Israel)		15			115			245
Foreign (United States)		874			1,481			(1,142	)
		889			1,596			(897	)
Previous years:
Domestic (Israel)		(209	)		(45	)		(71	)
Foreign (United States)		(133	)		(38	)		47
		(342	)		(83	)		(24	)
	$	1,041		$	2,090		$	(335	)

Schedule of Deferred Tax Assets and Liabilities

Significant components of TAT's deferred tax liabilities and assets are as follows:

	December 31,
	2013			2012
Deferred tax assets (liabilities):
Allowance for doubtful accounts	$	47		$	133
Unrealized gains		146			131
Provisions for employee benefits		277			270
Inventory		920			1,171
Other temporary differences		199			417
Deferred tax assets - short-term- other accounts receivables	$	1,589		$	2,122
Goodwill and intangible assets	$	671		$	884
Property, plant and equipment		18			707
Provisions for employee benefits and other temporary differences		38			64
Tax credits carryforward		447			274
Capital and state tax losses carryforward		3,306			1,823
Net operating losses carryforward		419			606
Other		23			-
Deferred tax assets, before valuation allowance - Long-term		4,922			4,358
Valuation allowance		(3,306	)		(1,823	)
Deferred tax assets, net - long-term	$	1,616		$	2,535
Other temporary differences deferred tax liabilities - short-term- other accounts receivable	$	(40	)	$	(126	)
Property, plant and equipment and intangible assets		(1,003	)		(1,457	)
Other		(55	)		(33	)
Deferred tax Liabilities - Long-term	$	(1,058	)	$	(1,490	)

Reconciliation of the Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized provision is as follows:

	Amount
Balance at January 1, 2011	$	84
Exchange rate differences		2
Balance at December 31, 2011		86
Exchange rate differences		(2	)
Balance at December 31, 2012		84
Exchange rate differences		6
Utilization upon assessment		(90	)
Balance at December 31, 2013	$	-

Schedule of Supplemental Consolidated Balance Sheets Information

	Warranty provision			Allowance for Doubtful Accounts
Balance, as of January 1, 2011		341			2,419
Additions		169			31
Utilization		(222	)		-
Write-offs, net of recoveries		-			(2,260	)
Balance, as of December 31, 2011		288			190
Additions		196			258
Utilization		(208	)		-
Write-offs, net of recoveries		-			(72	)
Balance, as of December 31, 2012	$	276		$	376

Additions		186			17
Utilization		(190	)		-
Write-offs, net of recoveries		-			(270	)
Less: Held for sale		(43	)		-
Balance, as of December 31, 2013	$	229		$	123

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HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2013

HELD FOR SALE CLASSIFICATION AND DISCONTINUED [Abstract]

Schedule of Held for Sale Classification and Discontinued Operations

The following table summarizes the components of assets and liabilities held-for-sale in the consolidated balance sheet as of December 31, 2013:

	December 31,
	2013
Assets:
Cash and cash equivalents	$	2,823
Trade accounts receivable		4,067
Other accounts receivable and prepaid expenses		196
Inventories, net		2,983
Funds in respect of employee right upon retirement		778
Deferred income taxes		29
Property, plant and equipment, net		2,402
Assets of businesses held for sale		13,278
Less: impairment		(3,319	)
Total assets held for sale	$	9,959
Liabilities:
Trade accounts payables	$	946
Other accounts payable and accrued expenses		1,109
Long-term loans, net of current maturities		248
Liability in respect of employee rights upon retirement		1,070
Deferred income taxes		55
Total liabilities held for sale	$	3,428

The following are amounts related to Bental included in net loss from discontinued operations:

	Year ended December 31,
	2013			2012			2011
Revenues	$	9,589		$	10,008		$	11,658
Loss before taxes on income (tax benefit)	$	(148	)	$	(191	)	$	(158	)
Loss from discontinued operations, net of tax ($5, $3 and $19 in 2013, 2012 and 2011, respectively)	$	(3,471	)	$	(1,205	)	$	(601	)
Loss from discontinued operations attributable to non-controlling interest		1,042			58			53
Loss from discontinued operations attributable to TAT Technologies Ltd. shareholders	$	(2,429	)	$	(1,147	)	$	(548	)

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SHAREHOLDERS' EQUITY (Treasury Purchase Plan) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Nov. 21, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Equity, Class of Treasury Stock [Line Items]
Total consideration paid for shares repurchased			(70)
Exercise of options, shares		6,666
Treasury Purchase Plan One [Member]
Equity, Class of Treasury Stock [Line Items]
Value of shares authorized to be repurchased	500
Total consideration paid for shares repurchased	$ (70)
Shares repurchased during period, average cost per share	$ 4.29
Balance, shares		8,798,570	8,815,003	8,815,003
Exercise of options, shares		6,666
Purchase of treasury shares	16,433		(16,433)
Balance, shares		8,805,236	8,798,570	8,815,003

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COMMITMENTS AND CONTINGENT LIABILITIES (Commissions and Royalty Commitments) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Commissions arrangements:
Commission expenses	$ 781	$ 670	$ 579
Royalty commitments:
Royalty expense		177	202
TAT Technologies Ltd [Member] | Minimum [Member]
Commissions arrangements:
Percentage rate paid to sales agents for marketing commissions	1.00%
Royalty commitments:
Royalties percentage rate for sales of products developed by third parties	9.00%
TAT Technologies Ltd [Member] | Maximum [Member]
Commissions arrangements:
Percentage rate paid to sales agents for marketing commissions	12.00%
Royalty commitments:
Royalties percentage rate for sales of products developed by third parties	17.00%
Limco Piedmont Inc [Member]
Royalty commitments:
Royalty expense	400	232	201
Limco Piedmont Inc [Member] | Minimum [Member]
Royalty commitments:
Royalties percentage rate for sales of products developed by third parties	3.00%
Royalties percentage rate for sales of additional products developed by third parties	1.50%
Limco Piedmont Inc [Member] | Maximum [Member]
Royalty commitments:
Royalties percentage rate for sales of products developed by third parties	5.00%
Royalties percentage rate for sales of additional products developed by third parties	10.00%
Bental Industries Ltd. [Member]
Royalty commitments:
Amount of royalty bearing grants due to the Chief Scientist		$ 86
Bental Industries Ltd. [Member] | Minimum [Member]
Royalty commitments:
Royalties percentage rate owed to the Israeli government	2.00%
Bental Industries Ltd. [Member] | Maximum [Member]
Royalty commitments:
Royalties percentage rate owed to the Israeli government	3.50%

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SEGMENT INFORMATION (Schedule of Operating Income By Segment) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	$ 79,551	$ 77,915	$ 73,739
Cost of revenues	60,879	58,539	56,708
Write down of inventory and impairment charges of long lived assets			5,465
Gross profit	18,672	19,376	11,566
Research and development, net	713	995	455
Selling and marketing	3,150	2,899	2,819
General and administrative	9,512	10,110	9,450
Other income	(20)	(13)	(190)
Operating income (loss) from continuing operations	5,317	5,385	(968)
Income (loss) from continuing operations before taxes on income	5,267	5,279	(1,148)
Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	79,551	77,915	85,397
Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
OEM of Heat Management Solutions [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	31,138	31,032	30,020
Cost of revenues	24,141	23,105	22,662
Write down of inventory and impairment charges of long lived assets
Gross profit	6,997	7,927	7,358
Research and development, net	415	581	455
Selling and marketing	1,520	1,476	1,202
General and administrative	3,158	3,530	3,789
Other income	(20)	(13)	(190)
Operating income (loss) from continuing operations	1,924	2,353	2,102
Financial income (expenses), net
Other expenses
OEM of Heat Management Solutions [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	27,326	27,944	25,993
OEM of Heat Management Solutions [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	3,812	3,088	4,027
OEM - Electric Motion Systems [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues		10,008	11,658
Cost of revenues		8,043	9,388
Gross profit		1,965	2,270
Research and development, net		157	331
Selling and marketing		527	619
General and administrative		1,377	1,499
Other income		21	21
Operating income (loss) from continuing operations		(117)	(200)
OEM - Electric Motion Systems [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues		10,008	11,658
OEM - Electric Motion Systems [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
Heat Transfer Services and Products [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	29,907	27,709	27,603
Cost of revenues	21,600	19,671	20,173
Write down of inventory and impairment charges of long lived assets
Gross profit	8,307	8,038	7,430
Research and development, net	298	414
Selling and marketing	1,145	1,049	1,026
General and administrative	3,093	3,270	3,035
Impairment of goodwill and other intangible assets
Other income
Operating income (loss) from continuing operations	3,771	3,305	3,369
Financial income (expenses), net
Other expenses
Heat Transfer Services and Products [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	29,706	27,529	27,600
Heat Transfer Services and Products [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	111	180	3
MRO services for Aviation Components [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	22,429	22,442	20,146
Cost of revenues	19,224	19,044	17,882
Write down of inventory and impairment charges of long lived assets			5,465
Gross profit	3,205	3,398	(3,201)
Research and development, net
Selling and marketing	485	374	591
General and administrative	3,261	3,310	2,626
Impairment of goodwill and other intangible assets
Other income
Operating income (loss) from continuing operations	(541)	(286)	(6,418)
Financial income (expenses), net
Other expenses
MRO services for Aviation Components [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	22,429	22,442	20,146
MRO services for Aviation Components [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
Amounts not allocated to segments [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
Cost of revenues
Write down of inventory and impairment charges of long lived assets
Gross profit
Research and development, net
Selling and marketing
General and administrative
Impairment of goodwill and other intangible assets
Other income
Operating income (loss) from continuing operations
Financial income (expenses), net	50	(106)	(420)
Other expenses
Amounts not allocated to segments [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
Amounts not allocated to segments [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
Elimination from inter companies sale [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	(3,923)	(3,268)	(4,030)
Cost of revenues	(4,086)	(3,281)	(4,009)
Write down of inventory and impairment charges of long lived assets
Gross profit	163	13	(21)
Research and development, net
Selling and marketing
General and administrative
Impairment of goodwill and other intangible assets
Other income
Operating income (loss) from continuing operations	163	13	(21)
Financial income (expenses), net
Other expenses
Elimination from inter companies sale [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues
Elimination from inter companies sale [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues	(3,923)	(3,268)	(4,030)
Adjustment To Consolidated Financial Statements [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues		(10,008)	(11,658)
Cost of revenues		(8,043)	(9,388)
Gross profit		(1,965)	(2,270)
Research and development, net		(157)	(331)
Selling and marketing		(527)	(619)
General and administrative		(1,377)	(1,499)
Impairment of goodwill and other intangible assets
Other income		(21)	(21)
Operating income (loss) from continuing operations		117	200
Adjustment To Consolidated Financial Statements [Member] | Sale of Products and Services [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues		(10,008)	(11,658)
Adjustment To Consolidated Financial Statements [Member] | Intersegment Revenues [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Revenues

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HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS (Schedule of Components of Assets and Liabilities Held-For-Sale) (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Assets of Disposal Group, Including Discontinued Operation [Abstract]
Cash and cash equivalents	$ 2,823,000	$ 2,309,000	$ 676,000
Total assets held for sale	9,959,000
Bental Industries Ltd. [Member]
Assets of Disposal Group, Including Discontinued Operation [Abstract]
Cash and cash equivalents	2,823,000
Trade accounts receivable	4,067,000
Other accounts receivable and prepaid expenses	196,000
Inventories	2,983,000
Funds in respect of employee right upon retirement	778,000
Deferred income taxes	29,000
Property, plant and equipment, net	2,402,000
Assets of businesses held for sale	13,278,000
Less: impairment	(3,319,000)
Total assets held for sale	9,959,000
Liabilities
Trade accounts payables	946,000
Other accounts payable and accrued expenses	1,109,000
Long-term loans, net of current maturities	248,000
Liability in respect of employee rights upon retirement	1,070,000
Deferred income taxes	55,000
Total liabilities held for sale	$ 3,428,000

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COMMITMENTS AND CONTINGENT LIABILITIES (Guarantees) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
TAT Technologies Ltd [Member]
Guarantees:
Bank guarantee to secure liability to Israeli customs	$ 241
Limco Piedmont Inc [Member]
Guarantees:
Guarantee provided by Piedmont in respect of FAVS debt	$ 4,600

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TAXES ON INCOME (Schedule of Deferred Tax Assets and Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Deferred tax assets (liabilities):
Allowance for doubtful accounts	$ 47		$ 133
Unrealized gains	146		131
Provisions for employee benefits	277		270
Inventory	920		1,171
Other temporary differences	199		417
Deferred tax assets - short-term- other accounts receivables	1,589	[1]	2,122
Goodwill and intangible assets	671		884
Property, plant and equipment	18		707
Provisions for employee benefits and other temporary differences	38		64
Tax credits carryforward	447		274
Capital and state tax losses carryforward	3,306		1,823
Net operating losses carryforward	419		606
Other	23
Deferred tax assets, before valuation allowance - Long-term	4,922		4,358
Valuation allowance	(3,306)		(1,823)	(184)	(200)
Deferred tax assets, net - Long-term	1,616		2,535
Other temporary differences deferred tax liabilities - short-term- other accounts payable	(40)	[1]	(126)
Property, plant and equipment and intangible assets	(1,003)		(1,457)
Other	(55)		(33)
Deferred tax Liabilities - Long-term	$ (1,058)		$ (1,490)

[1] Excluding held for sale assets at December 31, 2013

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EARNINGS (LOSS) PER SHARE ("EPS") (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Numerator for EPS:
Income (loss) from continuing operations	$ 5,251		$ (567)		$ (482)
Net loss from discontinued operations, net of tax	$ (2,429)		$ (1,147)		$ (548)
Denominator for EPS:
Weighted average number of shares outstanding - Basic	8,799,237		8,808,075		8,815,003
Dilutive shares	9,683
Weighted average number of shares outstanding - Diluted	8,808,920	[1]	8,808,075	[1]	8,815,003	[1]
EPS attributable to controlling interest: Basic and diluted
Net income (loss) from continuing operations	$ 0.60		$ (0.06)		$ (0.05)
Loss from discontinued operations	$ (0.28)		$ (0.13)		$ (0.07)

[1] Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans.

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TAXES ON INCOME (Schedule of Changes in Valuation Allowance) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Changes in Valuation Allowance
Balance	$ 1,823	$ 184	$ 200
Addition charged to expenses (Deductions)	1,483	1,639	(16)
Balance	3,306	1,823	184
Investments In Foreign Subsidiaries And Foreign Corporate Joint Ventures That Are Permanent In Nature [Member]
Changes in Valuation Allowance
Undistributed earnings of foreign subsidiaries	11,400
The amount of deferred tax liability that would be recorded if foreign earnings were distributed by cash dividend	2,850
Tax rate on recognized foreign earnings dividends	25.00%
Approved Enterprise [Member]
Changes in Valuation Allowance
Undistributed earnings of foreign subsidiaries	9,700
The amount of deferred tax liability that would be recorded if foreign earnings were distributed by cash dividend	$ 2,425
Tax rate on recognized foreign earnings dividends	25.00%

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COMMITMENTS AND CONTINGENT LIABILITIES (Covenants and Liens on Assets) (Details) In Thousands, unless otherwise specified	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2012 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2012 Limco Piedmont Inc [Member] USD ($)	Dec. 31, 2013 Bental Industries Ltd. [Member] Long-term loan One [Member] USD ($)	Dec. 31, 2013 Bental Industries Ltd. [Member] Long-term loan One [Member] ILS	Dec. 31, 2012 Bental Industries Ltd. [Member] Long-term loan One [Member] USD ($)	Dec. 31, 2012 Bental Industries Ltd. [Member] Long-term loan One [Member] ILS	Dec. 31, 2013 Bental Industries Ltd. [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2012 Bental Industries Ltd. [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2012 Bental Industries Ltd. [Member] Long-term loan Two [Member] ILS
Covenants And Liens On Assets [Line Items]
Minimum tangible net worth required by line of credit covenants					$ 51,500
Actual tangible net worth for the period					51,533
Maximum leverage ratio required by line of credit covenants					1.0
Actual maximum leverage ratio for the period					0.18
Minimum net financial assets required by line of credit covenants					10,000
Actual net financial assets for the period					20,667
Original value of loans secured by bank						1,185
Current loan balance	884	3,670	4,702	2,477		248		523		884
Restricted deposits					2,300
Actual shareholders' equity for the period	85,569	82,233									9,335	34,800
Maximum EBITDA ratio required by the secured bank loan covenants						3.0	3.0	3.0	3.0
Actual EBITDA ratio for the period						7.2	7.2	(2.4)	(2.4)
Minimum tangible shareholders' equity required under secured bank loan covenants						5,760	20,000	5,300	20,000
Minimum tangible shareholders' equity to total assets ratio required by secured bank loan covenants						30.00%	30.00%	30.00%	30.00%
Actual tangible shareholders' equity for the period						$ 9,789	34,000	$ 9,335	34,800
Actual tangible shareholders' equity to total assets ratio for the period						74.00%	74.00%	70.00%	70.00%

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SHORT TERM BANK CREDIT AND LONG TERM LOANS (Details) In Thousands, unless otherwise specified	12 Months Ended					1 Months Ended	12 Months Ended							12 Months Ended		12 Months Ended		0 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2012 TAT Technologies Ltd [Member] Long-term loan One [Member] USD ($)	Dec. 31, 2013 TAT Technologies Ltd [Member] Long-term loan One [Member] USD ($)	May 31, 2011 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2013 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2012 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2010 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2009 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2008 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Nov. 06, 2012 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Nov. 07, 2011 TAT Technologies Ltd [Member] Long-term loan Two [Member] USD ($)	Dec. 31, 2012 TAT Technologies Ltd [Member] Long-term loan Three [Member] USD ($)	Dec. 31, 2013 TAT Technologies Ltd [Member] Line of Credit [Member] USD ($)	Dec. 31, 2011 Limco Piedmont Inc [Member] Line of Credit [Member] USD ($)	Dec. 31, 2009 Bental Industries Ltd. [Member] Long-term loan One [Member] USD ($)	Sep. 08, 2013 Bental Industries Ltd. [Member] Long-term loan Three [Member] USD ($)	Sep. 08, 2013 Bental Industries Ltd. [Member] Long-term loan Three [Member] ILS	Sep. 07, 2011 Bental Industries Ltd. [Member] Long-term loan Three [Member] USD ($)	Sep. 07, 2011 Bental Industries Ltd. [Member] Long-term loan Three [Member] ILS	Dec. 31, 2012 Piedmont [Member] Line of Credit [Member] USD ($)	Dec. 31, 2011 Piedmont [Member] Line of Credit [Member] USD ($)	Dec. 31, 2011 Limco [Member] Line of Credit [Member] USD ($)
Debt Instrument [Line Items]
Total long-term loans	$ 884	$ 3,670	$ 4,702	$ 523	$ 248		$ 884	$ 2,477						$ 670
Less - current maturities				(290)				(1,594)						(670)
Total long-term loans, excluding current maturities		1,116
Interest rate, minimum								2.50%	2.50%
Interest rate				5.25%										1.00%
Interest rate, maximum								3.50%	3.50%
Interest rate spread										1.85%	3.50%					1.50%				1.00%	1.00%
Debt instrument, variable interest reference rate										Libor	Libor					Libor				Prime	Prime
Frequency of payment																	Quarterly			Quarterly	Quarterly
Debt term																21 months	5 years			24 months	24 months
Maturity date range, start				Jan. 01, 2012				Jan. 01, 2009
Maturity date range, end				Dec. 31, 2014				Dec. 31, 2014						Dec. 31, 2013
Original amount of debt instrument									6,250	1,250	5,000						1,400			700	2,500,000
Currency of loan				NIS				USD						NIS
Repayments of lLong-term debt	2,286	776	3,021				1,593											693	2,500
Principal payment made on loan						750
Prepaid amount of principal balance on long-term loan								3,775				775	2,250
Line of credit, initiation date																Nov. 15, 2011
Line of credit, expiration date																Aug. 31, 2013
Line of credit, maximum borrowing capacity																10,000							5,000	5,000
Line of credit, amount outstanding															$ 26	$ 688						$ 32

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SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2013

SEGMENT INFORMATION [Abstract]

SEGMENT INFORMATION

NOTE 18 - SEGMENT INFORMATION

a. Segment Activities Disclosure:

TAT operates under four segments: (i) Original Equipment Manufacturing or "OEM" of Heat Management Solutions (ii) Heat Transfer Services and Products (iii) Maintenance, Repair and Overhaul or "MRO" services for Aviation Components and (iv) OEM of Electric Motion Systems.

- OEM of Heat Management Solutions primarily includes the design, development, manufacture and sale of (i) 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; (ii) environmental control and cooling systems on board aircraft and for ground applications; and (iii) a variety of other electronic and mechanical aircraft accessories and systems such as pumps, valves, power systems and turbines.

- Heat Transfer Services and Products primarily includes the maintenance, repair and overhaul of heat transfer equipment and in a lesser extent, the manufacturing of certain heat transfer products. TAT's Limco subsidiary operates an FAA certified repair station, which provides heat transfer MRO services and products for airlines, air cargo carriers, maintenance service centers and the military.

- MRO services for Aviation Components primarily includes the maintenance, repair and overhaul of APUs, landing gear and other aircraft components. TAT's Piedmont subsidiary operates an FAA certified repair station, which provides aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

- OEM of Electric Motion Systems primarily includes the design, development, manufacture and sale of a broad range of electrical motor applications for airborne and ground systems.

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.

TAT evaluates segment performance based on revenue and operating income. The operating income reported in TAT's segments excludes other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported consolidated earnings. 

On February 18, 2014 TAT entered into an agreement to sell its entire interest in Bental, the OEM of Electric Motion Systems operating segment, constituting 70% of Bental's issued and outstanding share capital (for additional information see note 4).

b. Segments statement operations disclosure:

The following financial information is the information that management uses for analyzing the segment results. The figures are presented in consolidated method as presented to management.

The following financial information is a summary of the operating income of each operational segment:

	Year ended December 31, 2013
	OEM of Heat Management Solutions			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Consolidated
Revenues
Sale of products and services	$	27,326		$	29,796	$	22,429		$	-		$	-		$	79,551
Intersegment revenues		3,812			111		-			-			(3,923	)		-
Total revenues		31,138			29,907		22,429			-			(3,923	)		79,551
Cost of revenues		24,141			21,600		19,224			-			(4,086	)		60,879
Gross profit		6,997			8,307		3,205			-			163			18,672
Research and development		415			298		-			-			-			713
Selling and marketing		1,520			1,145		485			-			-			3,150
General and administrative		3,158			3,093		3,261			-			-			9,512
Other expense (income)		(20	)		-		-			-			-			(20	)
Operating income (loss)		1,924			3,771		(541	)		-			163			5,317
Financial expense, net		-			-		-			(50	)		-			(50	)
Income before taxes on income															$	5,267

	Year ended December 31, 2012
	OEM of Heat Management Solutions			OEM of Electric Motion Systems			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Adjustment to the consolidated financial statements			Consolidated
Revenues
Sale of products and services	$	27,944		$	10,008		$	27,529	$	22,442		$	-		$	-		$	(10,008	)	$	77,915
Intersegment revenues		3,088			-			180		-			-			(3,268	)		-			-
Total revenues		31,032			10,008			27,709		22,442			-			(3,268	)		(10,008	)		77,915
Cost of revenues		23,105			8,043			19,671		19,044			-			(3,281	)		(8,043	)		58,539
Gross profit		7,927			1,965			8,038		3,398			-			13			(1,965	)		19,376
Research and development		581			157			414		-			-			-			(157	)		995
Selling and marketing		1,476			527			1,049		374			-			-			(527	)		2,899
General and administrative		3,530			1,377			3,270		3,310			-			-			(1,377	)		10,110
Other expense (income)		(13	)		21			-		-			-			-			(21	)		(13	)
Operating income (loss)		2,353			(117	)		3,305		(286	)		-			13			117			5,385
Financial expense, net		-			-			-		-			(106	)		-			-			(106	)
Income before taxes on income																					$	5,279

	Year ended December 31, 2011
	OEM of Heat Management Solutions			OEM of Electric Motion Systems			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Adjustment to the consolidated financial statements			Consolidated
Revenues
Sale of products and services	$	25,993		$	11,658		$	27,600	$	20,146		$	-		$	-		$	(11,658	)	$	73,739
Intersegment revenues		4,027			-			3		-			-			(4,030	)		-			-
Total revenues		30,020			11,658			27,603		20,146			-			(4,030	)		(11,658	)		73,739
Cost of revenues		22,662			9,388			20,173		17,882			-			(4,009	)		(9,388	)		56,708
Write down of inventory and impairment charges of  long lived assets		-			-			-		5,465			-			-			-			5,465
Gross profit		7,358			2,270			7,430		(3,201	)		-			(21	)		(2,270	)		11,566
Research and development		455			331			-		-			-			-			(331	)		455
Selling and marketing		1,202			619			1,026		591			-			-			(619	)		2,819
General and administrative		3,789			1,499			3,035		2,626			-			-			(1,499	)		9,450
Other expense (income)		(190	)		21			-		-			-			-			(21	)		(190	)
Operating income (loss)		2,102			(200	)		3,369		(6,418	)		-			(21	)		200			(968	)
Financial expense, net		-			-			-		-			(420	)		-			-			(420	)
Income before taxes on income																					$	(1,388	)

c. The following financial information identifies the assets to segment:

	Year ended December 31, 2013
	OEM of Heat Management Solutions		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	45,518	$	28,806	$	18,137	$	16,419	$	108,880
Depreciation and amortization (*)		991		603		265		-		1,859
Expenditure for segment assets (*)		992		664		584		-		2,240

	Year ended December 31, 2012
	OEM of Heat Management Solutions		OEM of Electric Motion Systems		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	34,315	$	12,707	$	27,093	$	18,473	$	16,354	$	108,942
Depreciation and amortization (*)		974		-		735		197		-		1,906
Expenditure for segment assets (*)		1,047		-		756		344		-		2,147

	Year ended December 31, 2011
	OEM of Heat Management Solutions		OEM of Electric Motion Systems		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	34,055	$	13,941	$	27,464	$	21,068	$	19,783	$	116,311
Depreciation and amortization (*)		1,139		-		758		721		-		2,618
Expenditure for segment assets (*)		924		-		638		1,391		-		2,953
Goodwill		-		1,042		-		-		-		1,042

 (*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION [Abstract]

Schedule of Supplemental Consolidated Balance Sheets Information

	Warranty provision			Allowance for Doubtful Accounts
Balance, as of January 1, 2011		341			2,419
Additions		169			31
Utilization		(222	)		-
Write-offs, net of recoveries		-			(2,260	)
Balance, as of December 31, 2011		288			190
Additions		196			258
Utilization		(208	)		-
Write-offs, net of recoveries		-			(72	)
Balance, as of December 31, 2012	$	276		$	376

Additions		186			17
Utilization		(190	)		-
Write-offs, net of recoveries		-			(270	)
Less: Held for sale		(43	)		-
Balance, as of December 31, 2013	$	229		$	123

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LONG-TERM EMPLOYEE-RELATED OBLIGATIONS (Tables)

12 Months Ended

Dec. 31, 2013

LONG-TERM EMPLOYEE-RELATED OBLIGATIONS [Abstract]

Schedule of Expected Future Benefits

Year	Amount
2014	$	282
2015		189
2016		261
2017		198
2018		248
Thereafter (through 2023)		800
	$	1,978

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COMMITMENTS AND CONTINGENT LIABILITIES (Legal Claims Contingencies) (Details) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2013 ILS
Legal claims contingencies
Damages being sought in litigation matter	$ 1,620	6,151

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PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2013

PROPERTY, PLANT AND EQUIPMENT, NET [Abstract]

Schedule of Property, Plant and Equipment

Composition of assets, grouped by major classifications, is as follows:

	December 31,
	2013 (*)		2012
Cost:
Land and buildings	$	5,582	$	6,929
Machinery and equipment (1)		34,696		36,849
Motor vehicles		418		676
Office furniture and equipment		1,559		2,293
Software		1,166		1,166
		43,421		47,913
Less: Accumulated depreciation		32,274		35,003
Depreciated cost	$	11,147	$	12,910

(*) Excluding held for sale assets at December 31, 2013

(1) The cost is net of investment grants received by Bental in the amount of $274 as of December 31, 2012.

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SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Significant Accounting Policies [Line Items]
Short term bank deposit average interest rate	60.00%
Share-based Compensation
Share based compensation expenses (income)	$ 3	$ 8	$ (37)
Buildings [Member]
Property, plant and equipment
Estimated useful lives, years	25 years
Machinery and Equipment [Member]
Property, plant and equipment
Estimated useful lives, years	10 years
Machinery and Equipment [Member] | Minimum [Member]
Property, plant and equipment
Estimated useful lives, years	4 years
Machinery and Equipment [Member] | Maximum [Member]
Property, plant and equipment
Estimated useful lives, years	10 years
Motor Vehicles [Member] | Minimum [Member]
Property, plant and equipment
Estimated useful lives, years	6 years
Motor Vehicles [Member] | Maximum [Member]
Property, plant and equipment
Estimated useful lives, years	7 years
Office Furniture and Equipment [Member]
Property, plant and equipment
Estimated useful lives, years	7 years
Office Furniture and Equipment [Member] | Minimum [Member]
Property, plant and equipment
Estimated useful lives, years	3 years
Office Furniture and Equipment [Member] | Maximum [Member]
Property, plant and equipment
Estimated useful lives, years	17 years
Software [Member]
Property, plant and equipment
Estimated useful lives, years	3 years

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OTHER BALANCE SHEET SUPPLEMENTALS (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
Other accounts receivable and prepaid expenses:
Deferred tax asset	$ 1,589	[1]	$ 2,122
Government authorities	1,154	[1]	1,424
Prepaid expenses	498	[1]	831
Income receivables and grants		[1]	33
Derivatives		[1]	27
Amounts due from related parties	5		54
Other	68	[1]	96
Total other accounts receivable and prepaid expenses	3,314	[1]	4,587
Other account payable and accrued expenses:
Employees and payroll accruals	3,077	[1]	3,358
Accrued expenses	732	[1],[2]	1,757	[2]
Government authorities	483	[1]	673
Advances from customers	840	[1]	731
Warranty provision	229	[1]	276
Accrued royalties	336	[1]	268
Deferred tax liability	40	[1]	126
Amounts due to related parties			112
Other accrued expenses	78	[1]	106
Total other account payable and accrued expenses	5,815	[1]	7,407
MRO Services for Aviation Components [Member]
Other account payable and accrued expenses:
Accrued royalties			$ 750

[1] Excluding held for sale assets at December 31, 2013

[2] Includes $750 royalties payable to a supplier in the MRO business, at December 31, 2013, following a reconciliation of an audit.

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FAIR VALUE MEASUREMENT (Roll-Forward of Level 3 Assets) (Details) (First Aviation Services, Inc. [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended				1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Jun. 30, 2012 Convertible Subordinated Debt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Original amount of debt instrument					$ 3,000
Interest rate					10.00%
Exercise price of warrants issued					7,000
Impairment of equity method investment		$ 3,300		$ (1,813)
Percentage of post-exercise shareholders' equity callable by warrant					15.00%

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SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

SEGMENT INFORMATION [Abstract]

Schedule of Assets by Segment

The following financial information identifies the assets to segment:

	Year ended December 31, 2013
	OEM of Heat Management Solutions		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	45,518	$	28,806	$	18,137	$	16,419	$	108,880
Depreciation and amortization (*)		991		603		265		-		1,859
Expenditure for segment assets (*)		992		664		584		-		2,240

	Year ended December 31, 2012
	OEM of Heat Management Solutions		OEM of Electric Motion Systems		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	34,315	$	12,707	$	27,093	$	18,473	$	16,354	$	108,942
Depreciation and amortization (*)		974		-		735		197		-		1,906
Expenditure for segment assets (*)		1,047		-		756		344		-		2,147

	Year ended December 31, 2011
	OEM of Heat Management Solutions		OEM of Electric Motion Systems		Heat Transfer Services and Products		MRO services for Aviation Components		Amounts not allocated to segments		Consolidated
Assets	$	34,055	$	13,941	$	27,464	$	21,068	$	19,783	$	116,311
Depreciation and amortization (*)		1,139		-		758		721		-		2,618
Expenditure for segment assets (*)		924		-		638		1,391		-		2,953
Goodwill		-		1,042		-		-		-		1,042

 (*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

Schedule of Operating Income by Segment

The following financial information is a summary of the operating income of each operational segment:

	Year ended December 31, 2013
	OEM of Heat Management Solutions			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Consolidated
Revenues
Sale of products and services	$	27,326		$	29,796	$	22,429		$	-		$	-		$	79,551
Intersegment revenues		3,812			111		-			-			(3,923	)		-
Total revenues		31,138			29,907		22,429			-			(3,923	)		79,551
Cost of revenues		24,141			21,600		19,224			-			(4,086	)		60,879
Gross profit		6,997			8,307		3,205			-			163			18,672
Research and development		415			298		-			-			-			713
Selling and marketing		1,520			1,145		485			-			-			3,150
General and administrative		3,158			3,093		3,261			-			-			9,512
Other expense (income)		(20	)		-		-			-			-			(20	)
Operating income (loss)		1,924			3,771		(541	)		-			163			5,317
Financial expense, net		-			-		-			(50	)		-			(50	)
Income before taxes on income															$	5,267

	Year ended December 31, 2012
	OEM of Heat Management Solutions			OEM of Electric Motion Systems			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Adjustment to the consolidated financial statements			Consolidated
Revenues
Sale of products and services	$	27,944		$	10,008		$	27,529	$	22,442		$	-		$	-		$	(10,008	)	$	77,915
Intersegment revenues		3,088			-			180		-			-			(3,268	)		-			-
Total revenues		31,032			10,008			27,709		22,442			-			(3,268	)		(10,008	)		77,915
Cost of revenues		23,105			8,043			19,671		19,044			-			(3,281	)		(8,043	)		58,539
Gross profit		7,927			1,965			8,038		3,398			-			13			(1,965	)		19,376
Research and development		581			157			414		-			-			-			(157	)		995
Selling and marketing		1,476			527			1,049		374			-			-			(527	)		2,899
General and administrative		3,530			1,377			3,270		3,310			-			-			(1,377	)		10,110
Other expense (income)		(13	)		21			-		-			-			-			(21	)		(13	)
Operating income (loss)		2,353			(117	)		3,305		(286	)		-			13			117			5,385
Financial expense, net		-			-			-		-			(106	)		-			-			(106	)
Income before taxes on income																					$	5,279

	Year ended December 31, 2011
	OEM of Heat Management Solutions			OEM of Electric Motion Systems			Heat Transfer Services and Products		MRO services for Aviation Components			Amounts not allocated to segments			Elimination of inter-company sales			Adjustment to the consolidated financial statements			Consolidated
Revenues
Sale of products and services	$	25,993		$	11,658		$	27,600	$	20,146		$	-		$	-		$	(11,658	)	$	73,739
Intersegment revenues		4,027			-			3		-			-			(4,030	)		-			-
Total revenues		30,020			11,658			27,603		20,146			-			(4,030	)		(11,658	)		73,739
Cost of revenues		22,662			9,388			20,173		17,882			-			(4,009	)		(9,388	)		56,708
Write down of inventory and impairment charges of  long lived assets		-			-			-		5,465			-			-			-			5,465
Gross profit		7,358			2,270			7,430		(3,201	)		-			(21	)		(2,270	)		11,566
Research and development		455			331			-		-			-			-			(331	)		455
Selling and marketing		1,202			619			1,026		591			-			-			(619	)		2,819
General and administrative		3,789			1,499			3,035		2,626			-			-			(1,499	)		9,450
Other expense (income)		(190	)		21			-		-			-			-			(21	)		(190	)
Operating income (loss)		2,102			(200	)		3,369		(6,418	)		-			(21	)		200			(968	)
Financial expense, net		-			-			-		-			(420	)		-			-			(420	)
Income before taxes on income																					$	(1,388	)

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SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 -           SIGNIFICANT ACCOUNTING POLICIES

Accounting principles

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), applied on a consistent basis, unless otherwise indicated below.

a. 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: revenue recognition, recoverability of inventory, provision for doubtful accounts, impairment of goodwill, intangible assets and long lived assets, impairment of investment in affiliated company, contingencies, provision for taxes and the realizability of deferred tax assets.

b. Functional currency

The majority of the TAT's revenues are generated in U.S. dollars ("dollars") and a substantial portion of TAT's costs are incurred in dollars. In addition, a significant portion of the TAT's financing has been obtained in dollars. Accordingly, the dollar is the currency of the primary economic environment in which TAT operates and accordingly its functional and reporting currency is the dollar.

Limco's and Piedmont's ("U.S. subsidiaries") revenues are generated in dollars and its costs are incurred in dollars. In addition, the U.S. subsidiaries financing has been obtained in dollars. Accordingly, the dollar is the currency of the primary economic environment in which the U.S. subsidiaries operate and accordingly its functional and reporting currency is the dollar.

Most of Bental's revenues are generated in New Israeli Shekel ("NIS") and a substantial portion of Bental's costs are incurred in NIS. In addition, Bental's financing has been obtained in NIS. Accordingly, the NIS is the currency of the primary economic environment in which Bental operates and accordingly its functional and reporting currency is the NIS. For Bental whose functional currency has been determined to be the NIS, assets and liabilities are translated at year-end exchange rates, and statement of operations items are translated at average exchange rates prevailing during the year. Resulting translation differences are recorded as a separate component of accumulated other comprehensive income (loss) in equity. Although Bental has been accounted for as a discontinued operation, the currency impact of its business is not removed from other comprehensive income (loss).

Monetary accounts maintained in currencies other than the dollar are re-measured using the representative foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of the transaction. The effects of foreign currency re-measurement are recorded in financial income (expenses), net.

c. Principles of consolidation

The consolidated financial statements include the accounts of TAT and its subsidiaries. In these financial statements, "subsidiaries" are companies over which TAT has over 50% voting control and the financial statements of which are consolidated with those of the Company.

Intercompany balances and transactions, including profits from intercompany sales not yet realized outside the Group, have been eliminated upon consolidation. Non-controlling interests are included in equity.

d. Cash and Cash equivalents

All highly liquid investments, which include short-term bank deposits and money market accounts, 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.

e. Short-term bank deposits

Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits are in Dollars and bear interest at an average annual rate of 0.60%.

f. Restricted deposits

Restricted deposits primarily consisted of cash deposits which secured a guarantee provided by the Group to an affiliated company and a loan provided to the Company by a financial institution; see note 14(f)(5) for additional information. Classification of restricted deposits as current or non-current assets takes into consideration the expected release date.

g. Accounts receivable-trade, 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 an allowance for doubtful accounts. Accounts outstanding longer than their original contractual payment terms are considered past due. The Group determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Group's previous loss history from such customers, customer's current ability to pay its obligation to TAT and the condition of the general economy and the industry as a whole. The Group writes-off accounts receivable when they become uncollectible. Payments subsequently received on such receivables are credited against earnings. The allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection.

h. Inventories

Inventories are measured at the lower of cost or market.

Cost of inventories is determined as follows:

Raw materials and parts	-	On the basis of actual cost or standard cost.
Work in progress and Finished goods	-	On the basis of actual cost or standard cost which takes into account materials, labor and other direct and indirect manufacturing costs, or identifiable direct costs.

Since the Group sells products and services related to airplane accessories (heat transfer equipment, defined in note 1, APU's, landing gears etc.) 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 estimated market value based upon assumptions for future demand and market conditions.

i. 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	25
Machinery and equipment	4 - 10 (mainly 10)
Motor vehicles	6 - 7
Office furniture and equipment	3 - 17 (mainly 7)
Software	3

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.

j. Grants from Office of the Chief Scientist of Israel ("OCS"):

Grants received from the OCS for approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and included as a deduction from research and development expenses.  Due the fact that the Company is defined as "Traditional Industry Company", under the OCS regulations, these grants are non-royalty bearing.

k. Investment in Company Accounted for using the Equity Method

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. Significant influence is presumed to exist when the Group holds between 20% to 50% of an affiliated company's voting instruments.

The Group reviews this investment for impairment whenever events indicate the carrying amount may not be recoverable. See note 3(b).

l. Impairment of long-lived assets

Long-lived assets, including definite life intangible assets, held and used by an entity 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 8 and 9).

m. Treasury Shares

Company shares held by the Company are presented as a reduction of equity at their cost to the Company.

n. 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.

Revenues from the sale of products are recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, provided the collection of the resulting receivable is reasonably assured, the price is fixed or determinable and no significant obligation exists. The Group does not grant a right of return.

Revenues from multi-year, fixed price contracts for OEM customers are recognized when a product is shipped (and title passed) to the customer. Management provides for losses as soon as a loss is expected for the remaining portion of such contracts. For the years ended December 31, 2013, 2012 and 2011, no losses have been recognized for such fixed price contracts.

Revenues from MRO services are recognized when services are completed and the item is shipped back to the customer.

Revenues from some maintenance contracts are recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract. The Group estimates the costs that are expected to be incurred based on its experience with the aggregate costs incurred and to be incurred on contracts of this nature. The costs incurred related to the maintenance contracts are not incurred on a straight-line basis, as the timing to provide the maintenance services is dependent on when parts under these contracts require maintenance. Therefore, the Group accrues revenue as costs are incurred. These revenues are then compared to actual results and adjusted to either deferred revenue for results greater than historical estimates or recognized in those cases of performance less than historical estimates.  These accounts are reviewed on a timely basis and adjusted (if required) based on cost structures.

Revenues from royalties from sales of products developed with the Group's intellectual property, technology and technical assistance are recognized when the related sales are made.

o. Shipping and handling costs

Shipping and handling costs billed to customers are included in revenue. The cost of shipping and handling products is included in costs of revenues.

p. 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.

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 the product is shipped. The Group periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

q. Research and development

Research and development costs, net of grants, are charged to expenses as incurred.

r. Fair value measurement

The Group measures fair value and discloses fair value measurements for financial and non-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.

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.

s. Concentrations of credit risk

Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents 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 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.

t. 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 necessary, to reduce deferred tax assets to their estimated realizable value, see note 17(i).

Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting or, if not related to an asset or liability for financial reporting, according to the expected reversal dates of the specific temporary differences.

Taxes which would apply in the event of disposal of investments in 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.

Following the recognition of Bental as held for sale and discontinued operations as of December 31, 2013, the Company computed deferred tax asset derived from estimated loss for tax purposes, incurred in the sale of its entire interest in Bental. For such capital loss the Company provides valuation allowance as it cannot predict its future realization.

The Group records deferred taxes related to its share in results of its affiliated company.

With regard to dividends distributable from the income of non-Israeli subsidiaries: as the Group intends to permanently reinvest retained earnings and has no intention to declare dividends out of such earnings in the foreseeable future it does not record deferred taxes in respect of taxes that would have been paid in such event.

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 17(b)), 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 the Company and TAT's Israeli subsidiary are measured and reflected in NIS and for TAT's U.S. subsidiaries are measured and reflected in dollars. As explained in (b) above, the consolidated financial statements are presented in 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 income tax expense. Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance sheet date.

u. Held for sale classification and Discontinued operations

A business is reported as held for sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying value of the business exceeds its estimated fair value, a loss is recognized.

Assets and liabilities related to a business classified as held for sale are segregated in the consolidated balance sheet in the period in which the business is classified as held for sale.

Operations of a business are reported as discontinued operations if the business is classified as held for sale, the operations and cash flows of the business have been or will be eliminated from our ongoing operations as a result of a disposal transaction and we will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in discontinued operations in the consolidated statement of operations for current and prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

Depreciation is not recorded on assets of a business while it is classified as held for sale.

At December 31, 2013, held for sale assets and liabilities consisted of Bental, the OEM of Electric Motion Systems operating segment, and its results of operations are presented as discontinued operations in the consolidated statement of operations (see also note 4).

w. Basic and diluted net Earnings per share

Earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted earnings (loss) per share includes the potential effect of stock options outstanding during the year, in accordance with ASC 260 "Earnings per Share", using the treasury stock method.

x. Share-based compensation

The Group applies ASC 718 "Stock Based Compensation" with respect to employees 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 Group estimates forfeitures based on historical experience and anticipated future conditions.

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. For an award with performance conditions that has a graded vesting schedule, compensation cost is recognized upon meeting such conditions, using the accelerated method over the requisite service period for the entire award.

The total share-based compensation expenses (income) recognized in the years ended December 31, 2013, 2012 and 2011 in the statements of operations were $3, $8 and $(37), respectively.

y. Comprehensive income (loss)

Comprehensive income (loss), net of related taxes where applicable, includes, in addition to net income (loss): (i) currency translation adjustments; and (ii) unrealized holding gains and losses on available-for-sale securities.

z. 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.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

aa. Reclassifications:

Certain comparative amounts previously reported as cash and cash equivalents have been reclassified to accounts payable and accounts receivable.

ab. Recently Issued Accounting Principles

In February 2013, the FASB issued accounting standard update ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts  Reclassified Out of Accumulated Other Comprehensive Income. Previously, information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income had been presented in separate places throughout the financial statements. ASU No. 2013-02 requires entities to present this information in one centralized disclosure in the financial statements; however, it emphasized that there is no change in the current requirements for reporting net income or other comprehensive income in financial statements. The adoption of ASU No. 2013-02 did not have a material effect on Company's consolidated financial statements.

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FAIR VALUE MEASUREMENT (Schedule of Non-Recurring Fair Value Measurements) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012		Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Goodwill		$ 1,015	[1]
Investment in affiliated company		3,300
Impairment of goodwill, intangible assets and other long lived assets				2,965
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in affiliated company		1,264
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Goodwill
Investment in affiliated company
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Goodwill
Investment in affiliated company
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Goodwill
Investment in affiliated company		$ 1,264

[1] Excluding discontinued operations for the year ended on December 31, 2012

XML

COMMITMENTS AND CONTINGENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENT LIABILITIES [Abstract]

Schedule of Operating Leases

As of December 31, 2013, future minimum rental payments under non-cancelable operating leases are as follows:

Year	Amount
2014	$	636
2015		646
2016		623
2017		534
2018		468
2019 and thereafter		964
Total	$	3,871

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 22 -        SUBSEQUENT EVENTS

a.  On March 19, 2014, subsequent to the balance sheet date, TAT's board of directors declared a cash dividend in the total amount of $2,000 (approximately NIS6.97 million), or $0.23 per share (approximately NIS0.79 per share), for all of the shareholders of TAT. The dividend will be paid to shareholders of record on April 21, 2014. TAT will pay the dividend on May 7, 2014.

b.  On March 19, 2014, pursuant to the 2012 stock option Plan, TAT's Board of Directors approved the grant of 195,000 Options, at an exercise price of $8.79 per share, to senior executives.

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SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION

12 Months Ended

Dec. 31, 2013

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION [Abstract]

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION

NOTE 21 -        SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION

	Warranty provision			Allowance for Doubtful Accounts
Balance, as of January 1, 2011		341			2,419
Additions		169			31
Utilization		(222	)		-
Write-offs, net of recoveries		-			(2,260	)
Balance, as of December 31, 2011		288			190
Additions		196			258
Utilization		(208	)		-
Write-offs, net of recoveries		-			(72	)
Balance, as of December 31, 2012	$	276		$	376

Additions		186			17
Utilization		(190	)		-
Write-offs, net of recoveries		-			(270	)
Less: Held for sale		(43	)		-
Balance, as of December 31, 2013	$	229		$	123

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HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS (Narrative) (Details) (USD $)	1 Months Ended	12 Months Ended
	Feb. 18, 2014	Dec. 31, 2013
Bental Industries Ltd. [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale of ownerhsip interest, percentage	70.00%
Cash received from sale of affiliate	$ 5,000,000
Impariment		3,319,000
Loss on sale of discontinued operation		152,000
Controlling Interest [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Impariment		2,323,000
Loss on sale of discontinued operation		$ 106,000

XML

SHAREHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2013

SHAREHOLDERS' EQUITY [Abstract]

Reconciliation of Ordinary Shares

A reconciliation of opening and closing balances of the number of ordinary shares outstanding is presented below:

	2013		2012			2011
Balance outstanding at beginning of year		8,798,570		8,815,003			8,815,003
Purchase of treasury shares		-		(16,433	)		-
Exercise of options		6,666		-			-
Balance outstanding at end of year		8,805,236		8,798,570			8,815,003

Schedule of Stock Options Assumptions

The fair value of the Company's stock options granted under the 2012 plan for the year ended December 31, 2012 was estimated using the following assumptions:

	2012
Expected stock price volatility	41.57% - 43.4%
Expected option life (in years)	2.23 - 3.23
Risk free interest rate	0.23% - 0.32%
Dividend yield	9.8%

Schedule of Stock Option Activity

The following table is a summary of the activity of TAT's stock Option plan:

	Year ended December 31,
	2013
	Number of options			Weighted average exercise price
Outstanding at the beginning of the year		285,000		$	6.50
Granted		-			-
Expired		-			-
Forfeited		(133,334	)		6.50
Exercised		(6,666	)		6.50
Outstanding at the end of the year		145,000		$	6.50
Exercisable options		24,167		$	6.50

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Use of estimates in the preparation of financial statement

a. 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: revenue recognition, recoverability of inventory, provision for doubtful accounts, impairment of goodwill, intangible assets and long lived assets, impairment of investment in affiliated company, contingencies, provision for taxes and the realizability of deferred tax assets.

Functional currency

b. Functional currency

The majority of the TAT's revenues are generated in U.S. dollars ("dollars") and a substantial portion of TAT's costs are incurred in dollars. In addition, a significant portion of the TAT's financing has been obtained in dollars. Accordingly, the dollar is the currency of the primary economic environment in which TAT operates and accordingly its functional and reporting currency is the dollar.

Limco's and Piedmont's ("U.S. subsidiaries") revenues are generated in dollars and its costs are incurred in dollars. In addition, the U.S. subsidiaries financing has been obtained in dollars. Accordingly, the dollar is the currency of the primary economic environment in which the U.S. subsidiaries operate and accordingly its functional and reporting currency is the dollar.

Most of Bental's revenues are generated in New Israeli Shekel ("NIS") and a substantial portion of Bental's costs are incurred in NIS. In addition, Bental's financing has been obtained in NIS. Accordingly, the NIS is the currency of the primary economic environment in which Bental operates and accordingly its functional and reporting currency is the NIS. For Bental whose functional currency has been determined to be the NIS, assets and liabilities are translated at year-end exchange rates, and statement of operations items are translated at average exchange rates prevailing during the year. Resulting translation differences are recorded as a separate component of accumulated other comprehensive income (loss) in equity. Although Bental has been accounted for as a discontinued operation, the currency impact of its business is not removed from other comprehensive income (loss).

Monetary accounts maintained in currencies other than the dollar are re-measured using the representative foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of the transaction. The effects of foreign currency re-measurement are recorded in financial income (expenses), net.

Principles of consolidation

c. Principles of consolidation

The consolidated financial statements include the accounts of TAT and its subsidiaries. In these financial statements, "subsidiaries" are companies over which TAT has over 50% voting control and the financial statements of which are consolidated with those of the Company.

Intercompany balances and transactions, including profits from intercompany sales not yet realized outside the Group, have been eliminated upon consolidation. Non-controlling interests are included in equity.

Cash and Cash equivalents

d. Cash and Cash equivalents

All highly liquid investments, which include short-term bank deposits and money market accounts, 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.

Short-term bank deposits

e. Short-term bank deposits

Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits are in Dollars and bear interest at an average annual rate of 0.60%.

Restricted deposits

f. Restricted deposits

Restricted deposits primarily consisted of cash deposits which secured a guarantee provided by the Group to an affiliated company and a loan provided to the Company by a financial institution; see note 14(f)(5) for additional information. Classification of restricted deposits as current or non-current assets takes into consideration the expected release date.

Accounts receivable-trade, net

g. Accounts receivable-trade, 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 an allowance for doubtful accounts. Accounts outstanding longer than their original contractual payment terms are considered past due. The Group determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Group's previous loss history from such customers, customer's current ability to pay its obligation to TAT and the condition of the general economy and the industry as a whole. The Group writes-off accounts receivable when they become uncollectible. Payments subsequently received on such receivables are credited against earnings. The allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection.

Inventories

h. Inventories

Inventories are measured at the lower of cost or market.

Cost of inventories is determined as follows:

Raw materials and parts	-	On the basis of actual cost or standard cost.
Work in progress and Finished goods	-	On the basis of actual cost or standard cost which takes into account materials, labor and other direct and indirect manufacturing costs, or identifiable direct costs.

Since the Group sells products and services related to airplane accessories (heat transfer equipment, defined in note 1, APU's, landing gears etc.) 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 estimated market value based upon assumptions for future demand and market conditions.

Property, plant and equipment

i. 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	25
Machinery and equipment	4 - 10 (mainly 10)
Motor vehicles	6 - 7
Office furniture and equipment	3 - 17 (mainly 7)
Software	3

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.

Grants from Office of the Chief Scientist of Israel ("OCS"):

j. Grants from Office of the Chief Scientist of Israel ("OCS"):

Grants received from the OCS for approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and included as a deduction from research and development expenses.  Due the fact that the Company is defined as "Traditional Industry Company", under the OCS regulations, these grants are non-royalty bearing.

Investment in Company Accounted for using the Equity Method

k. Investment in Company Accounted for using the Equity Method

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. Significant influence is presumed to exist when the Group holds between 20% to 50% of an affiliated company's voting instruments.

The Group reviews this investment for impairment whenever events indicate the carrying amount may not be recoverable. See note 3(b).

Impairment of long-lived assets

l. Impairment of long-lived assets

Long-lived assets, including definite life intangible assets, held and used by an entity 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 8 and 9).

Treasury Shares

m. Treasury Shares

Company shares held by the Company are presented as a reduction of equity at their cost to the Company.

Revenue recognition

n. 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.

Revenues from the sale of products are recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, provided the collection of the resulting receivable is reasonably assured, the price is fixed or determinable and no significant obligation exists. The Group does not grant a right of return.

Revenues from multi-year, fixed price contracts for OEM customers are recognized when a product is shipped (and title passed) to the customer. Management provides for losses as soon as a loss is expected for the remaining portion of such contracts. For the years ended December 31, 2013, 2012 and 2011, no losses have been recognized for such fixed price contracts.

Revenues from MRO services are recognized when services are completed and the item is shipped back to the customer.

Revenues from some maintenance contracts are recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract. The Group estimates the costs that are expected to be incurred based on its experience with the aggregate costs incurred and to be incurred on contracts of this nature. The costs incurred related to the maintenance contracts are not incurred on a straight-line basis, as the timing to provide the maintenance services is dependent on when parts under these contracts require maintenance. Therefore, the Group accrues revenue as costs are incurred. These revenues are then compared to actual results and adjusted to either deferred revenue for results greater than historical estimates or recognized in those cases of performance less than historical estimates.  These accounts are reviewed on a timely basis and adjusted (if required) based on cost structures.

Revenues from royalties from sales of products developed with the Group's intellectual property, technology and technical assistance are recognized when the related sales are made.

Shipping and handling costs

o. Shipping and handling costs

Shipping and handling costs billed to customers are included in revenue. The cost of shipping and handling products is included in costs of revenues.

Warranty costs

p. 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.

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 the product is shipped. The Group periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Research and development

q. Research and development

Research and development costs, net of grants, are charged to expenses as incurred.

Fair value measurement

r. Fair value measurement

The Group measures fair value and discloses fair value measurements for financial and non-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.

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.

Concentrations of credit risk

s. Concentrations of credit risk

Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents 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 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.

Income taxes

t. 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 necessary, to reduce deferred tax assets to their estimated realizable value, see note 17(i).

Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting or, if not related to an asset or liability for financial reporting, according to the expected reversal dates of the specific temporary differences.

Taxes which would apply in the event of disposal of investments in 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.

Following the recognition of Bental as held for sale and discontinued operations as of December 31, 2013, the Company computed deferred tax asset derived from estimated loss for tax purposes, incurred in the sale of its entire interest in Bental. For such capital loss the Company provides valuation allowance as it cannot predict its future realization.

The Group records deferred taxes related to its share in results of its affiliated company.

With regard to dividends distributable from the income of non-Israeli subsidiaries: as the Group intends to permanently reinvest retained earnings and has no intention to declare dividends out of such earnings in the foreseeable future it does not record deferred taxes in respect of taxes that would have been paid in such event.

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 17(b)), 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 the Company and TAT's Israeli subsidiary are measured and reflected in NIS and for TAT's U.S. subsidiaries are measured and reflected in dollars. As explained in (b) above, the consolidated financial statements are presented in 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 income tax expense. Such liabilities are classified as long-term, unless the liability is expected to be resolved within twelve months from the balance sheet date.

Held for sale classification and Discontinued operations

u. Held for sale classification and Discontinued operations

A business is reported as held for sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying value of the business exceeds its estimated fair value, a loss is recognized.

Assets and liabilities related to a business classified as held for sale are segregated in the consolidated balance sheet in the period in which the business is classified as held for sale.

Operations of a business are reported as discontinued operations if the business is classified as held for sale, the operations and cash flows of the business have been or will be eliminated from our ongoing operations as a result of a disposal transaction and we will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in discontinued operations in the consolidated statement of operations for current and prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

Depreciation is not recorded on assets of a business while it is classified as held for sale.

At December 31, 2013, held for sale assets and liabilities consisted of Bental, the OEM of Electric Motion Systems operating segment, and its results of operations are presented as discontinued operations in the consolidated statement of operations (see also note 4).

Basic and diluted net Earnings per share

w. Basic and diluted net Earnings per share

Earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted earnings (loss) per share includes the potential effect of stock options outstanding during the year, in accordance with ASC 260 "Earnings per Share", using the treasury stock method.

Share-based compensation

x. Share-based compensation

The Group applies ASC 718 "Stock Based Compensation" with respect to employees 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 Group estimates forfeitures based on historical experience and anticipated future conditions.

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. For an award with performance conditions that has a graded vesting schedule, compensation cost is recognized upon meeting such conditions, using the accelerated method over the requisite service period for the entire award.

The total share-based compensation expenses (income) recognized in the years ended December 31, 2013, 2012 and 2011 in the statements of operations were $3, $8 and $(37), respectively.

Comprehensive income (loss)

y. Comprehensive income (loss)

Comprehensive income (loss), net of related taxes where applicable, includes, in addition to net income (loss): (i) currency translation adjustments; and (ii) unrealized holding gains and losses on available-for-sale securities.

Contingencies

z. 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.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Reclassification

aa. Reclassifications:

Certain comparative amounts previously reported as cash and cash equivalents have been reclassified to accounts payable and accounts receivable.

Recently Issued Accounting Principles Not Yet Adopted

ab. Recently Issued Accounting Principles

In February 2013, the FASB issued accounting standard update ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts  Reclassified Out of Accumulated Other Comprehensive Income. Previously, information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income had been presented in separate places throughout the financial statements. ASU No. 2013-02 requires entities to present this information in one centralized disclosure in the financial statements; however, it emphasized that there is no change in the current requirements for reporting net income or other comprehensive income in financial statements. The adoption of ASU No. 2013-02 did not have a material effect on Company's consolidated financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Schedule of Property, Plant and Equipment Estimated Useful Lives

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, as follows:

	years
Buildings	25
Machinery and equipment	4 - 10 (mainly 10)
Motor vehicles	6 - 7
Office furniture and equipment	3 - 17 (mainly 7)
Software	3

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GENERAL

12 Months Ended

Dec. 31, 2013

GENERAL [Abstract]

GENERAL

NOTE 1 - GENERAL

a. TAT Technologies Ltd., ("TAT" or the "Company") an Israeli corporation, incorporated in 1985, is a leading provider of services and products to the commercial and military aerospace and ground defense industries. Together with its subsidiaries, 100% held, Limco-Piedmont Inc. ("Limco-Piedmont"), 70% held, Bental Industries Ltd. ("Bental") (with respect to the sale of the entire interest in Bental see note 1(d) and 4) and 100% held, TAT Gal Inc. ("TAT Gal") hereinafter collectively referred to as the "Group", it is principally engaged in the following activities:

· Design, development, manufacture and sale of a broad range of heat transfer equipment and solutions;

· Remanufacture, overhaul and repair of heat transfer equipment;

· Maintenance, repair and overhaul of auxiliary power units, landing gears and related components;

· Design, development and manufacture of aviation and flow control accessories including fuel components, secondary power systems, and various instrumentation and electronic assemblies;

· Design, development and manufacture of environmental control and cooling systems; and

· Production and development of precision electric motion systems, mainly earmarked for the defense industries.

The products developed, repaired, and maintained by the Group are primarily used for airborne systems on commercial and military aircrafts as well as for defense ground systems. The principal markets of TAT are in Israel, Europe and the United States.

As of December 31, 2013, Limco-Piedmont holds 100% of Limco-Airepair Inc. ("Limco"), of Piedmont Aviation Component Services LLC. ("Piedmont") and holds, through Piedmont, 29.36% in First Aviation Services Inc. ("FAvS"), a world-wide service provider to the aerospace industry and a one-stop-shop for maintenance, repair and overhaul services (for propellers and landing gear) for the General Aviation Industry.

b. TAT's shares are listed on both the NASDAQ (TATT) and Tel-Aviv stock exchange.

c. In October 2012 two lenders to TAT's then controlling shareholders, KMN Industries and TAT Industries (herein "Controlling Shareholders"), filed separate petitions to the court to enforce certain liens granted to such lenders by each of the Controlling Shareholders. Such liens consisted of KMN Industries' holdings of an approximately 80% ownership interest in TAT Industries (which in turn owned approximately 43% of the issued share capital of TAT) and KMN Industries' direct holdings in TAT (which represented approximately 10% of the issued share capital of TAT). On December 18, 2012 the court appointed permanent receivers on behalf of the two lenders mentioned above for the purpose of jointly realizing the liens granted to such lenders. On March 15, 2013 the receivers of TAT's shares initiated a bid process for the sale of such shares. On August 7, 2013 the receivers informed TAT that a transaction for the sale of 4,732,351 Ordinary shares of TAT, constituting 53.8% of TAT's outstanding Ordinary shares as of the date of the transaction, closed after receiving all required approvals and transfer of the agreed consideration by FIMI Israel Opportunity FIVE, Limited Partnership and FIMI Opportunity V, L.P. ("FIMI Funds").

d. On February 18, 2014 TAT entered into an agreement to sell its entire interest in Bental, constituting 70% of Bental's issued and outstanding share capital, to Bental Investments Agshah Ltd. ("Bental Investments"), for an aggregate consideration of $5,000, reflecting an impairment of $3,319 (out of which $2,323 attributed to controlling interest), which is reported in Income (loss) from discontinued operations in the consolidated statement of operations for the year ended December 31, 2013 (see also note 4).

The Company determined Bental met the criteria for held for sale and discontinued operations as of December 31, 2013.

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INVESTMENT IN AN AFFILIATED COMPANY (Tables)

12 Months Ended

Dec. 31, 2013

INVESTMENT IN AN AFFILIATED COMPANY [Abstract]

Reconciliation of the Share in Income (Loss), Impairment of Investment in FAvS and Gain from Dilution

A reconciliation of the share in results of affiliated company and impairment of share in affiliated company for each of the years ended December 31, 2013, 2012 and 2011:

	Year ended December 31,
	2013		2012			2011
Share in income (loss) related to common stockholders	$	837	$	(653	)	$	192
Share in income related to preferred stock		187		197			139
Impairment of  in affiliated company		-		(3,300	)		-
Gain from dilution of interests in affiliated company		-		-			240
Net income (loss)	$	1,024	$	(3,756	)	$	571

Schedule of Summarized Balance Sheets Financial Information for Equity Method Investment

Condensed financial information from FAvS consolidated balance sheets as of December 31, 2013 and 2012:

	December 31,
	2013		2012
Current assets	$	10,179	$	31,090
Long-term assets		8,954		9,742
Total assets		19,133		40,832
Current liabilities		6,522		31,476
Long-term liabilities		4,471		4,196
Total liabilities	$	10,993	$	35,672

Schedule of Summarized Statement of Operations Financial Information for Equity Method Investment

Condensed financial information from FAvS consolidated statements of operations for each of the three years in the period ended December 31, 2013:

	Year ended December 31,
	2013			2012			2011
Net sales	$	23,445		$	21,579		$	20,515
Gross profit		6,182			9,202			8,626
Loss from continuing operations		(341	)		(1,476	)		630
Net income (loss)		3,158			(12,979	)		(94	)
Income (loss) attributable to common stockholders	$	2,821		$	(13,271	)	$	(345	)

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TAXES ON INCOME (Schedule of Reconciliation of Tax Provisions to the Domestic and Effective Tax Rate) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
TAXES ON INCOME [Abstract]
Income / (Loss) before Income Taxes		$ 5,267	$ 5,279	$ (1,148)
Statutory tax rate in Israel	26.50%	25.00%	25.00%	24.00%
Theoretical taxes on income (tax benefit)		1,317	1,320	(276)
Increase (decrease) in taxes on income resulting from:
Tax adjustment for foreign subsidiaries subject to a different tax rate		453	434	(73)
Reduced tax rate on income derived from "Preferred Enterprises" plans		(255)	(143)	103
Change in enacted tax rates		34
Exempt income			(4)	(10)
Valuation allowance		294	499
Tax in respect of prior years		(342)	(83)	(24)
Permanent differences		(460)	67	(55)
Taxes on income (tax benefit) as reported in the statements of income (loss)		$ 1,041	$ 2,090	$ (335)

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TRANSACTIONS WITH RELATED PARTIES (Tables)

12 Months Ended

Dec. 31, 2013

TRANSACTIONS WITH RELATED PARTIES [Abstract]

Schedule of Transactions with TAT Industries

Transactions with TAT Industries:

	Year ended December 31,
	2013		2012		2011
Management fees (1)	$	29	$	50	$	50
Lease expenses (2)	$	424	$	416	$	408

(1) According to the agreement between TAT and TAT Industries, TAT Industries will pay the Company an annual management fee in the amount of $50. The management fees are recorded as a reduction of general and administration expenses. Such services provided to TAT Industries until the purchase of TAT's shares by FIMI Funds on August 7, 2013 (see also note 1).

(2) During 2000, TAT entered into a lease agreement with TAT Industries, pursuant to which the Company leases from TAT Industries approximately 344,000 square feet, including 90,000 square feet of manufacturing, office and storage space, for a period of 24 years and eleven months for an annual rental fee which is subject to revaluation every fifth year by a real estate appraiser, with an additional incremental payment of 2% per year.

In 2010, following a revaluation by a real estate appraiser, the rental fee was increased to $400 per year with an additional incremental payment of 2% per year. The rental fee will be revaluated again in 2015 (the "Next Revaluation"). The Company's Audit Committee has reapproved the said agreement until the Next Revaluation.

Schedule of Balances with Related Parties

Balances with related parties:

	December 31,
	2013		2012
TAT Industries - current asset (1)	$	-	$	54
FAVS - current asset		5		-
Total asset	$	5	$	54
Bental Non-controlling interest - current liability	$	-	$	(60	)
FAVS - current liability		-		(29	)
Isal Amlat Investment (1993) Ltd.		-		(23	)
Total liability	$	-	$	(112	)

(1) Results from certain expenses incurred by TAT Industries and borne by the Company. The debt bears interest at the rate equal to the interest rate agreed between TAT Industries and its lending banks.

Schedule of Transactions with Related Parties

Transactions with related parties:

	Year ended December 31,
	2013		2012		2011
Management fees to shareholders (see item e below)	$	-	$	359	$	400

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INVESTMENT IN AN AFFILIATED COMPANY (Acquisition of Stocks of FAvS) (Narrative) (Details) (USD $)	1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			12 Months Ended						1 Months Ended
	Jun. 30, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2011 Payment Guarantee [Member]	Dec. 31, 2012 Payment Guarantee [Member]	Oct. 01, 2010 Payment Guarantee [Member]	Dec. 04, 2009 Payment Guarantee [Member]	Dec. 31, 2013 First Aviation Services, Inc. [Member]	Dec. 31, 2012 First Aviation Services, Inc. [Member]	Dec. 31, 2011 First Aviation Services, Inc. [Member]	Dec. 31, 2010 First Aviation Services, Inc. [Member]	Dec. 31, 2009 First Aviation Services, Inc. [Member]	Dec. 04, 2009 First Aviation Services, Inc. [Member]	Mar. 18, 2013 First Aviation Services, Inc. [Member] API [Member]	Jun. 30, 2012 First Aviation Services, Inc. [Member] Convertible Debt [Member]	Jun. 30, 2011 First Aviation Services, Inc. [Member] Chief Executive Officer [Member]	Mar. 31, 2013 First Aviation Services, Inc. [Member] Term Loan [Member]
Business Acquisition [Line Items]
Shares of investee acquired														288,334
Investee ownership percentage									29.36%		30.30%	36.60%		37.00%
Value of preferred stocks owned														$ 750,000
Preferred stock, cash dividend rate													12.00%
Preferred stock, stock dividend rate													15.00%
Investment in affiliated company			3,300,000
Maximum guarantee						4,600,000	6,600,000	7,000,000
Amount of guarantee secured						2,300,000
Monthly amortization related to guarantee agreement					200,000
Payment for settlement	1,400,000
Shares issued																	166,113
Market price of stock									$ 6.60	$ 7.0	$ 5.45						$ 18.06
Shares issued to directors																	3,000,000
Gain from dilution of interests in affiliated company				240,000							240,000
Impairment of equity method investment										(3,300,000)		1,813,000
Loss from equity method investments		1,025,000	(3,756,000)	331,000						(456,000)
Repayments of lines of credit															15,900			4,000,000
Original amount of debt instrument																3,000,000
Exercise price of warrants issued																7,000
Purchase price															16,500
Percentage of post-exercise shareholders' equity callable by warrant																15.00%
Ownership percentage															3.00%
Write down															$ 11,500

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LONG-TERM EMPLOYEE-RELATED OBLIGATIONS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Plan Disclosure [Line Items]
Severance payments actually paid	$ 226	$ 26	$ 23
Severance pay expenses	555	495	425
Expected deposits to be made in the next fiscal year for severance and pension payment obligations	820
2014	282
2015	189
2016	261
2017	198
2018	248
Thereafter (through 2023)	800
Total	1,978
Limco Piedmont Inc [Member]
Defined Benefit Plan Disclosure [Line Items]
401(K) profit sharing plan contributions made by company	$ 253	$ 209	$ 188

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 19,814		$ 17,786
Short-term bank deposits	10,059		10,048
Short-term restricted deposits			2,307
Accounts receivable-trade, net	18,387		21,156
Other accounts receivable and prepaid expenses	3,314	[1]	4,587
Inventories, net	29,395	[1]	33,031
Assets held for sale	9,959
Total current assets	90,928		88,915
INVESTMENT AND OTHER NON CURRENT ASSETS:
Investment in an affiliated company	2,289		1,264
Funds in respect of employee rights upon retirement	2,900		3,318
Deferred income taxes	1,616		2,535
Total investment and other non current assets	6,805		7,117
PROPERTY, PLANT AND EQUIPMENT, NET	11,147	[1]	12,910
Total long-term assets	17,952		20,027
Total assets	108,880		108,942
CURRENT LIABILITIES:
Short term bank loan and current maturities of long-term loans	910		3,274
Accounts payable trade	6,941		6,804
Other accounts payable and accrued expenses	5,815	[1]	7,407
Liabilities held for sale	3,428
Total current liabilities	17,094		17,485
NON CURRENT LIABILITIES:
Long-term loans, net of current maturities			1,116
Other long-term liabilities	58
Liability in respect of employee rights upon retirement	3,140		3,815
Deferred income taxes	1,058		1,490
Total long-term liabilities	4,256		6,421
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 14)
Total liabilities	21,350		23,906
EQUITY:
Ordinary shares of NIS 0.9 par value : Authorized: 10,000,000 shares at December 31, 2013 and 2012; Issued: 9,079,709 and 9,073,043 shares at December 31, 2013 and 2012, respectively; Outstanding: 8,805,236 and 8,798,570 shares at December 31, 2013 and 2012, respectively	2,792		2,790
Additional paid-in capital	64,454		64,410
Treasury stock, at cost, 274,473 shares at December 31, 2013 and 2012	(2,088)		(2,088)
Accumulated other comprehensive loss	(429)		(897)
Retained earnings	20,840		18,018
Total shareholders' equity	85,569		82,233
Non-controlling interest	1,961		2,803
Total equity	87,530		85,036
Total liabilities and equity	$ 108,880		$ 108,942

[1] Excluding held for sale assets at December 31, 2013

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EARNINGS (LOSS) PER SHARE ("EPS") (Tables)

12 Months Ended

Dec. 31, 2013

EARNINGS (LOSS) PER SHARE (?EPS?)[Abstract]

Schedule of Earnings per Share

	Year ended December 31,
	2013			2012			2011
Numerator for EPS:
Net income (loss) from continuing operations	$	5,251		$	(567	)	$	(482	)
Net loss from discontinued operations, net of tax		(2,429	)		(1,147	)		(548	)
Denominator for EPS:
Weighted average shares outstanding - basic		8,799,237			8,808,075			8,815,003
Dilutive shares		9,683			-			-
Weighted average shares outstanding - diluted (*)		8,808,920			8,808,075			8,815,003
EPS attributable to controlling interest:
Basic and diluted
Net income (loss) from continuing operations	$	0.60		$	(0.06	)	$	(0.05	)
Loss from discontinued operations	$	(0.28	)	$	(0.13	)	$	(0.07	)

(*) Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $) In Thousands, except Share data	Total	Share capital [Member]	Additional paid-in capital [Member]	Accumulated other comprehensive income (loss) [Member]	Treasury shares [Member]	Retained earnings [Member]	Non-controlling interest [Member]
Balance at Dec. 31, 2010	$ 91,111	$ 2,790	$ 64,439	$ (414)	$ (2,018)	$ 23,262	$ 3,052
Balance, shares at Dec. 31, 2010		9,073,043
Net income (loss)	(1,083)					(1,030)	(53)
Foreign currency translation	(819)			(614)			(205)
Adjustment on marketable securities	(11)			(8)			(3)
Share based compensation (income) expense	(37)		(37)
Balance at Dec. 31, 2011	89,161	2,790	64,402	(1,036)	(2,018)	22,232	2,791
Balance, shares at Dec. 31, 2011		9,073,043
Net income (loss)	(1,772)					(1,714)	(58)
Foreign currency translation	209			139			70
Adjustment on marketable securities
Dividend distributed	(2,500)					(2,500)
Purchase of treasury shares	(70)
Purchase of treasury shares, shares					(70)
Share based compensation (income) expense	8		8
Balance at Dec. 31, 2012	85,036	2,790	64,410	(897)	(2,088)	18,018	2,803
Balance, shares at Dec. 31, 2012		9,073,043
Net income (loss)	1,780					2,822	(1,042)
Foreign currency translation	668			468			200
Adjustment on marketable securities
Share based compensation (income) expense	3		3
Exercise of options	43	2	41
Exercise of options, shares	6,666	6,666
Balance at Dec. 31, 2013	$ 87,530	$ 2,792	$ 64,454	$ (429)	$ (2,088)	$ 20,840	$ 1,961
Balance, shares at Dec. 31, 2013		9,079,709

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SUBSEQUENT EVENTS (Details) In Thousands, except Share data, unless otherwise specified	1 Months Ended	12 Months Ended			1 Months Ended
	Apr. 30, 2012	Dec. 31, 2013 USD ($)	Apr. 22, 2012 USD ($)	Apr. 22, 2012 ILS	Mar. 19, 2014 Subsequent Event [Member] USD ($)	Mar. 19, 2014 Subsequent Event [Member] ILS
Subsequent Event [Line Items]
Cash dividend declared, value per share			$ 0.283	1.065	$ 0.23	0.79
Cash dividend declared, declaration date	Apr. 22, 2012				Mar. 19, 2014
Cash dividend declared, record date	May 03, 2012				Apr. 21, 2014
Cash dividend declared, payment date	May 17, 2012				May 07, 2014
Cash dividend declared, amount			$ 2,500	9,400	$ 2,000	6,970
Granted, shares					195,000
Stock options granted, exercise price					$ 8.79

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AVAILABLE-FOR-SALE - MARKETABLE SECURITIES (Details) (Money Market [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Money Market [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 1,136	$ 3,341
Fair value	$ 1,136	$ 3,341

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FAIR VALUE MEASUREMENT (Tables)

12 Months Ended

Dec. 31, 2013

FAIR VALUE MEASUREMENT [Abstract]

Schedule of Financial Assets Measured at Fair Value on a Recurring Basis

The Company's financial assets measured at fair value on a recurring basis, consisted of the following types of instruments:

	December 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money Market	$	1,136	$	-	$	-	$	1,136

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Money Market	$	3,341	$	-	$	-	$	3,341
Derivatives		-		27		-		27
Total	$	3,341	$	27	$	-	$	3,368

Schedule of Non-Recurring Fair Value Measurements

The following table presents the Group's assets measured at fair value on a non-recurring basis for the year ended December 31 2012:

			Fair value measurements using
	As of December 31, 2012		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total losses for the year ended December 31, 2012
Goodwill (1) (*)	$	-	$	-	$	-	$	-	$	1,015
Investment in affiliated company (2)	$	1,264	$	-	$	-	$	1,264	$	3,300

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GOODWILL AND INTANGIBLE ASSETS (Schedule of Intangible Assets) (Details) (License for Service Center [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
License for Service Center [Member]
Finite-Lived Intangible Assets [Line Items]
Cost:	$ 2,050	$ 2,050
Less: accumulated amortization	(2,050)	(2,050)
Amortized cost

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SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2013

SHAREHOLDERS' EQUITY [Abstract]

SHAREHOLDERS' EQUITY

NOTE 15 -        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.

b. Treasury purchase plan

TAT's Board of Directors approved a stock repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934.  The plan was for a period of 6 months and provided for the purchase of shares in an aggregate amount of up to $500. Such plan replaced and superseded a prior repurchase plan approved by TAT's Board of Directors on February 21, 2012. On November 21, 2012, the term of such stock repurchase plan ended. As of such date, the Company had purchased 16,433 shares for approximately $70 (average of $4.29 per share) constituting less than 0.1% of TAT's issued shares.

The repurchased shares became dormant as defined in the Israeli Companies Law.

A reconciliation of opening and closing balances of the number of ordinary shares outstanding is presented below:

	2013		2012			2011
Balance outstanding at beginning of year		8,798,570		8,815,003			8,815,003
Purchase of treasury shares		-		(16,433	)		-
Exercise of options		6,666		-			-
Balance outstanding at end of year		8,805,236		8,798,570			8,815,003

c. Stock option plans:

(1) On August 14, 2008, TAT's Board of Directors approved the grant of 65,477 unregistered options in three Series A, B and C to its Chief Executive Officer. Each option of Series A, B and C vests over two, three and four years commencing May 19, 2008, respectively, and expires three years after vesting. Each Series A, B and C option can be exercised into one Ordinary share NIS 0.9 par value, for an exercise price of $6.15 (adjusted for dividend distribution and other equity changes as defined in the option grant terms). Alternatively, the Chief Executive Officer can opt to receive TAT's Ordinary shares based on the value of the appreciation over the exercise price.

The weighted average fair value of stock options granted at the grant date, is $2.69, $2.9 and $3.15, for Series A, B and C, respectively, based on Black-Scholes option-pricing model.

Following the resignation of Mr. Fledel, the Company's Chief Executive Officer on December 7, 2011 the 21,825 unvested stock options forfeited and the remaining 43,652 stock options expired on March 6, 2012. As result, the Company recorded for the year ended December 31, 2011 an income from the expiration of such options, in the total amount of $37.

(2) 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 380,000 options to purchase Ordinary shares, 0.9 NIS par value, of the Company to senior executives and certain members of the Board of Directors, at an exercise price of $6.5 per share. The Options vest over a three-year period (one-third each year), the vesting of 50% of the Options is subject, in addition, to certain minimum shareholders' equity during a period of 4 years from the grant date, unless the optionee is no longer employed by the Company, in which case the options will be considered forfeited within 30 days. On August 21, 2012, pursuant to the 2012 Plan, TAT's Board of Directors approved the grant of 330,000 Options, which were granted on October 4, 2012.

The fair value of the Company's stock options granted under the 2012 plan for the year ended December 31, 2012 was estimated using the following assumptions:

	2012
Expected stock price volatility	41.57% - 43.4%
Expected option life (in years)	2.23 - 3.23
Risk free interest rate	0.23% - 0.32%
Dividend yield	9.8%

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.

(3) The following table is a summary of the activity of TAT's stock Option plan:

	Year ended December 31,
	2013
	Number of options			Weighted average exercise price
Outstanding at the beginning of the year		285,000		$	6.50
Granted		-			-
Expired		-			-
Forfeited		(133,334	)		6.50
Exercised		(6,666	)		6.50
Outstanding at the end of the year		145,000		$	6.50
Exercisable options		24,167		$	6.50

The weighted-average grant-date fair value of options granted in 2012 was $0.19. The aggregate intrinsic value for the options outstanding as of December 31, 2013, 2012 and 2011 was $212, $0 and $0, respectively.

Compensation expenses (income) attributable to outstanding stock options were $3, $8 and $(37) for the years ended December 31, 2013, 2012 and 2011, respectively. Compensation expense is recognized in the statement of income as an operating expense based on the fair value of the option over the requisite service period. As of December 31, 2013 and 2012 total unrecognized compensation cost related to nonvested Share based compensation arrangements granted under the Company's 2012 plan was $17.8 and $46.9, respectively. That cost is expected to be recognized over a weighted-average period of 1.04 years.

e. Market Maker for TAT shares traded in Tel Aviv Stock Exchange

On August 15, 2011, TAT entered into a Market Making agreement for its shares traded on the Tel Aviv Stock Exchange (TASE) with Harel Finance Trade & Securities Ltd. for the purpose of improving liquidity of TAT shares. The agreement is for a 12 month period, subject for TASE's approval. The agreement will be automatically extended in 12 month periods, unless otherwise terminated by either of the parties giving 30 days notice or in accordance with certain regulatory circumstances. TAT will pay an immaterial fee in connection with the said agreement.

f. Dividends

On April 22, 2012, TAT's Board declared a cash dividend in the total amount of $2.5 million (approximately NIS 9.4 million), or $0.283 per share (approximately NIS 1.065 per share), for all of the shareholders of TAT. The dividend was paid on May 17, 2012 to shareholders of record on May 3, 2012.

g. Accumulated other comprehensive loss

As of December 31, 2013, the entire amount of accumulated other comprehensive loss consists of amounts derived from foreign currency translation and is related to Bental.

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INVENTORIES, NET (Tables)

12 Months Ended

Dec. 31, 2013

INVENTORIES [Abstract]

Schedule of Inventories

Inventories are composed of the following:

	December 31,
	2013 (*)		2012
Raw materials and components	$	9,648	$	12,321
Work in process		14,044		16,145
Spare parts		4,742		3,897
Finished goods		961		668
	$	29,395	$	33,031

(*) Excluding held for sale assets at December 31, 2013

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TAXES ON INCOME

12 Months Ended

Dec. 31, 2013

TAXES ON INCOME [Abstract]

INCOME TAXES

NOTE 17 - TAXES ON INCOME

a. Measurement of taxable income under the Income Tax (Inflationary Adjustments) Law, 1985 (the "Inflationary Adjustments Law")

In accordance with the Inflationary Adjustments Law, the results for tax purposes have been measured through 2007, and reflected in real terms in accordance with the changes in the Israeli Consumer Price Index (CPI).  Under the Inflationary Adjustments Law (Amendment No. 20, 2008, ("the amendment"), that was enacted in the Israeli Parliament on February 26, 2008, the provisions of the Inflationary adjustments law will no longer apply to the Company and Bental in 2008 and thereafter. The amendment specifies transitional provisions regarding the discontinuance of the provisions of the Inflationary adjustments law that have applied to the Company and Bental through the end of 2007.

b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the Law"):

Some facilities of the Israeli companies in Israel have been granted approved enterprise status under the above law.

The main tax benefits available are:

In respect of income derived from the approved enterprise, the Israeli companies were entitled to reduced tax rates during a period of up to seven years from the year in which such enterprise first earn taxable income (limited to twelve years from commencement of production or fourteen years from the date of approval, whichever is earlier).

Income derived from the approved enterprise is tax exempt during the first two years of the seven year tax benefit period as above, and is subject to a reduced tax rate not exceeding 25% during the remaining years of benefits.

In the event of distribution of a cash dividend from income which was tax exempt as above, the Company and Bental would have to pay the 25% tax in respect of the amount distributed. Company has policy not to distribute cash dividends from such exempt income. As of December 31, 2013, the Company had accumulated a total amount of approximately $9,700 of exempt income (out of which $7,750 relates to Bental which determined as discontinued operation as of December 31, 2013).

Conditions for the entitlement of benefits

The above mentioned benefits were subject to the fulfillment of the terms specified in the Law, the related regulations and the approval plans as specified above. Failure to fulfill these terms might result the cancellation of the tax benefits (all or some), in which case the Israeli companies will be required to repay all benefits including interest and fines. Management estimates that the Israeli companies comply with all terms as mentioned above.

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 current 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 10% in areas in Israel that are designated as Development Zone A and 15% elsewhere in Israel during 2011-2012, 7% and 12.5%, respectively, in 2013-2014, and 6% and 12%, respectively, thereafter. Income derived by a Preferred Company from a 'Special Preferred Enterprise' (as defined in the Approved Enterprise) would enjoy further reduced tax rates for a period of ten years of 5% in Zone A and 8% elsewhere. As with dividends distributed from taxable income derived from an Approved Enterprise or Benefiting Enterprise during the applicable benefits period, dividends distributed from Preferred Income would be subject to a 15% tax (or lower, if so provided under an applicable tax treaty), which would generally be withheld by the distributing company. While the Company may incur additional tax liability in the event of distribution of dividends from tax exempt income generated from its Approved and Benefiting Enterprises, no additional tax liability will be incurred by the Company in the event of distribution of dividends from income taxed in accordance with the 2011 Amendment.

Under the transitional provisions of the 2011 Amendment, the Company and Bental 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 Benefiting Enterprises while waiving benefits provided under the legislation prior to the 2011 Amendment.

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 20% (instead of 15%). In addition, tax rates under the Preferred Enterprise were also raised effective as of January 1, 2014 to 9% in Zone A and 16% elsewhere (instead of the 6% and 12%, respectively).

Bental is located in area in Israel that is designated as Development Zone A and as such entitled to reduce tax rates of 10% during 2011-2012, 7% in 2013, and 9% in 2014 and thereafter.

TAT is located in area in Israel that is designated as elsewhere and as such entitled to reduce tax rates of 15% during 2011-2012, 12.5% in 2013, and 16% in 2014 and thereafter.

c. Corporate tax rate in Israel

The statutory rate of the Israeli corporate tax is as follows: 2013 and 2012 - 25%, 2011- 24%. In July 2009, the "Knesset" (Israeli Parliament) passed the Law for Economic Efficiency (Amended Legislation for Implementing the Economic Plan for 2009 and 2010), 2009, which prescribed, among others, an additional gradual reduction in the rates of the Israeli corporate tax and real capital gains tax starting 2011.

On December 6, 2011, the Knesset (Israel's Parliament) passed a law for changing the tax burden (Legislative Amendments), which cancels, among others, the gradual reduction in the corporate tax rates in Israel. In addition, the corporate tax in Israel was increased to 25% from 2012 and thereafter.

On July 30, 2013, the Israeli Parliament (the Knesset) approved the second and third readings of the Economic Plan for 2013-2014 ("Amended Budget Law") which consists, among others, of fiscal changes whose main aim is to enhance long-term collection of taxes. These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%.

The effect of the abovementioned change on the financial statements is immaterial.

d. U.S. subsidiaries   U.S. subsidiaries are taxed based on federal and state tax laws. The statutory tax rate for 2013, 2012, and 2011 was 38%.

e. Tax assessments

TAT's income tax assessments are considered final through 2011. In 2013, a tax assessment for the years 2008 through 2011 was finalized by the Israeli tax authorities.

Bental income tax assessments are considered final through 2009.

Limco-piedmont income tax assessments are considered final through 2009.

TAT-GAL which was incorporated in 2008 has not received final tax assessment yet.

f. 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,
	2013			2012			2011
Income (loss) before taxes on income (tax benefit) as reported in the statements of income	$	5,267		$	5,279		$	(1,148	)
Statutory tax rate in Israel		25	%		25	%		24	%
Theoretical taxes on income (tax benefit)	$	1,317		$	1,320		$	(276	)
Increase (decrease) in taxes on income resulting from:
Tax adjustment for foreign subsidiaries subject to a different tax rate		453			434			(73	)
Reduced tax rate on income derived from "Preferred Enterprises" plans		(255	)		(143	)		103
Change in enacted tax rates		34			-			-
Exempt income		-			(4	)		(10	)
Valuation allowance		294			499			-
Tax in respect of prior years		(342	)		(83	)		(24	)
Permanent differences		(460	)		67			(55	)
Taxes on income (tax benefit) as reported in the statements of income (loss)	$	1,041		$	2,090		$	(335	)

g. Income (loss) before taxes on income (tax benefit) is comprised as follows:

	Year ended December 31,
	2013		2012		2011
Domestic (Israel)	$	1,942	$	2,046	$	1,547
Foreign (United States)		3,325		3,233		(2,695	)
	$	5,267	$	5,279	$	(1,148	)

h. Taxes on income (tax benefit) included in the statements of income:

	Year ended December 31,
	2013			2012			2011
Current:
Domestic (Israel)	$	160		$	282		$	373
Foreign (United States)		334			295			213
		494			577			586
Deferred:
Domestic (Israel)		15			115			245
Foreign (United States)		874			1,481			(1,142	)
		889			1,596			(897	)
Previous years:
Domestic (Israel)		(209	)		(45	)		(71	)
Foreign (United States)		(133	)		(38	)		47
		(342	)		(83	)		(24	)
	$	1,041		$	2,090		$	(335	)

i. 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,
	2013			2012
Deferred tax assets (liabilities):
Allowance for doubtful accounts	$	47		$	133
Unrealized gains		146			131
Provisions for employee benefits		277			270
Inventory		920			1,171
Other temporary differences		199			417
Deferred tax assets - short-term- other accounts receivables	$	1,589		$	2,122
Goodwill and intangible assets	$	671		$	884
Property, plant and equipment		18			707
Provisions for employee benefits and other temporary differences		38			64
Tax credits carryforward		447			274
Capital and state tax losses carryforward		3,306			1,823
Net operating losses carryforward		419			606
Other		23			-
Deferred tax assets, before valuation allowance - Long-term		4,922			4,358
Valuation allowance		(3,306	)		(1,823	)
Deferred tax assets, net - long-term	$	1,616		$	2,535
Other temporary differences deferred tax liabilities - short-term- other accounts receivable	$	(40	)	$	(126	)
Property, plant and equipment and intangible assets		(1,003	)		(1,457	)
Other		(55	)		(33	)
Deferred tax Liabilities - Long-term	$	(1,058	)	$	(1,490	)

As of December 31, 2013, TAT did not provide a valuation allowance in respect of deferred tax assets, since management currently believes that it is more likely than not that the deferred tax asset will be realized in the future. For capital losses and certain state tax losses, incurred by the U.S. subsidiaries, the Company provides valuation allowance as it cannot predict its future realization.

The following table summarizes the changes in the valuation allowance for deferred tax assets:

Balance, January 1, 2011	$	200
Addition charged to expenses		(16	)
Balance, December 31, 2011		184
Addition charged to expenses		1,639
Balance, December 31,2012		1,823
Addition charged to expenses		1,483
Balance, December 31,2013	$	3,306

TAT does not intend to distribute earnings of a foreign subsidiary aggregating up to approximately $11,400 (tax earnings and profits) as of December 31, 2013, and accordingly, no deferred tax liability has been established relative to these earnings. If such profits and earnings are distributed by cash dividend, it would be taxed at tax rate applicable to such distribution (25%) and an income tax liability of up to approximately $2,850 would be incurred as of December 31, 2013.

TAT does not intend to distribute tax-exempt earnings deriving from Approved Enterprise aggregating approximately $9,700 as of December 31, 2013, and accordingly, no deferred tax liability has been established related to these earnings. If such tax-exempt income is distributed by cash dividend (including a liquidation dividend), it would be taxed at the reduced corporate tax rate applicable to such profits (25%) and an income tax liability of up to approximately $2,425 would be incurred as of December 31, 2013 (See also note 17(b)).

j. A reconciliation of the beginning and ending amount of unrecognized provision is as follows:

	Amount
Balance at January 1, 2011	$	84
Exchange rate differences		2
Balance at December 31, 2011		86
Exchange rate differences		(2	)
Balance at December 31, 2012		84
Exchange rate differences		6
Utilization upon assessment		(90	)
Balance at December 31, 2013	$	-

Unrecognized tax benefits, mainly of a long-term nature, at December 31, 2013, 2012 and 2011 amounted to $(84), $(2) and $2, respectively. All of the above amounts of unrecognized tax benefits would affect the effective tax rate if recognized.

XML

TRANSACTIONS WITH RELATED PARTIES (Transactions with TAT Industries) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Buildings [Member] sqft	Dec. 31, 2010 Buildings [Member]	Dec. 31, 2013 Manufacturing, Office and Storage Space [Member] sqft
Related Party Transaction [Line Items]
Management fees	$ 29	$ 50	$ 50
Lease expenses	$ 424	$ 416	$ 408		$ 400
Area of property leased				344,000		90,000
Length of lease contract				24 years 11 months
Annual incremental increase in lease payment				2.00%	2.00%

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) attributable to TAT Technologies Ltd. shareholders	$ 2,822		$ (1,714)		$ (1,030)
Net loss from discontinued operations	2,429		1,147		548
Net income (loss) from continuing operations	5,251		(567)		(482)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,859	[1]	1,906	[1]	2,618	[1]
Exchange differentials of loans	23		16		(19)
Write down of inventory	67				2,500
Impairment of goodwill, intangible assets and other long lived assets					2,965
Gain on sale of property and equipment	(20)		(12)		(190)
Loss (gain) from change in fair value of derivatives	(27)		(399)		372
Interest from short-term bank deposits and restricted deposits	(11)		(48)
Provision for doubtful accounts	17		258		31
Share in results of affiliated company and impairment of share in affiliated company	(1,025)		3,756		(331)
Gain from dilution of interests in affiliated company					(240)
Share based compensation expenses (income)	3		8		(37)
Liability in respect of employee rights upon retirement	286		396		(86)
Deferred income taxes, net	71		1,712		(863)
Changes in operating assets and liabilities:
Amounts due to (from) related parties, net	(63)		711		(674)
Increase in trade accounts receivable	(1,001)		(979)		(1,717)
Decrease in other accounts receivable, prepaid expenses and other	1,195		266		1,161
Decrease (increase) in inventories, net	659		(2,908)		(2,021)
Increase (decrease) in trade accounts payable	278		581		(82)
Increase (decrease) in other accounts payable and accrued expenses	(417)		1,197		(1,498)
Increase (decrease) in other long-term liabilities	58		(2)
Net cash provided by operating activities	7,203		5,892		1,407
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities			1,900		50
Funds in respect of employee rights upon retirement	(48)		(457)		103
Proceeds from sale of property and equipment	51		50		217
Purchase of property and equipment	(2,240)		(2,147)		(2,953)
Investment in short-term deposit			(10,000)
Proceeds released from restricted deposits	2,307		947		1,822
Net cash provided by (used in) investing activities	70		(9,707)		(761)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term loans	(2,286)		(776)		(3,021)
Proceeds from long-term loans received					674
Dividend paid			(2,500)
Repayments of short-term loans	(719)		(4,542)		(796)
Short-term credit received from a bank	26		627		2,645
Repurchase of treasury shares			(70)
Exercise of options	43
Net cash used in financing activities	(2,936)		(7,261)		(498)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Cash provided by operating activities of discontinued operations	685		2,054		148
Cash provided by (used in) investing activities of discontinued operations	(31)		(226)		272
Cash used in financing activities of discontinued operations	(304)		(285)		(351)
Effect of exchange rate changes on cash and cash equivalents of discontinued operations	164		90		(29)
Net cash provided by discontinued operations	514		1,633		40
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	4,851		(9,443)		188
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	17,786		27,229		27,041
CASH AND CASH EQUIVALENTS AT END OF YEAR	22,637		17,786		27,229
Cash and cash equivalents	2,823		2,309		676
CASH AND CASH EQUIVALENTS AT END OF YEAR	19,814		17,786
Supplementary information on investing activities not involving cash flows:
Purchase of property and equipment on credit	590
Supplemental disclosure of cash flow information:
Interest paid	(89)		(209)		(184)
Income taxes paid	(961)		(813)		(966)
Income taxes refunds	$ 1,383		$ 780		$ 1,793

[1] Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (ILS)	Dec. 31, 2013	Dec. 31, 2012
Ordinary shares, par value per share	0.9	0.9
Ordinary shares, shares authorized	10,000,000	10,000,000
Ordinary shares, shares issued	9,079,709	9,073,043
Ordinary shares, shares outstanding	8,805,236	8,798,570
Treasury stock, shares	274,473	274,473

XML

OTHER BALANCE SHEET SUPPLEMENTALS

12 Months Ended

Dec. 31, 2013

OTHER BALANCE SHEETS SUPPLEMENTAL [Abstract]

OTHER BALANCE SHEETS SUPPLEMENTAL

NOTE 10 -        OTHER BALANCE SHEETS SUPPLEMENTALS

a. Other accounts receivable and prepaid expenses:

	December 31,
	2013 (*)		2012
Deferred tax asset	$	1,589	$	2,122
Government authorities		1,154		1,424
Prepaid expenses		498		831
Income receivables and grants		-		33
Derivatives		-		27
Amounts due from related parties		5		54
Other		68		96
	$	3,314	$	4,587

(*) Excluding held for sale assets at December 31, 2013

b. Other account payable and accrued expenses:

	December 31,
	2013(*)		2012
Employees and payroll accruals	$	3,077	$	3,358
Accrued expenses (**)		732		1,757
Government authorities		483		673
Advances from customers		840		731
Warranty provision		229		276
Accrued royalties		336		268
Deferred tax liability		40		126
Amounts due to related parties		-		112
Other accrued expenses		78		106
	$	5,815	$	7,407

(*) Excluding held for sale assets at December 31, 2013

(**) Includes $750 royalties payable to a supplier in the MRO business, at December 31, 2013, following a reconciliation of an audit.

XML

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Warranty provision [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance, beginning	$ 276	$ 288	$ 341
Additions	186	196	169
Utilization	(190)	208	222
Write-offs, net of recoveries
Less: Held for sale	(43)
Balance, ending	229	276	288
Allowance for Doubtful Accounts [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance, beginning	376	190	2,419
Additions	17	258	31
Utilization
Write-offs, net of recoveries	(270)	(72)	2,260
Balance, ending	$ 123	$ 376	$ 190

XML

ENTITY-WIDE DISCLOSURE (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - sales of products	$ 34,364	[1]	$ 36,263	[1]	$ 36,837	[1]
Total revenues - services	45,187		41,652		36,902
Long-lived assets - sale of products	5,748	[2]	8,417		8,528
Long-lived assets - service revenues	5,399		4,493		4,325
Number of customers accounting for more than 10% of total net revenue
Israel [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - sales of products	6,248	[1]	9,147	[1]	8,218	[1]
Total revenues - services	612		468		384
Long-lived assets - sale of products	5,748	[2]	8,417		8,528
Long-lived assets - service revenues
Unites States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - sales of products	18,016	[1]	16,475	[1]	21,495	[1]
Total revenues - services	27,639		25,648		25,416
Long-lived assets - sale of products
Long-lived assets - service revenues	5,399		4,493		4,325
France [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - sales of products	5,482	[1]	4,604	[1]	3,264	[1]
Long-lived assets - sale of products
Netherland [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - services	1,553		3,303		4,378
Long-lived assets - service revenues
Rest of Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - sales of products	2,292	[1]	1,966	[1]	2,507	[1]
Total revenues - services	7,658		4,624		3,875
Long-lived assets - sale of products
Long-lived assets - service revenues
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenues - sales of products	2,326	[1]	4,071	[1]	1,353	[1]
Total revenues - services	7,725		7,609		2,849
Long-lived assets - sale of products
Long-lived assets - service revenues

[1] Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

[2] Excluding held for sale assets at December 31, 2013

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2013
Document And Entity Information Abstract
Entity Registrant Name	TAT TECHNOLOGIES LTD
Entity Central Index Key	0000808439
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	20-F
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Entity Common Stock, Shares Outstanding	8,805,236
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes

XML

TRANSACTIONS WITH RELATED PARTIES

12 Months Ended

Dec. 31, 2013

TRANSACTIONS WITH RELATED PARTIES [Abstract]

TRANSACTIONS WITH RELATED PARTIES

NOTE 11 - TRANSACTIONS WITH RELATED PARTIES

a. Transactions with TAT Industries:

	Year ended December 31,
	2013		2012		2011
Management fees (1)	$	29	$	50	$	50
Lease expenses (2)	$	424	$	416	$	408

(1) According to the agreement between TAT and TAT Industries, TAT Industries will pay the Company an annual management fee in the amount of $50. The management fees are recorded as a reduction of general and administration expenses. Such services provided to TAT Industries until the purchase of TAT's shares by FIMI Funds on August 7, 2013 (see also note 1).

(2) During 2000, TAT entered into a lease agreement with TAT Industries, pursuant to which the Company leases from TAT Industries approximately 344,000 square feet, including 90,000 square feet of manufacturing, office and storage space, for a period of 24 years and eleven months for an annual rental fee which is subject to revaluation every fifth year by a real estate appraiser, with an additional incremental payment of 2% per year.

In 2010, following a revaluation by a real estate appraiser, the rental fee was increased to $400 per year with an additional incremental payment of 2% per year. The rental fee will be revaluated again in 2015 (the "Next Revaluation"). The Company's Audit Committee has reapproved the said agreement until the Next Revaluation.

b. Balances with related parties:

	December 31,
	2013		2012
TAT Industries - current asset (1)	$	-	$	54
FAVS - current asset		5		-
Total asset	$	5	$	54
Bental Non-controlling interest - current liability	$	-	$	(60	)
FAVS - current liability		-		(29	)
Isal Amlat Investment (1993) Ltd.		-		(23	)
Total liability	$	-	$	(112	)

(1) Results from certain expenses incurred by TAT Industries and borne by the Company. The debt bears interest at the rate equal to the interest rate agreed between TAT Industries and its lending banks.

c. Transactions with related parties:

	Year ended December 31,
	2013		2012		2011
Management fees to shareholders (see item e below)	$	-	$	359	$	400

d. Bental is engaged in various agreements with the Non-controlling interest and other related parties for the rental, maintenance and other services provided to it, in connection with its plant and operations. Total amount paid by Bental for these services in 2013, 2012 and 2011 was $432, $505 and $526, respectively.

e. In March 2012, the audit committee and the board of directors of TAT approved a new three-year management agreement with Isal Amlat Investment (1993) Ltd. ("Isal Amlat") commencing as of February 8, 2012 (the "New Management Agreement"). Each of TAT and Isal Amlat shall be entitled to terminate the New Management Agreement subject to a prior written notice of 4 months. Pursuant to the New Management Agreement, in consideration of the management services provided by Isal Amlat, TAT pays Isal Amlat  management fees in a total annual amount of NIS 1,500,000 (approximately $400), linked to the Consumer Price Index to be paid on a monthly basis, plus VAT. In addition, Isal Amlat is entitled to repayment of expenses actually borne as part of providing the management services. The audit committee and board of directors of the Company will examine on a yearly basis, the management services actually provided to the Company, and shall examine whether a material change has occurred justifying the update of the management fees and/or the conditions of the New Management Agreement. The New Management Agreement was approved by the shareholders of TAT on June 28, 2012.

On August 21, 2012, the board of directors of TAT approved, following an approval of TAT's audit committee, a change to the New Management Agreement with Isal Amlat, effective from such date according to which the scope of the services provided by Isal Amlat to TAT were reduced and the annual management fees were also reduced by a total amount of NIS 570,000 (approximately $150 - the "reduced amount").

Total amount paid by TAT for the management services in 2012 and 2011, was $359 and $397, respectively.

In addition, the Company received management services from a private company ("Management company") controlled by Mr. Nathan Galili ("Galili"), CEO of KNM Industries Ltd. (a private company through which Isal Amlat indirectly holding control in the Company). The management services will consist of a half-time of Galili, which value is more than the reduced amount, and will additionally include its services as active chairman of Bental. For those services the Company will pay the Management company annual management fees equal to the reduced amount, in addition to NIS 7,000 (approximately $2, plus VAT), as a monthly remuneration for travelling expenses to Bental. In addition, if during the service period or within a twelve month period from the end of the service period the Company will sell its holding in Bental, for more than $6,600 ("low threshold"), then the Management company will be eligible for a bonus which will be determined as follows:

2% out of the 1st million above the low threshold, the Company will receive for its holding in Bental, plus an additional 3% out of the 2nd million above the low threshold the Company will receive for its holding in Bental, plus an additional 5% out of the 3rd million above the low threshold the Company will receive for its holding in Bental. It is clarified that in any event the amount of the bonus shall not exceed $100.

Such management services will be provided until February 8, 2015 (the end of term of the new management agreement with Isal Amlat). Each of the parties (TAT and the Management company) may terminate the agreement with a prior written notice of four months.

On January 27, 2013, TAT informed Isal Amlat that no management services had been provided by Isal Amlat to TAT during the preceding months, and that TAT decided to immediately terminate the Management Agreement. At that date TAT ceased paying management fees.

On February 8, 2013, Mr. Galili informed TAT on the termination of the engagement with TAT, effectively immediately while management fees will be paid throughout June 8, 2013 at the end of the four-month notice period.

f. On June 14, 2010, TAT and Bental signed a management services agreement. TAT agreed to provide Bental with various services including investor relations, business development, marketing and advertising consulting, legal services and the appointing of TAT personnel in Bental board of directors. The agreement was effective since January 1, 2010 and the annual management fees were in the amount of $120. Such management fees were paid until June 30, 2013, following which the extent of such services reduced significantly together with the intent of the Company to sell its entire interest in Bental (see also note 4).

g. In December 2009, Piedmont provided a guarantee for a period of one year up to $7,000 in respect of FAvS' debt taken in connection with the acquisition of AeTR. As of December 31, 2012, the guarantee amount is $4,600 (such guarantee was released on March 18, 2013, see also note 3(a)).

h. On September 7, 2011, TAT received a loan from Bental for the total amount of NIS 2.5 million (approximately $700), to be repaid in whole at the end of a 24 month period (the "Term"). The principal amount bears interest of Prime + 1% payable on a quarterly basis and may be repaid at any time during the term upon TAT's discretion. Simultaneously with such loan, Bental received a loan from an Israeli bank for similar amount under similar terms and conditions. Such loan amount was repaid by TAT to Bental on September 8, 2013, which in turn Bental made, on the same date, an on time repayment of the loan in the total amount of NIS2.5 million (approximately $693)

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SHAREHOLDERS' EQUITY (Stock Option Plans TAT Technology) (Details)	12 Months Ended				1 Months Ended	12 Months Ended	0 Months Ended		0 Months Ended		0 Months Ended		1 Months Ended		12 Months Ended					12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2013 ILS	Dec. 31, 2012 ILS	Mar. 31, 2012 Chief Executive Officer [Member]	Dec. 31, 2011 Chief Executive Officer [Member]	Aug. 14, 2008 Chief Executive Officer Series A [Member] USD ($)	Aug. 14, 2008 Chief Executive Officer Series A [Member] ILS	Aug. 14, 2008 Chief Executive Officer Series B [Member] USD ($)	Aug. 14, 2008 Chief Executive Officer Series B [Member] ILS	Aug. 14, 2008 Chief Executive Officer Series C [Member] USD ($)	Aug. 14, 2008 Chief Executive Officer Series C [Member] ILS	Oct. 31, 2012 2012 Plan [Member]	Jun. 30, 2012 2012 Plan [Member]	Dec. 31, 2013 2012 Plan [Member] USD ($)	Dec. 31, 2012 2012 Plan [Member] USD ($)	Dec. 31, 2011 2012 Plan [Member] USD ($)	Jun. 28, 2012 2012 Plan [Member] USD ($)	Jun. 28, 2012 2012 Plan [Member] ILS	Dec. 31, 2012 2012 Plan [Member] Minimum [Member]	Dec. 31, 2012 2012 Plan [Member] Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for the plan																		380,000	380,000
Vesting period for plan							2 years		3 years		4 years			3 years
Ordinary shares, par value per share			0.9	0.9				0.9		0.9		0.9							0.9
Exercise price																		$ 6.5
Expected volatility							6.15%		6.15%		6.15%									41.57%	43.40%
Expected life of option, years																				2 years 2 months 23 days	3 years 2 months 23 days
Average risk-free interest rate																				0.23%	0.32%
Expected dividend yield																9.80%
Number of options
Options, Granted													330,000
Options, Expired					(43,652)
Options, Forfeited	(133,334)					(21,825)
Exercised	(6,666)
Options, ending	145,000
Exercisable at end of year	24,167
Weighted average exercise price
Options, Granted
Options, Expired
Options, Forfeited	$ 6.5
Exercised	$ 6.5
Options, ending	$ 6.5
Exercisable at end of year	$ 6.5
Weighted-average grant-date fair value of options granted		$ 0.19					$ 2.69		$ 2.90		$ 3.15
Aggregate intrinsic value															$ 212,000	$ 0	$ 0
Plan compensation expense															3,000	8,000	(37,000)
Unrecognized compensation cost related to non-vested stock options															$ 17,800	$ 46,900
Unrecognized compensation weighted average period of recognition, years															1 year 15 days
Period in which equity exceeds threshold														4 years

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SEGMENT INFORMATION (Schedule of Assets By Segment) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Segment Reporting, Asset Reconciling Item [Line Items]
Assets	$ 108,880,000		$ 108,942,000		$ 116,311,000
Assets less assets held for sale	98,889,000
Depreciation and amortization	1,859,000	[1]	1,906,000	[1]	2,618,000	[1]
Expenditure for segment assets	2,830,000	[1]	2,147,000	[1]	2,953,000	[1]
OEM of Heat Management Solutions [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Assets	45,518,000		34,315,000		34,055,000
Depreciation and amortization	991,000	[1]	974,000	[1]	1,139,000	[1]
Expenditure for segment assets	992.000	[1]	1,047,000	[1]	924,000	[1]
Goodwill
OEM - Electric Motion Systems [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Assets			12,707,000		13,941,000
Depreciation and amortization		[1]		[1]		[1]
Expenditure for segment assets		[1]		[1]		[1]
Heat Transfer Services and Products [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Assets	28,806,000		27,093,000		27,464,000
Depreciation and amortization	603,000	[1]	735,000	[1]	758,000	[1]
Expenditure for segment assets	664,000	[1]	756,000	[1]	638,000	[1]
MRO services for Aviation Components [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Assets	18,137,000		18,473,000		21,068,000
Depreciation and amortization	265,000	[1]	197,000	[1]	721,000	[1]
Expenditure for segment assets	584,000	[1]	344,000	[1]	1,391,000	[1]
Amounts not allocated to segments [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Assets	16,419,000		16,354,000		19,783,000
Depreciation and amortization		[1]		[1]		[1]
Expenditure for segment assets		[1]		[1]		[1]
Goodwill

[1] Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Revenues:
Products	$ 34,364	[1]	$ 36,263	[1]	$ 36,837	[1]
Services	45,187		41,652		36,902
Total revenues	79,551		77,915		73,739
Cost of revenues:
Products	24,892		25,177		24,914
Services	35,987		33,362		31,794
Write down of inventory and impairment charges of long lived assets					5,465
Total cost of revenues	60,879		58,539		62,173
Gross profit	18,672		19,376		11,566
Operating expenses:
Research and development, net	713		995		455
Selling and marketing	3,150		2,899		2,819
General and administrative	9,512		10,110		9,450
Other income	(20)		(13)		(190)
Total operating expenses	13,355		13,991		12,534
Operating income (loss) from continuing operations	5,317		5,385		(968)
Financial expenses, net	(947)		(2,094)		(2,123)
Financial income	897		1,988		1,703
Gain from dilution of interests in affiliated company					240
Income (loss) from continuing operations before taxes on income	5,267		5,279		(1,148)
Taxes on income (tax benefit)	1,041		2,090		(335)
Net income (loss) from continuing operations after taxes on income	4,226		3,189		(813)
Share in results of affiliated company and impairment of share in affiliated company	1,025		(3,756)		331
Net income (loss) from continuing operations	5,251		(567)		(482)
Loss from discontinued operations, net of tax ($5, $3 and $19 in 2013, 2012 and 2011, respectively)	(2,429)		(1,147)		(548)
Net loss attributable to TAT Technologies Ltd. shareholders	$ 2,822		$ (1,714)		$ (1,030)
EPS attributable to controlling interest: Basic and diluted
Net income (loss) from continuing operations per share attributable to controlling interest	$ 0.60		$ (0.06)		$ (0.05)
Loss from discontinued operations per share attributable to controlling interest	$ (0.28)		$ (0.13)		$ (0.07)
Basic and diluted net loss per share attributable to controlling interest	$ 0.32		$ (0.19)		$ (0.12)
Weighted average number of shares outstanding - Basic	8,799,237		8,808,075		8,815,003
Weighted average number of shares outstanding - Diluted	8,808,920	[2]	8,808,075	[2]	8,815,003	[2]

[1] Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

[2] Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans.

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AVAILABLE-FOR-SALE - MARKETABLE SECURITIES

12 Months Ended

Dec. 31, 2013

AVAILABLE-FOR-SALE - MARKETABLE SECURITIES [Abstract]

AVAILABLE-FOR-SALE - MARKETABLE SECURITIES

NOTE 5 -           AVAILABLE-FOR-SALE - MARKETABLE SECURITIES

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Fair Value
Available-for-sale:
Money Market	$	1,136	$	-	$	1,136

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Fair Value
Available-for-sale:
Money Market	$	3,341	$	-	$	3,341

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HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2013

HELD FOR SALE CLASSIFICATION AND DISCONTINUED [Abstract]

HELD FOR SALE CLASSIFICATION AND DISCONTINUED

NOTE 4 -           HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

On February 18, 2014 TAT entered into an agreement to sell its entire interest in Bental, the OEM of Electric Motion Systems operating segment, constituting 70% of Bental's issued and outstanding share capital, to Bental Investments Agshah Ltd. ("Bental Investments"), for an aggregate consideration of $5 million, reflecting an impairment of $3,319 (out of which $2,323 attributed to controlling interest), which is reported in Income (loss) from discontinued operations in the consolidated statement of operations for the year ended December 31, 2013. In addition the Company recorded a loss from discontinued operations of $152 for the year ended on December 31, 2013 (out of which $106 attributed to controlling interest).

The impairment amount is based on the selling price, which is categorized as level 3 measurement.

Closing of the transaction is expected to take place within the next several weeks.

The following table summarizes the components of assets and liabilities held-for-sale in the consolidated balance sheet as of December 31, 2013:

	December 31,
	2013
Assets:
Cash and cash equivalents	$	2,823
Trade accounts receivable		4,067
Other accounts receivable and prepaid expenses		196
Inventories, net		2,983
Funds in respect of employee right upon retirement		778
Deferred income taxes		29
Property, plant and equipment, net		2,402
Assets of businesses held for sale		13,278
Less: impairment		(3,319	)
Total assets held for sale	$	9,959
Liabilities:
Trade accounts payables	$	946
Other accounts payable and accrued expenses		1,109
Long-term loans, net of current maturities		248
Liability in respect of employee rights upon retirement		1,070
Deferred income taxes		55
Total liabilities held for sale	$	3,428

The following are amounts related to Bental included in net loss from discontinued operations:

	Year ended December 31,
	2013			2012			2011
Revenues	$	9,589		$	10,008		$	11,658
Loss before taxes on income (tax benefit)	$	(148	)	$	(191	)	$	(158	)
Loss from discontinued operations, net of tax ($5, $3 and $19 in 2013, 2012 and 2011, respectively)	$	(3,471	)	$	(1,205	)	$	(601	)
Loss from discontinued operations attributable to non-controlling interest		1,042			58			53
Loss from discontinued operations attributable to TAT Technologies Ltd. shareholders	$	(2,429	)	$	(1,147	)	$	(548	)

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EARNINGS (LOSS) PER SHARE ("EPS")

12 Months Ended

Dec. 31, 2013

EARNINGS (LOSS) PER SHARE (?EPS?)[Abstract]

EARNINGS (LOSS) PER SHARE (?EPS?)

NOTE 16 -        EARNINGS (LOSS) PER SHARE ("EPS")

Basic and diluted earnings (loss) 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,
	2013			2012			2011
Numerator for EPS:
Net income (loss) from continuing operations	$	5,251		$	(567	)	$	(482	)
Net loss from discontinued operations, net of tax		(2,429	)		(1,147	)		(548	)
Denominator for EPS:
Weighted average shares outstanding - basic		8,799,237			8,808,075			8,815,003
Dilutive shares		9,683			-			-
Weighted average shares outstanding - diluted (*)		8,808,920			8,808,075			8,815,003
EPS attributable to controlling interest:
Basic and diluted
Net income (loss) from continuing operations	$	0.60		$	(0.06	)	$	(0.05	)
Loss from discontinued operations	$	(0.28	)	$	(0.13	)	$	(0.07	)

(*) Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans.

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SHORT TERM BANK CREDIT AND LONG TERM LOANS

12 Months Ended

Dec. 31, 2013

SHORT TERM BANK CREDIT AND LONG TERM LOANS [Abstract]

SHORT TERM BANK CREDIT AND LONG TERM LOANS

NOTE 12 -        SHORT TERM BANK CREDIT AND LONG TERM LOANS

a. Terms of the long-term loans and balances:

		Interest Rate
	Currency of loan	December 31, 2013			Years of Maturity		December 31, 2013
Current maturities of long-term loan (2)	$		2.50%-3.50	%		2009-2014	$	884

		Interest Rate
	Currency of loan	December 31, 2012			Years of Maturity		December 31, 2012
Long-term loan (1)	NIS		5.25	%		2012-2014	$	523
Long-term loan (2)	$		2.50%-3.50	%		2009-2014		2,477
Long-term loan (3)	NIS	Prime + 1		%		2013		670
								3,670
Less - current maturities (1)								(290	)
Less - current maturities (2)								(1,594	)
Less - current maturities (3)								(670	)
							$	1,116

(1) The original loan was received by Bental in 2009 from an Israeli bank in the amount of $1,400 to be repaid in quarterly installments over a five year period, commencing 2010.  On June 30, 2010, the remaining balance of the original loan, in the amount of $1,185, was repaid and a new loan in the same amount was taken. This new loan bears annual fixed interest of 5.25% and will be repaid until August 2014 in quarterly installments. The loan balance as of December 31, 2013 and 2012 was $248 (presented as part of the liabilities held for sale) and $523, respectively (with regard to covenants related to such loan see note 14(f)(3)).

(2) Loans received by TAT from an Israeli bank in a total amount of $6,250 out of which $5,000 were received during year 2008 and additional $1,250 were received during year 2009. The loans amount was to be repaid in four annual installments commencing 2011. These loans bear quarterly interest of Libor + 3.5% and Libor + 1.85%, respectively. Through November, 2012 TAT prepaid $3,775, following which the remaining balance was $2,477. In September, 2011, TAT reached agreement with its lending bank to adjust certain financial covenants related to the said loans it was failing to meet at the time. On May 1, 2013, the Company made a payment of $1,593 in accordance with its payment schedule following which the remaining balance was $884. As of December 31, 2013 the Company met all financial covenants related to such loans (see also note 14(f)(2)).

(3) On September 7, 2011, Bental received a loan from an Israeli bank in a total amount of NIS2.5 million (approximately $700), to be repaid in full at the end of a 24 month period (the "Term"). The principal amount bears interest of Prime + 1% payable on a quarterly basis and may be repaid at any time during the term upon Bental's discretion. On September 8, 2013 Bental made an on time repayment of the loan in the total amount of NIS2.5 million (approximately $693) (see also note 11(h)).

Group provided certain guarantees and covenants to secure its long-term loans, see note 14(e) and 14(f).

b. As of December 31, 2013 TAT's short-term bank credit balance amounted to $26.

c. Line of credit

On November 15, 2011, Limco-Piedmont renewed its line of credit with a U.S bank for an additional 21 month period ending on August 31, 2013 (not renewed further in 2013), for borrowings of up to $10,000 under certain conditions. $5,000 of this amount will stand for Limco and $5,000 will stand for Piedmont. The line of credit bears interest of Libor + 1.5%, and its utilization is subject to compliance with financial covenants agreed between the parties. As of December 31, 2012, approximately $688 of the total line of credit was utilized by Limco and Piedmont. In addition, as of December 31, 2012 Limco-Piedmont met all financial covenants related to such line of credit (see also note 14(f)(1)).

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TAXES ON INCOME (Schedule of Income (Loss) from Continuing Operations Before Income Tax Domestic and Foreign) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
TAXES ON INCOME [Abstract]
Domestic (Israel)	$ 1,942	$ 2,046	$ 1,547
Foreign (United States)	3,325	3,233	(2,695)
Loss before taxes on income	$ 5,267	$ 5,279	$ (1,148)

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PROPERTY, PLANT AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2013

PROPERTY, PLANT AND EQUIPMENT, NET [Abstract]

PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 8 -           PROPERTY, PLANT AND EQUIPMENT, NET

Composition of assets, grouped by major classifications, is as follows:

	December 31,
	2013 (*)		2012
Cost:
Land and buildings	$	5,582	$	6,929
Machinery and equipment (1)		34,696		36,849
Motor vehicles		418		676
Office furniture and equipment		1,559		2,293
Software		1,166		1,166
		43,421		47,913
Less: Accumulated depreciation		32,274		35,003
Depreciated cost	$	11,147	$	12,910

(*) Excluding held for sale assets at December 31, 2013

(1) The cost is net of investment grants received by Bental in the amount of $274 as of December 31, 2012.

Depreciation and amortization expenses amounted to $1,859, $1,906 and $2,618 for the years ended December 31, 2013, 2012 and 2011, respectively (depreciation and amortization expenses do not include impairment charges).

During the year ended December 31, 2011, the Company recorded impairment of property, plant and equipment in the amount of $1,865, attributable to certain property and equipment items of the MRO services for aviation components segment, based on estimations of the fair value of these assets. The impairment charge was recorded under the cost of revenues item in the consolidated statements of operations.

Liens on property, plant and equipment are discussed at note 14(f).

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FAIR VALUE MEASUREMENT (Schedule of Financial Assets Measured at Fair Value on a Recurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Assets:
Money market	$ 1,136	$ 3,341
Derivatives		27
Total	1,136	3,368
Level 1 [Member]
Assets:
Money market	1,136	3,341
Derivatives
Total		3,341
Level 2 [Member]
Assets:
Money market
Derivatives		27
Total		27
Level 3 [Member]
Assets:
Money market
Derivatives
Total

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FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2013

FAIR VALUE MEASUREMENT [Abstract]

FAIR VALUE MEASUREMENT

NOTE 6 -           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 measured at fair value on a recurring basis, consisted of the following types of instruments:

	December 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money Market	$	1,136	$	-	$	-	$	1,136

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Money Market	$	3,341	$	-	$	-	$	3,341
Derivatives		-		27		-		27
Total	$	3,341	$	27	$	-	$	3,368

The carrying amounts of financial instruments, include cash and cash equivalents, short-term bank deposits, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their generally short maturities.

The fair values of long-term liabilities were estimated by using level 3 inputs based on discounted future cash flows, using the rate currently available for liabilities of similar terms and maturity. The carrying amount of the Group's long-term liabilities approximates their fair value since interest rate reflects current market rates.

Non-Recurring Fair Value Measurements

As for the fair value measurement related to the impairment of Bental as of December 31, 2013, see note 4.

The following table presents the Group's assets measured at fair value on a non-recurring basis for the year ended December 31 2012:

			Fair value measurements using
	As of December 31, 2012		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total losses for the year ended December 31, 2012
Goodwill (1) (*)	$	-	$	-	$	-	$	-	$	1,015
Investment in affiliated company (2)	$	1,264	$	-	$	-	$	1,264	$	3,300

(*) Excluding discontinued operations for the year ended on December 31, 2012

(1) During the second quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System reporting unit and accordingly performed interim goodwill impairment testing as of June 30, 2012, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill for this reporting unit, with the assistance of a third party valuation firm. Based on the results of this test, the Company determined that the entire balance of goodwill included in this reporting unit was impaired and recorded an impairment charge of $1,015.

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

Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT's investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of a third party valuation firm. Based on the results of this test the Company determined that its investment in FAvS was impaired by $3,300. The impairment was due to a decline in FAvS' profitability margins and future forecasted sales levels.

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INVENTORIES, NET

12 Months Ended

Dec. 31, 2013

INVENTORIES [Abstract]

INVENTORIES

NOTE 7 - INVENTORIES, NET

Inventories are composed of the following:

	December 31,
	2013 (*)		2012
Raw materials and components	$	9,648	$	12,321
Work in process		14,044		16,145
Spare parts		4,742		3,897
Finished goods		961		668
	$	29,395	$	33,031

(*) Excluding held for sale assets at December 31, 2013

Inventories are net of reserve for slow moving.

Write down of inventory (as mentioned below) is in the amount of $1,147 and $1,430 at December 31, 2013 and 2012, respectively.

During the year ended December 31, 2011, the Company recorded a write down of inventory in the amount of $2,500 attributable to inventory of the MRO services for aviation components segment. The write down was due to management's estimation of the continued decline in future forecasted sales levels and decline in profitability margins in certain product lines in this operating segment, which were lower than previously anticipated, resulting from the weakness in these areas of business, and was recorded under cost of revenues.

In 2013, 2012 and 2011, approximately $350, $1,892 and $1,501, respectively, of inventory previously written-down were used or sold in the course of providing MRO services.

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GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2013

GOODWILL AND INTANGIBLE ASSETS [Abstract]

GOODWILL AND INTANGIBLE ASSETS

NOTE 9 -           GOODWILL AND INTANGIBLE ASSETS

a. Intangible assets:

	December 31,
	2013			2012
License for service center
Cost	$	2,050		$	2,050
Accumulated amortization and impairment charges		(2,050	)		(2,050	)
Amortized cost	$	-		$	-

Amortization expenses amounted to $539 for the year ended December 31, 2011 (amortization expenses do not include impairment charges).

For the year ended December 31, 2011, due to decrease in the anticipated profit margins the Company recorded an impairment charge for its intangible assets in the total amount of $1,398, under cost of revenues. This amount is comprised of impairment charge in the amount of $1,100 (the entire asset was written off) in connection with the "Authorized service center" intangible asset at the MRO services for Aviation Components operating segment and $298 (the entire asset was written off) in connection with the 'Customer Relations' intangible asset at its OEM of Electric Motion Systems operating segment (see also note 6(2)).

b. Impairment Assessments

During the quarter ended June 30, 2012, management believed that there were indicators of impairment of goodwill in its OEM of Electric Motion System reporting unit as of June 30, 2012, primarily due to a decline in future forecasted sales levels and profitability margins resulting from the continued weakness in the defense industry. Accordingly, the Company performed an impairment test of goodwill for this reporting unit, with the assistance of a third party valuation firm. Based on the results of this test, the Company determined that the entire balance of goodwill included in this reporting unit was impaired and recorded an impairment charge of $1,015.

The Company determined the fair value of the OEM of Electric Motion Systems reporting unit using the discounted cash flows method. The material assumptions used for 2012 annual test were five years of projected net cash flows (in accordance with the Company's budget), a discount rate of 17.72% and a long-term growth rate of 2.0%. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses.

During the year ended December 31, 2011, the Company determined under the first step of its annual test that the fair value of the OEM of Electric Motion Systems reporting unit is greater than its carrying amount. Based on the results of this test the Company determined that the goodwill related to the said reporting unit was not impaired.

In 2011, the fair value of the OEM of Electric Motion Systems reporting unit exceeded its carrying value by approximately $100, or 1.1% and thus was at risk of failing step one of the goodwill impairment test, and was therefore at risk of a future impairment in the event of unfavorable changes in the forecasted cash flows or the key assumptions used in the analysis, including the weighted average cost of capital (discount rate) and growth rates utilized in the discounted cash flow analysis.

The Company determined the fair value of the OEM of Electric Motion Systems reporting unit using the discounted cash flows method. The material assumptions used for 2011 annual test were three years of projected net cash flows (in accordance with the Company's budget), a discount rate of 18% and a long-term growth rate of 1.95%. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses.

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PROPERTY, PLANT AND EQUIPMENT, NET (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	$ 43,421	[1]	$ 47,913
Less: Accumulated depreciation	32,274	[1]	35,003
Depreciated cost	11,147	[1]	12,910
Investment grants			274
Depreciation and amortization	1,859	[2]	1,906	[2]	2,618	[2]
MRO Services for Aviation Components [Member]
Property, Plant and Equipment [Line Items]
Depreciation and amortization	265	[2]	197	[2]	721	[2]
Impairment charges					1,865
Land and Buildings [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	5,582	[1]	6,929
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	34,696	[1],[3]	36,849	[3]
Motor Vehicles [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	418	[1]	676
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	1,559	[1]	2,293
Software [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, gross	$ 1,166	[1]	$ 1,166

[1] Excluding held for sale assets at December 31, 2013

[2] Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

[3] The cost is net of investment grants received by Bental in the amount of $274 as of December 31, 2012.

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TAXES ON INCOME (Schedule of Components of Income Tax Provision) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Current:
Domestic (Israel)	$ 160	$ 282	$ 373
Foreign (United States)	334	295	213
Total current	494	577	586
Deferred:
Domestic (Israel)	15	115	245
Foreign (United States)	874	1,481	(1,142)
Total deferred	889	1,596	(897)
Previous Years:
Domestic (Israel)	(209)	(45)	(71)
Foreign (United States)	(133)	(38)	47
Total previous years	(342)	(83)	(24)
Taxes on income (tax benefit) as reported in the statements of income (loss)	$ 1,041	$ 2,090	$ (335)

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GOODWILL AND INTANGIBLE ASSETS (Intangible Assets Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010 Customer Relationship [Member] MRO Services for Aviation Components [Member]	Dec. 31, 2011 Customer Relationship [Member] OEM Electric Motion Systems [Member]	Dec. 31, 2011 License for Service Center [Member] MRO Services for Aviation Components [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 539
Impairment of intangible assets	$ 1,398	$ 481	$ 298	$ 1,100

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INVENTORIES, NET (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Dec. 31, 2011
Schedule of Inventory [Line Items]
Raw materials and components	$ 9,648	[1]	$ 12,321
Work in process	14,044	[1]	16,145
Spare parts	4,742	[1]	3,897
Finished goods	961	[1]	668
Total inventories	29,395	[1]	33,031
Reserve for slow moving and surplus production and write down of inventory	1,147	[1]	1,430
Write down of inventory	67			2,500
MRO Services for Aviation Components [Member]
Schedule of Inventory [Line Items]
Write down of inventory				2,500
Inventory previously written down used in provision	$ 350		$ 1,892	$ 1,501

[1] Excluding held for sale assets at December 31, 2013

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SELECTED STATEMENTS OF INCOME DATA (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Financial income:
Foreign currency gains	$ 661	$ 1,294	$ 1,108
Derivatives	27	399	352
Tax refund	95	53	71
Interest on cash equivalents, short-term bank deposits and others	114	242	172
Total financial income	897	1,988	1,703
Financial expenses:
Bank charges	(77)	(71)	(74)
Interest on short-term loans	(18)	(98)	(98)
Interest on long-term loans	(66)	(120)	(148)
Foreign currency losses	(786)	(1,376)	(1,149)
Derivatives		(321)	(642)
Others		(108)	(12)
Total financial expenses	(947)	(2,094)	(2,123)
Financial income (expenses), net	$ (50)	$ (106)	$ (420)

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AVAILABLE-FOR-SALE - MARKETABLE SECURITIES (Tables)

12 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-For-Sale Securities

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Fair Value
Available-for-sale:
Money Market	$	1,136	$	-	$	1,136

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Fair Value
Available-for-sale:
Money Market	$	3,341	$	-	$	3,341

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GENERAL (Details) (USD $)							1 Months Ended					0 Months Ended
	Dec. 31, 2013 Limco Piedmont Inc Subsidiary [Member]	Dec. 31, 2013 Bental Industries Ltd Subsidiary [Member]	Dec. 31, 2013 Tat Gal Inc Subsidiary [Member]	Dec. 31, 2012 TAT Industries Ltd. Parent [Member] Tat Technologies Ltd Subsidiary [Member]	Dec. 31, 2012 KMN Industries Ltd. [Member] Tat Technologies Ltd Subsidiary [Member]	Dec. 31, 2012 KMN Industries Ltd. [Member] Tat Industries Ltd Subsidiary [Member]	Feb. 18, 2014 Tat Technologies Ltd Parent [Member] Bental Industries Ltd Subsidiary [Member]	Dec. 31, 2013 Limco Piedmont Inc Parent [Member] Limco Airepair Inc Subsidiary [Member]	Dec. 31, 2013 Limco Piedmont Inc Parent [Member] Piedmont Aviation Component Services LLC Subsidiary [Member]	Dec. 31, 2013 Limco Piedmont Inc Parent [Member] First Aviation Services Inc Subsidiary [Member]	Dec. 31, 2013 Piedmont Aviation Component Services Llc Parent [Member] First Aviation Services Inc Subsidiary [Member]	Aug. 07, 2013 FIMI Funds [Member] Tat Technologies Ltd Subsidiary [Member]
Subsidiary or Equity Method Investee [Line Items]
Investee ownership percentage	100.00%	70.00%	100.00%			80.00%		100.00%	100.00%		0.00%	53.80%
Ownership percentage				43.00%	10.00%					29.36%
Sale of ownerhsip interest, percentage							70.00%
Cash received from sale of affiliate							$ 5,000,000
Loss on sale of discontinued operation							2,323,000
Impariment							$ 3,319
Number ordinary shares sold in transaction												4,732,351

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COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENT LIABILITIES [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

NOTE 14 -        COMMITMENTS AND CONTINGENT LIABILITIES

a. Commissions arrangements:

The group is committed to pay marketing commissions to sale agents at a range of 1% to 12% of total sales contracts which were received through promotion and distribution carried out by them. Commission expenses were $781, $670 and $579 for the years ended December 31, 2013, 2012 and 2011, respectively. The commissions were recorded as part of the selling and marketing expenses.

b. Royalty commitments:

(1) TAT is committed to pay royalties to third parties through 2013, of ranging between 9% to 17% of sales of products developed by the third parties. Royalty expenses were $177 and $202 for the years ended December 31, 2013 and 2012, respectively. The royalties were recorded as part of the cost of revenues.

(2) Limco-Piedmont is committed to pay royalties to a third party, ranging between 3% to 5% of sales of products purchased from the third party, after deducting related costs incurred by Limco-Piedmont. That third party is the exclusive manufacturer of the products for which Limco-Piedmont provide MRO services. In addition, Limco-Piedmont is committed to pay said third party royalties, ranging between 1.5% to 10% of sales of additional products exclusively manufactured by the third party. Royalty expenses were $400, $232 and $201 for the years ended December 31, 2013, 2012 and 2011, respectively. The royalties were recorded as part of the cost of revenues.

(3) Bental is committed to pay royalties to the Israeli government on proceeds from the sales of products, in the research and development of which the Israeli government participated by way of grants. Under the terms of Bental's funding from the Office of the Chief Scientist, royalty payments are computed on the portion of sales from such products at a rate of 2% and 3.5%. The commitment to the Chief Scientist is limited to the amount of the received participation (U.S. dollar linked), with the addition of an annual interest rate based on Libor. As of December 31, 2012 the total amount of royalty bearing grants due by Bental to the Chief Scientist was approximately $86.

c. 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 2017. The monthly rental expense ranges from approximately $3.5 to $8. Certain leases contain renewal options as defined in the agreements. Lease expense (excluding related parties) totaled $215, $233 and $239 for the years ended December 31, 2013, 2012, and 2011 respectively.

TAT leases its factory from TAT Industries until 2020; (related party rent expense of $424 for the year ended December 31, 2013, see also note 11(a)).

As of December 31, 2013, future minimum rental payments under non-cancelable operating leases are as follows:

Year	Amount
2014	$	636
2015		646
2016		623
2017		534
2018		468
2019 and thereafter		964
Total	$	3,871

d. Legal claims contingencies

(1) For details about the settlement of the commercial dispute between Piedmont and FAvS See note 3(a).

(2) On November 29, 2011, a Factoring company ("the plaintiff"), filed a claim with the magistrates court in Tel-Aviv against the Company, Bental and ten others ("the respondents"), jointly and severally, for the amount of NIS6,151 thousand (approximately $1,620). The plaintiff's case against the Company and Bental is based on invoices that were presented to the plaintiff by supplier of the Company and Bental ("the supplier"), by virtue of assignment of rights, which were originally issued to the Company and Bental by the supplier for certain alleged services. On February 5, 2012, the Company and Bental filed for its statement of defense, in which it denied the plaintiff's claims and clarified that it acted according to the deed of assignment of rights, and that the invoices neither represent nor reflect real transactions and/or real services which were rendered. The Company and Bental and their legal advisor are of the opinion that their exposure due to the claim filed is not probable and thus no provision was recorded in regard of that claim of December 31, 2013.

e. Guarantees:

(1) In order to secure TAT's liability to the Israeli customs, the Company provided a bank guarantee in the amount of $241. The guarantee is linked to the consumer price index and is valid until December 2014.

(2) See also note 14(f) for restricted cash deposit against certain loans and guarantees.

(3) See also note 11(g) for details of a guarantee provided by Piedmont in respect of FAvS' debt. As of December 31, 2012, the amount of this guarantee was $4,600 (such guarantee was released on March 18, 2013, see also note 3(a)).

f. Covenants and liens on assets:

1) In connection with its line of credit, Limco-Piedmont was obligated to meet minimal borrowing base and certain financial covenants. The utilization of the credit line was subject to compliance with the following financial covenants as agreed with the lending U.S bank:

(i) Tangible net worth of not less than $51,500 (on August 20, 2012 concluded with the U.S bank to set this covenant at $49,500). As of December 31, 2012 Limco-Piedmont's tangible net worth was $51,533;

(ii) Total liabilities to tangible net worth ratio of less than 1.0. As of December 31, 2012 Limco-Piedmont's leverage was 0.18; and

(iii) Net financial assets of not less than $10,000. As of December 31, 2012 Limco-Piedmont's net financial assets amount was $20,667.

Accordingly, as of December 31, 2012 Limco-Piedmont met all financial covenants (such credit line not renewed further in 2013 - see also note 12(c)).

2) In order to secure bank loans in the remaining amount of $884 as of December 31, 2013, TAT granted a specific lien on Bental's shares held by TAT - see also note 12(a)(2)). In addition, TAT is obligated to meet certain covenants, all of which have been met.

3) In order to secure bank loans in the amount of $1,185 (remaining balance of $248 as of December 31, 2013) , Bental granted floating liens on all of its property and assets, fixed lien on its unpaid share capital and goodwill and first priority liens on its property, plant and equipment, checks and other trading instruments. In addition, Bental is obligated to certain covenants including:

(i) Bental's debt to EBITDA ratio will be less than 3.0. As of December 31, 2013 and 2012 the ratio was (7.2) and (2.4), respectively; and

(ii) Bental's tangible shareholders' equity will not be less than NIS 20 million (approximately $5,760) and not less than 30% of its total assets. As of December 31, 2013 and 2012 Bental's tangible shareholders' equity was NIS 34.0 million (approximately $9,789) and NIS 34.8 million (approximately $9,335), representing 74% and 70%, respectively of its total assets.

Accordingly, as of December 31, 2013, Bental met all financial covenants as agreed.

4) A lien on Bental Approved Enterprise has been registered in favor of the State of Israel (see note 17(b) below).

5) In order to secure the guarantee Piedmont provided to FAvS as mentioned on note 11(g), Piedmont granted a lien on a bank deposit in the amount of $2,300, which is recorded as restricted deposit in the balance sheet as of December 31, 2012. Such guarantee and restricted deposit were released on March 18, 2013(see also note 3(a)).

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ENTITY-WIDE DISCLOSURE

12 Months Ended

Dec. 31, 2013

ENTITY-WIDE DISCLOSURE [Abstract]

ENTITY-WIDE DISCLOSURE

NOTE 19 - ENTITY-WIDE DISCLOSURE

a. Total revenues and long-lived assets - by geographical location were as follows:

	Year ended December 31,
	2013				2012				2011
	Total revenues (**)		Long-lived assets (*)		Total revenues (**)		Long-lived assets		Total revenues (**)		Long-lived assets
Sale of products
Israel	$	6,248	$	5,748	$	9,147	$	8,417	$	8,218	$	8,528
United states		18,016		-		16,475		-		21,495		-
France		5,482		-		4,604		-		3,264		-
Rest of Europe		2,292		-		1,966		-		2,507		-
Other		2,326		-		4,071		-		1,353		-
	$	34,364	$	5,748	$	36,263	$	8,417	$	36,837	$	8,528

	Year ended December 31,
	2013				2012				2011
	Total revenues		Long-lived assets		Total revenues		Long-lived assets		Total revenues		Long-lived assets
Services
Israel	$	612	$	-	$	468	$	-	$	384	$	-
United states		27,639		5,399		25,648		4,493		25,416		4,325
Netherland		1,553		-		3,303		-		4,378		-
Rest of Europe		7,658		-		4,624		-		3,875		-
Other		7,725		-		7,609		-		2,849		-
	$	45,187	$	5,399	$	41,652	$	4,493	$	36,902	$	4,325

(*) Excluding held for sale assets at December 31, 2013

(**) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

b. Major Customers

No single customer accounted for 10% or more of Group's total net revenue in any year presented.

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SELECTED STATEMENTS OF INCOME DATA (Tables)

12 Months Ended

Dec. 31, 2013

SELECTED STATEMENTS OF INCOME DATA [Abstract]

Schedule of Financial Income (Expenses), Net

	Year ended December 31,
	2013			2012			2011
Financial income (expenses), net (*):
Financial income:
Foreign currency gains	$	661		$	1,294		$	1,108
Derivatives		27			399			352
Tax refund		95			53			71
Interest on cash equivalents, short-term bank deposits and others		114			242			172
		897			1,988			1,703
Financial expenses (*):
Bank charges		(77	)		(71	)		(74	)
Interest on short-term loans		(18	)		(98	)		(98	)
Interest on long-term loans		(66	)		(120	)		(148	)
Foreign currency losses		(786	)		(1,376	)		(1,149	)
Derivatives		-			(321	)		(642	)
Others		-			(108	)		(12	)
		(947	)		(2,094	)		(2,123	)
	$	(50	)	$	(106	)	$	(420	)

(*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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SHORT TERM BANK CREDIT AND LONG TERM LOANS (Tables)

12 Months Ended

Dec. 31, 2013

SHORT TERM BANK CREDIT AND LONG TERM LOANS [Abstract]

Schedule of Long-Term Debt

Terms of the long-term loans and balances:

		Interest Rate
	Currency of loan	December 31, 2013			Years of Maturity		December 31, 2013
Current maturities of long-term loan (2)	$		2.50%-3.50	%		2009-2014	$	884

Schedule of Required Principal Payments

		Interest Rate
	Currency of loan	December 31, 2012			Years of Maturity		December 31, 2012
Long-term loan (1)	NIS		5.25	%		2012-2014	$	523
Long-term loan (2)	$		2.50%-3.50	%		2009-2014		2,477
Long-term loan (3)	NIS	Prime + 1		%		2013		670
								3,670
Less - current maturities (1)								(290	)
Less - current maturities (2)								(1,594	)
Less - current maturities (3)								(670	)
							$	1,116

(1) The original loan was received by Bental in 2009 from an Israeli bank in the amount of $1,400 to be repaid in quarterly installments over a five year period, commencing 2010.  On June 30, 2010, the remaining balance of the original loan, in the amount of $1,185, was repaid and a new loan in the same amount was taken. This new loan bears annual fixed interest of 5.25% and will be repaid until August 2014 in quarterly installments. The loan balance as of December 31, 2013 and 2012 was $248 (presented as part of the liabilities held for sale) and $523, respectively (with regard to covenants related to such loan see note 14(f)(3)).

(2) Loans received by TAT from an Israeli bank in a total amount of $6,250 out of which $5,000 were received during year 2008 and additional $1,250 were received during year 2009. The loans amount was to be repaid in four annual installments commencing 2011. These loans bear quarterly interest of Libor + 3.5% and Libor + 1.85%, respectively. Through November, 2012 TAT prepaid $3,775, following which the remaining balance was $2,477. In September, 2011, TAT reached agreement with its lending bank to adjust certain financial covenants related to the said loans it was failing to meet at the time. On May 1, 2013, the Company made a payment of $1,593 in accordance with its payment schedule following which the remaining balance was $884. As of December 31, 2013 the Company met all financial covenants related to such loans (see also note 14(f)(2)).

(3) On September 7, 2011, Bental received a loan from an Israeli bank in a total amount of NIS2.5 million (approximately $700), to be repaid in full at the end of a 24 month period (the "Term"). The principal amount bears interest of Prime + 1% payable on a quarterly basis and may be repaid at any time during the term upon Bental's discretion. On September 8, 2013 Bental made an on time repayment of the loan in the total amount of NIS2.5 million (approximately $693) (see also note 11(h)).

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net income (loss)	$ 1,780	$ (1,772)	$ (1,083)
Other comprehensive income (loss):
Foreign currency translation adjustments	668	209	(819)
Unrealized loss on marketable securities, net of tax			(11)
Total other comprehensive income (loss)	668	209	(830)
Comprehensive income (loss)	2,448	(1,563)	(1,913)
Comprehensive loss (income) attributable to non controlling interest	842	(12)	261
Comprehensive income (loss) attributable to shareholders	$ 3,290	$ (1,575)	$ (1,652)

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TAXES ON INCOME (Reconciliation of the Amount of Unrecognized Tax Benefits) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
TAXES ON INCOME [Abstract]
Unrecognized tax benefits, beginning	$ 84	$ 86	$ 84
Exchange rate differences		(2)	2
Exchange rate differences	6
Utilization upon assessment	(90)
Unrecognized tax benefits, ending		84	86
Unrecognized tax benefits that would impact effective tax rate, if recognized	$ (84)	$ (2)	$ 2

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INVESTMENT IN AN AFFILIATED COMPANY

12 Months Ended

Dec. 31, 2013

INVESTMENT IN AN AFFILIATED COMPANY [Abstract]

INVESTMENT IN AN AFFILIATED COMPANY

NOTE 3 -           INVESTMENT IN AN AFFILIATED COMPANY

a. Acquisition of stocks of FAvS

On December 4, 2009, the Company, through its subsidiary Piedmont, signed an investment agreement with FAvS. According to the agreement Piedmont was issued 288,334 shares of Class B Common stock of FAvS representing 37% of FAvS' then share capital and $ 750 of FAvS Preferred stocks (entitled to cash dividends at an annual rate of 12% payable quarterly or to additional Preferred stocks at an annual rate of 15%) in return for Piedmont's propeller and parts businesses.

On the date of the above mentioned transaction, FAvS also signed an agreement to purchase all the assets and liabilities of Aerospace Turbine Rotables ("AeTR"). AeTR specializes in renovation and repair of landing gear, safety equipment and hydraulic and electrical components for corporate, regional and military aircraft. Piedmont also provided a guarantee for a period of one year (later renewed for additional periods until finally released on March 2013 as described further below) of up to $ 7,000 with respect to FAvS' debt in connection with the acquisition of AeTR (see also note 14(e)).

On October 1, 2010, Piedmont agreed to extend the guarantee for $6,600, by renewing the guarantee to the lender of FAvS. The renewed guarantee was for a period of 15 months that ended on December 31, 2011, and Piedmont was also granted a second lien on the assets of FAvS to secure the repayment obligations of FAvS in the event that the letter of credit is drawn upon. Piedmont also entered into an inter creditor agreement with the lender to FAvS which subordinated Piedmont's claims if the letter of credit is drawn upon to the obligations of FAvS to the lender.

FAvS' shares are quoted over the counter (OTC) at the PINKSHEET stock market (PINKSHEET: FAVS.PK). FAvS' share value as of December 31, 2013, 2012 and 2011 was $6.60, $7.0 and $5.45, respectively. The Company believes that the share value does not reflect the fair value of FAvS' share, due to very low trading volume in FAvS' shares that do not comprise an active market.

A commercial dispute existed between Piedmont and FAvS relating to the propeller maintenance business which had been contributed to FAvS by Piedmont, as part of the transaction discussed above.  The commercial dispute began in April 2010 when a customer of the propeller maintenance business requested reimbursement from FAvS for damages to certain propellers. FAvS then sought reimbursement from Piedmont for such amounts.

In order to settle the commercial dispute that existed between TAT's subsidiary, Piedmont and FAvS, on June 30, 2011, Piedmont and FAvS entered into a Settlement Agreement and Release (the "Settlement Agreement"). Pursuant to the Settlement Agreement, each party fully released the other party and acknowledged that the settlement was a compromise of disputed claims and was not to be construed as an admission of liability or wrongdoing.  In addition, each party agreed not to disparage the other and Piedmont paid an aggregate amount of $1,400 to FAvS (which amount had been fully reserved during 2010).

Simultaneously with the execution of the Settlement Agreement, the Chief Executive Officer and controlling stockholder of FAvS ("FAvS CEO"), purchased 166,113 shares of Class A Common Stock of FAvS at a price of $18.06 per share, for an aggregate amount of $3,000, while diluting Piedmont's interest in FAvS from 36.6% to 30.3% (29.36% as of December 31, 2013). In addition, Piedmont agreed to extend its guarantee to the bank debt incurred by FAvS to fund the AeTR transaction through June 30, 2013 and to continue to provide a letter of credit to secure such guarantee.  The amortization schedule for such debt was revised so that no amortization will occur until June 30, 2012. Thereafter the debt will amortize at the rate of $200 per month. On March 18, 2013, the guarantee was released with the completion of the transaction, as described further below.

The Stockholders Agreement initially entered into in 2009 between Piedmont and FAvS CEO was also amended to delete the reciprocal drag along rights and to provide that Piedmont may designate one member to the Board of Directors of FAvS (rather than the two members provided in the original agreement). Finally, the Rights Agreement entered into in 2009 between Piedmont and FAvS was amended so that Piedmont's right to approve certain material corporate actions by FAvS has been limited to the right to approve contracts or agreements with affiliates of FAvS. The amendment also provided that the approval of Piedmont would not be required if FAvS seeks to raise additional capital from FAvS CEO as long as the consideration that was paid by FAvS CEO was not less than the consideration that would have been paid by a third-party in an arms-length transaction and would have been a fair, equitable and reasonable consideration under the circumstances.

In connection with the Settlement Agreement and the dilution in Piedmont's interest in FAvS, the Company recorded, on June 30, 2011, a gain in the amount of $240 related to the $3,000 capital investment in FAvS by FAvS CEO which was at a higher share price than recorded at Piedmont books.

In June 2012, FAvS entered into another transaction with FAvS CEO, pursuant to which FAvS borrowed $3,000 from FAvS CEO, secured by a third lien on the assets of FAvS. The loan bears interest at 10% and in addition FAvS CEO was issued warrants to purchase shares of Class A Common Stock of FAvS, representing 15% of FAvS post-exercise shareholders' equity, at an exercise price of $7.00 per share. Pursuant to the terms and conditions of the transaction, management believed that there were indicators of impairment with respect to TAT's investment in FAvS. Accordingly, the Company performed an impairment test of its investment in FAvS, with the assistance of a third party valuation. Based on the results of this test, the Company determined that its investment in FAvS was impaired by $3,300. The impairment was due to a decline in FAvS' profitability margins and future forecasted sales levels.

On March 18, 2013, FAvS closed a transaction according to which it sold the majority of the stock of API, one of its subsidiaries, for a total purchase price of $16,500, out of which $15,900 were used to pay-off the outstanding balance of FAvS' Revolving Line of Credit as of the transaction date. The sale resulted in FAvS retaining a 3% equity interest in the API business. The transaction resulted in a loss from discontinued operations on FAvS books and a write-down of the API business of $11,500 (the "Write Down") which is included in the FAvS loss for the year ended December 31, 2012. As mentioned above, on June 30, 2012, as a result of certain indications of impairment, the Company recorded an impairment charge of $3,300 in its investment in FAvS (which approximates its share in the said Write-Down). The Company also recorded its share in the losses of FAvS for the year ended on December 31, 2012 in the amount of $456. As such, no additional impairment was required to be recorded by Piedmont at the time of the closing of the sale of API. Simultaneously with the transaction, FAvS paid-off its Term Loan in the amount of $4,000 on March 18, 2013, thereby releasing the guarantee issued to the lending bank by the Piedmont. Accordingly the restricted deposit associated with the above guarantee, was released as well as of March 18, 2013.

b. Financial information

The FAvS audited consolidated financial statements as of December 31, 2012, which were signed on March 20, 2013, included a restatement for their 2011 consolidated financial statements for the correction of errors in its previously reported amounts.

Company's management reviewed the restatement and its effect on the consolidated financial statements of the Company and found it to be immaterial to the Company's financial statements for all periods reported. Accordingly, no restatement was recorded in the Company's consolidated financial statements.

Condensed financial information from FAvS consolidated balance sheets as of December 31, 2013 and 2012:

	December 31,
	2013		2012
Current assets	$	10,179	$	31,090
Long-term assets		8,954		9,742
Total assets		19,133		40,832
Current liabilities		6,522		31,476
Long-term liabilities		4,471		4,196
Total liabilities	$	10,993	$	35,672

Condensed financial information from FAvS consolidated statements of operations for each of the three years in the period ended December 31, 2013:

	Year ended December 31,
	2013			2012			2011
Net sales	$	23,445		$	21,579		$	20,515
Gross profit		6,182			9,202			8,626
Loss from continuing operations		(341	)		(1,476	)		630
Net income (loss)		3,158			(12,979	)		(94	)
Income (loss) attributable to common stockholders	$	2,821		$	(13,271	)	$	(345	)

A reconciliation of the share in results of affiliated company and impairment of share in affiliated company for each of the years ended December 31, 2013, 2012 and 2011:

	Year ended December 31,
	2013		2012			2011
Share in income (loss) related to common stockholders	$	837	$	(653	)	$	192
Share in income related to preferred stock		187		197			139
Impairment of  in affiliated company		-		(3,300	)		-
Gain from dilution of interests in affiliated company		-		-			240
Net income (loss)	$	1,024	$	(3,756	)	$	571

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HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS (Schedule of Net Loss from Discontinued Operations) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss from discontinued operations, net of tax ($5, $3 and $19 in 2013, 2012 and 2011, respectively)	$ (2,429)	$ (1,147)	$ (548)
Bental Industries Ltd. [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	9,589	10,008	11,658
Loss before taxes on income (tax benefit)	(148)	(191)	(158)
Loss from discontinued operations, net of tax ($5, $3 and $19 in 2013, 2012 and 2011, respectively)	(3,471)	(1,205)	(601)
Loss from discontinued operations attributable to non-controlling interest	1,042	58	53
Loss from discontinued operations attributable to TAT Technologies Ltd. shareholders	(2,429)	(1,147)	(548)
Discontinued operations, tax	$ 5	$ 3	$ 19

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TAXES ON INCOME (Narrative) (Details) (USD $)	1 Months Ended	12 Months Ended
	Aug. 31, 2013	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Taxes Line Items
Period of tax benefit for approved enterprise, maximum					7 years
Preferred Income tax rate not within Development Zone A			12.00%	16.00%	12.50%	15.00%	15.00%
Period of tax benefit for approved enterprise, commencement of production, maximum					12 years
Period of tax beneift for approved enterprise, since date of approval, maximum.					14 years
Tax exempt period for income, approved enterprise					2 years
Preferred Income tax rate for Development Zone A			6.00%	9.00%	7.00%	10.00%	10.00%
Special Preferred Enterprise income tax rate for Development Zone A					5.00%
Special Preferred Enterprise tax rate not within Development Zone A					8.00%
The period of Special Preferred Enterprise tax rates apply					10 years
Maximum tax rate on dividends distributed from Preferred Income.	20.00%				15.00%
Statutory tax rate in Israel				26.50%	25.00%	25.00%	24.00%
Amended provision (benefit) at domestic statutory rate		18.00%	20.00%	21.00%	22.00%	23.00%
Statutory tax rate changes					25.00%
U.S. subsidiaries tax rate, federal and state				38.00%	38.00%	38.00%
Accumulated tax exempt income					$ 0
TAT Technologies Ltd [Member]
Income Taxes Line Items
Preferred Income tax rate not within Development Zone A				16.00%	12.50%	15.00%	15.00%
Tax rate on transactions					25.00%
Accumulated tax exempt income					9,700,000
Tat Technologies Ltd and Bental Industries Ltd [Member]
Income Taxes Line Items
Tax rate on transactions					25.00%
Bental Industries Ltd. [Member]
Income Taxes Line Items
Preferred Income tax rate for Development Zone A				9.00%	7.00%	10.00%	10.00%
Accumulated tax exempt income					$ 7,750,000

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TRANSACTIONS WITH RELATED PARTIES (Balances with Related Parties) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
Related Party Transaction [Line Items]
Current asset	$ 5		$ 54
Current liability			(112)
Total liability			(112)
TAT Industries [Member]
Related Party Transaction [Line Items]
Current asset		[1]	54	[1]
Bental Non Controlling Interest [Member]
Related Party Transaction [Line Items]
Current liability			(60)
First Aviation Services, Inc. [Member]
Related Party Transaction [Line Items]
Current asset	5
Current liability			(29)
Isal Amlat Investment (1993) Ltd. [Member]
Related Party Transaction [Line Items]
Current liability			$ (23)

[1] Results from certain expenses incurred by TAT Industries and borne by the Company. The debt bears interest at the rate equal to the interest rate agreed between TAT Industries and its lending banks.

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SELECTED STATEMENTS OF INCOME DATA

12 Months Ended

Dec. 31, 2013

SELECTED STATEMENTS OF INCOME DATA [Abstract]

SELECTED STATEMENTS OF INCOME DATA

NOTE 20 -        SELECTED STATEMENTS OF INCOME DATA

	Year ended December 31,
	2013			2012			2011
Financial income (expenses), net (*):
Financial income:
Foreign currency gains	$	661		$	1,294		$	1,108
Derivatives		27			399			352
Tax refund		95			53			71
Interest on cash equivalents, short-term bank deposits and others		114			242			172
		897			1,988			1,703
Financial expenses (*):
Bank charges		(77	)		(71	)		(74	)
Interest on short-term loans		(18	)		(98	)		(98	)
Interest on long-term loans		(66	)		(120	)		(148	)
Foreign currency losses		(786	)		(1,376	)		(1,149	)
Derivatives		-			(321	)		(642	)
Others		-			(108	)		(12	)
		(947	)		(2,094	)		(2,123	)
	$	(50	)	$	(106	)	$	(420	)

(*) Excluding discontinued operations for each of the years ended on December 31, 2013, 2012 and 2011.

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COMMITMENTS AND CONTINGENT LIABILITIES (Lease Commitments) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Lease commitments:
Lease expenses	$ 424,000	$ 416,000	$ 408,000
Future minimum rental payments under non-cancelable operating leases, due 2014	636,000
Future minimum rental payments under non-cancelable operating leases, due 2015	646,000
Future minimum rental payments under non-cancelable operating leases, due 2016	623,000
Future minimum rental payments under non-cancelable operating leases, due 2017	534,000
Future minimum rental payments under non-cancelable operating leases, due 2018	468,000
Future minimum rental payments under non-cancelable operating leases, due 2019 and thereafter	964,000
Total future minimum rental payments under non-cancelable operating leases	3,871,000
TAT Technologies Ltd [Member] | Maximum [Member]
Lease commitments:
Lease expiration date	Dec. 31, 2020
Limco Piedmont Inc [Member]
Lease commitments:
Lease expense	215,000	233,000	239,000
Limco Piedmont Inc [Member] | Minimum [Member]
Lease commitments:
Monthly rent payments owed on leased properties	3,500
Limco Piedmont Inc [Member] | Maximum [Member]
Lease commitments:
Monthly rent payments owed on leased properties	$ 8,000
Lease expiration date	Dec. 31, 2017

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GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

GOODWILL AND INTANGIBLE ASSETS [Abstract]

Schedule of Intangible Assets

Intangible assets:

	December 31,
	2013			2012
License for service center
Cost	$	2,050		$	2,050
Accumulated amortization and impairment charges		(2,050	)		(2,050	)
Amortized cost	$	-		$	-

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LONG-TERM EMPLOYEE-RELATED OBLIGATIONS

12 Months Ended

Dec. 31, 2013

LONG-TERM EMPLOYEE-RELATED OBLIGATIONS [Abstract]

LONG-TERM EMPLOYEE-RELATED OBLIGATIONS

NOTE 13 - LONG-TERM EMPLOYEE-RELATED OBLIGATIONS

Severance pay:

TAT's and Bental's (the "Israeli companies") liability for severance pay, for their Israeli employees, is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date. The liability is presented on the undiscounted basis. The Israeli companies record an expense for the net increase in its severance liability.

TAT's liability for all of its Israeli employees is fully covered for by monthly deposits with severance pay funds, insurance policies, Mivtahim Social Insurance Institution Ltd. ("Mivtahim"). The liability covered by deposits with Mivtahim is irrevocably transferred to Mivtahim. Accordingly, neither the amounts accumulated with Mivtahim, nor the corresponding liabilities for severance pay are reflected in the consolidated balance sheet.

The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash surrender value of these policies and includes profits (or loss) accumulated through the balance sheet date.

Severance pay expenses for TAT were $555, $495 and $425 for the years ended December 31, 2013, 2012 and 2011, respectively.

Limco-Piedmont sponsors a 401(K) profit sharing plan covering substantially all of its employees. The plan permits the employer to contribute a discretionary amount for a plan year, which the employer designates a qualified non-elective contribution. Contributions to plan by Limco-Piedmont were $253, $209 and $188 for the years ended December 31, 2013, 2012 and 2011, respectively.

The Group (excluding discontinued operation) expects to contribute approximately $820 in 2014 to the pension funds and insurance companies in respect of their severance and pension pay obligations.

The Israeli companies are required to make severance payment 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 sheets under "Employee rights upon retirement." The liability is recorded as if it were payable at each balance sheet date on an undiscounted basis.

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 "Liability in respect of employee rights upon retirement." These policies are the Company's assets. However, under employment agreements and subject to certain limitations, any policy may be transferred to the ownership of the individual employee for whose benefit the funds were deposited. In the years ended

In accordance with the current employment agreements with certain employees, the Israeli companies make regular deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee's rights upon retirement. The Israeli companies are fully relieved from any severance pay liability with respect to each such employee after they make 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 Israeli Companies balance sheets, as the amounts funded are not under the control and management of the Israeli companies and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies (the "Contribution Plans").

The amounts of severance payments, actually paid to retired employees, by TAT were $226, $26 and $23 for the years ended December 31, 2013, 2012 and 2011.

TAT expect to pay $1,868 in future benefits to their employees during 2014 to 2022 upon their normal retirement age - see breakdown below. 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 companies before their normal retirement age.

Year	Amount
2014	$	282
2015		189
2016		261
2017		198
2018		248
Thereafter (through 2023)		800
	$	1,978