Air T, Inc. Reports Third Quarter Fiscal 2019 Results

News provided by

Air T, Inc.

Feb 14, 2019, 16:35 ET

DENVER, N.C., Feb. 14, 2019 /PRNewswire/ -- Air T, Inc. (NASDAQ: AIRT) is organized as a portfolio of powerful businesses, each of which is independent yet interrelated. These include overnight air cargo operations; ground support equipment manufacturing; ground support equipment maintenance services; and commercial aircraft management, leasing and logistics. Today the Company announced results for its fiscal quarter ended December 31, 2018.

Q3 2019 Overview

  • Revenues totaled $63.6 million for the fiscal quarter ended December 31, 2018, a 43% increase over the prior year comparable quarter
  • Operating income of $1.5 million, an increase of $0.9 million from the prior year comparable quarter's operating income of $0.6 million
  • Non-operating expense of $3.6 million, an increase of $2.3 million over the prior year comparable quarter
  • Net loss attributable to Air T stockholders was $2.7 million as compared to net loss of $0.7 million in Q3 2018
  • Loss per share was $1.34, compared to the prior comparable quarter's loss per share of $0.33

"While segment operating performance varied significantly, our consolidated third quarter operating results grew nicely from the prior year third quarter, as well as quarter over quarter," stated Nick Swenson, CEO and President of Air T.  "Growth was driven by our Commercial Jet Engines and Parts segment. Congratulations to Joe Kuhn and his team! Their business posted a solid third quarter, with high levels of both revenues and operating income.  Clearly, we have the start of a meaningful platform, and we are looking for innovative ways to enhance and accelerate the growth of this segment.  In contrast, Air Cargo Services reported significantly lower operating results in the period. Higher direct and indirect flight crew expenses have significantly eroded our margins. We are pursuing appropriate accommodation and remain hopeful that Air Cargo will deliver acceptable profit levels --- on time.  Similarly, the third quarter operating performance at Ground Support Maintenance Services sank from the prior year comparable quarter, although results improved sequentially from the second quarter of this year. Our new operating plan got traction in fiscal Q3, as we implemented various micro-actions to sustain a better operating dynamic. These actions included station by station assessments, with a special focus on markets for skilled labor. Management initiated certain rate increases and efficiency improvement plans in the early part of our fourth quarter. Finally, our Ground Support Equipment segment grew revenue at a rapid 26% in the quarter, which then reflected a more modest improvement in operating income.  This segment is growing steadily and profitably under Mike Moore's leadership. As new product launches take hold, and our customers save money by upgrading to the technology solutions integrated into our latest equipment, we expect to continue to deliver real value for customers with jobs to do."

Business Segment Results

Commercial Jet Engines and Parts

  • This segment leases commercial jet engines and aircraft; buys, sells and trades in surplus and aftermarket commercial jet engines, engine parts, airframes, and airframe parts, avionics, and other; then delivers the related documents and logistics.
  • Recent acquisitions in this segment include AirCo in October 2017 and the acquisition of the assets of Worthington Aviation in May 2018.
  • Revenues for this segment totaled $21.0 million in Q3 2019, an increase of $17.1 million over the same period of fiscal 2018. Contrail experienced record levels of sales and income for the quarter.
  • Operating income for this segment totaled $2.4 million in Q3 2019 compared to an operating loss of $0.3 million in the prior-year quarter.

Overnight Air Cargo

  • The segment provides air express delivery services, substantially all for FedEx.
  • Revenues for this segment declined 1% to $17.9 million in Q3 2019 compared to $18.0 million in Q3 2018.
  • Operating income for this segment totaled $0.1 million, a decrease of $0.9 million when compared to the operating income of Q3 2018. This decrease is due primarily to our absorption of higher operating costs (mainly increased flight crew costs to meet operational requirements); and higher general and administrative staff needed to meet higher-frequency requirements.

Aviation Ground Support Maintenance Services

  • This segment provides ground support equipment maintenance and facilities maintenance services to domestic airlines and aviation service providers across the United States.
  • Revenue from this segment totaled $8.1 million in Q3 2019, a decline of 6% over Q3 2018. The decrease in the current quarter is principally due to the closure of two airport locations during fiscal 2018.
  • Operating loss for this segment was $0.4 million in the current quarter, compared to a loss of $0.1 million in the same quarter of the prior year.

Aviation Ground Support Equipment

  • This segment manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers.
  • Revenues for this segment, which is the world's largest manufacturer of aircraft de-icing equipment, totaled $16.3 million for the fiscal quarter ended December 31, 2018. This represents an increase of 26% over the revenue of $12.9 million in the prior comparable quarter. The increase was primarily due to an increase in the unit sales of deicers and catering trucks sold during the quarter.
  • Operating income for this segment was $1.2 million in the third quarter, an increase of $0.1 million for Q3 of last year principally due to the higher level of revenues.

Corporate

  • This segment includes expenses attributable to core Corporate functions, investment research, and specialized resources that are available to business units.
  • This segment's operating loss totaled $1.5 million in the current quarter. In the comparable quarter of the prior year, operating loss totaled $1.3 million when excluding the $1.2 million foreclosed inventory recognized in this segment related to the bankruptcy of Delphax Canada in the third quarter of last year. The $1.2 million related to the foreclosed inventory was eliminated in consolidation.
  • The increase in Corporate segment costs in the current quarter is primarily attributable to increased headcount and significant professional fees billed by our former auditor.

Other Investments and Financial Liquidity

  • Air T owned approximately 3.5 million shares of common stock of Insignia Systems, Inc. (NASDAQ: ISIG) with a market value of $5.2 million as of December 31, 2018.
  • As of December 31, 2018, Air T held $8.2 million of marketable securities (including Insignia at market value of $5.2 million).
  • Working capital (defined as current assets less current liabilities) as of December 31, 2018 totaled $15.0 million compared to $30.5 million as of March 31, 2018.

ABOUT AIR T, INC.
Established in 1980, Air T Inc. is a portfolio of powerful businesses and financial assets, each of which is independent yet interrelated. Its core segments are: overnight air cargo, aviation ground support equipment manufacturing, aviation ground support maintenance services, and commercial aircraft asset management and logistics. We seek to expand, strengthen and diversify Air T's after-tax cash flow per share.  Our goal is to build Air T's core businesses, and when appropriate, to expand into adjacent and other industries. We seek to activate growth and overcome challenges while delivering meaningful value for all stakeholders.  For more information, visit www.airt.net.

FORWARD-LOOKING STATEMENTS
Certain matters discussed in this press release may be considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements are subject to risks, uncertainties and assumptions about our operations and the investments we make, including, among other things, factors discussed under the heading "Risk Factors" in our 10-K, as well as the following:

  • The risk that contracts with major customers will be terminated or not extended;
  • Future economic conditions and their impact on the Company's customers;
  • The Company's ability to recover on its investments, including its investments in Delphax and other recently acquired companies,
  • The timing and amounts of future orders under the Company's Global Ground Support subsidiary's contract with the United States Air Force; and
  • The risks and uncertainties related to business acquisitions (including the ability to successfully achieve the anticipated benefits of the acquisitions) inflation rates, competition, changes in technology or government regulation, debt covenants, information technology disruptions, and the impact of future terrorist activities in the United States and abroad.

Forward-looking statements can be identified by the use of words like "believes," "could," "possibly," "probably," "anticipates," "estimates," "projects," "expects," "may," "will," "should," "seek," "intend," "plan," "expect," or "consider" or the negative of these expressions or other variations, or by discussions of strategy that involves risks and uncertainties. All forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. We base these forward-looking statements on current expectations and projections about future events and the information currently available to us. Although we believe that the assumptions for these forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Consequently, no representation or warranty can be given that the estimates, opinions, or assumptions made in or referenced by this prospectus will prove to be accurate. We undertake no obligation to update our forward-looking statements. We caution you that the forward-looking statements in this press release are only estimates and predictions, or statements or current intent. Actual results or outcomes, or actions that we ultimately undertake, could differ materially from those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions underlying these statements. These risks, uncertainties and assumptions include, but are not limited to, those discussed in this press release.

AIR T, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)















Three Months Ended December 31,

Nine Months Ended December 31,




2018

2017

2018

2017

Operating Revenues:








Overnight air cargo

$       17,868,191

$       18,028,688

$       52,573,449

$       52,851,936

Ground equipment sales

16,278,359

12,911,101

35,501,936

34,376,866

Ground support services

8,136,466

8,643,267

25,658,143

26,557,666

Printing equipment and maintenance

104,980

905,860

543,748

5,340,163

Commercial jet engines and parts

20,990,088

3,930,510

58,953,054

21,781,095

Corporate and other

244,587

81,820

600,587

152,383




63,622,671

44,501,246

173,830,917

141,060,109






















Operating Expenses:








Overnight air cargo

16,292,144

15,538,554

46,816,294

46,020,254

Ground equipment sales

13,760,055

10,578,846

29,677,280

28,606,906

Ground support services

7,098,098

7,337,862

22,925,769

21,738,525

Printing equipment and maintenance

94,733

265,054

289,164

2,848,861

Commercial jet engines and parts

12,268,266

2,143,540

38,052,172

15,534,775

Research and development

-

-

-

195,653

General and administrative

10,373,194

7,253,472

28,028,050

21,114,626

Depreciation and amortization

2,253,291

768,660

5,554,904

1,522,998

Impairment

7,125

46,930

27,818

220,957

Gain on sale of property and equipment

10,802

16,648

10,802

16,648




62,157,708

43,949,566

171,382,253

137,820,203











Operating Income

1,464,963

551,680

2,448,664

3,239,906











Non-operating Income (Expense):








Gain on sale of marketable securities

81,388

72,145

81,388

72,145

Foreign currency loss, net

(15,352)

(11,797)

(17,484)

(260,903)

Other-than-temporary impairment loss on investments

(2,000,000)

(788,799)

(2,000,000)

(1,559,972)

Other investment income (loss), net

(586,039)

50,485

(623,623)

123,286

Interest expense

(1,186,349)

(538,459)

(2,607,639)

(1,010,177)

Gain on asset retirement obligation

-

-

-

562,500

Unrealized gain (loss) on interest rate swap

-

(199,122)

145,222

(199,122)

Bargain purchase acquisition gain

-

-

1,983,776

501,880

Income from equity method investments

200,929

89,426

370,670

119,363

Other expense, net

(102,406)

-

(74,720)

-




(3,607,829)

(1,326,121)

(2,742,410)

(1,651,000)











Income (Loss) Before Income Taxes

(2,142,866)

(774,441)

(293,746)

1,588,906











Income Taxes (Benefit)

174,000

(60,000)

168,000

595,000











Net Income (Loss)

(2,316,866)

(714,441)

(461,746)

993,906











Net (Income) Loss Attributable to Non-controlling








Interests

$          (398,085)

$              42,502

$           (745,697)

$           (275,755)






















Net Income (Loss) Attributable to Air T, Inc. Stockholders

$       (2,714,951)

$          (671,939)

$        (1,207,443)

$            718,151






















Income (Loss) Per Share:









Basic

$                (1.34)

$                (0.33)

$                 (0.59)

$                  0.35


Diluted

$                (1.34)

$                (0.33)

$                 (0.59)

$                  0.35











Weighted Average Shares Outstanding:









Basic

2,028,194

2,042,789

2,038,523

2,042,789


Diluted

2,028,194

2,042,789

2,038,523

2,047,547











AIR T, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)















December 31, 2018

March 31, 2018

ASSETS



Current Assets:




Cash and cash equivalents (Delphax $58,511 and $241,430)*

$                           2,729,249

$                       4,803,238

Marketable securities

2,457,609

290,449

Restricted cash 

907,488

269,659

Restricted investments

135,291

1,235,405

Accounts receivable, less allowance for doubtful accounts




  of $739,607 and $801,000 (Delphax $293,044 and $317,000)*

17,881,122

15,157,855

Costs and estimated earnings in excess of billings on uncompleted projects

-

2,012,121

Income tax receivable

1,940,955

1,557,180

Inventories, net 

39,585,915

34,231,005

Other current assets

4,298,164

658,630

Prepaid expenses (Delphax $58,516 and $72,269)*

1,680,419

1,455,566

  Total Current Assets

71,616,212

61,671,108






Investments in securities

356,013

1,026,920

Assets on lease, net of accumulated depreciation of $4,932,576 and $1,625,237

26,920,552

15,664,606

Property and equipment, net of accumulated depreciation of $5,356,017 and $4,722,016

4,904,741

4,608,565

Cash surrender value of life insurance policies, net of policy loans

562,430

2,356,507

Other tax receivables-long-term (Delphax $311,000 and $311,000)*

311,000

311,000

Investments in funds

278,709

324,854

Equity method investments

5,666,430

5,032,268

Other assets 

598,006

420,981

Intangible assets, net of accumulated amortization of $2,081,004 and $1,788,598

1,271,688

1,312,472

Goodwill 

4,417,605

4,417,605

  Total Assets

$                       116,903,386

$                     97,146,886






LIABILITIES AND STOCKHOLDERS' EQUITY



Current Liabilities:




Accounts payable (Delphax $2,163,424 and $2,145,847)*

$                         10,960,852

$                     10,181,143

Income tax payable (Delphax $0 and $11,312)*

23,000

23,000

Accrued expenses (Delphax $3,127,229 and $3,244,514)*

12,151,574

11,743,973

Deferred tax liabilities

-

-

Current portion of long-term debt

33,437,246

9,229,690

 Total Current Liabilities   

56,572,672

31,177,806






Long-term debt

33,361,871

38,855,260

Deferred tax liabilities

641,080

92,000

Other non-current liabilities 

1,012,234

785,797

 Total Liabilities   

91,587,857

70,910,863






Redeemable non-controlling interest

2,998,161

1,992,939






Commitments and contingencies (Note 17)









Equity:



  Air T, Inc. Stockholders' Equity:




Preferred stock, $1.00 par value, 50,000 shares authorized

-

-

Common stock, $.25 par value; 4,000,000 shares authorized,




  2,024,331 and 2,043,607 shares issued and outstanding 

506,084

510,901

Additional paid-in capital

4,195,484

4,171,869

Retained earnings

18,694,300

20,695,981

Accumulated other comprehensive loss

(120,284)

(260,900)

     Total Air T, Inc. Stockholders' Equity

23,275,584

25,117,851

  Non-controlling Interests

(958,216)

(874,767)

  Total Equity

22,317,368

24,243,084

  Total Liabilities and Equity  

$                       116,903,386

$                     97,146,886






* Amounts related to Delphax as of December 31, 2018 and March 31, 2018, respectively.









AIR T, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)











Nine Months Ended December 31,





2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES:



Net income (loss)

$                    (461,746)

$                      993,906


Adjustments to reconcile net income to net




  cash provided by operating activities:





Gain on sale of marketable securities

(28,060)

(72,145)



Loss on sale of property and equipment

15,671

16,648



Profit from sale of assets on lease

(946,185)

-



Change in inventory reserves

(367,022)

(69,222)



Change in accounts receivable reserves

(61,823)

(2,731)



Depreciation and amortization

5,554,904

1,522,998



Impairment

27,818

220,957



Change in cash surrender value of life insurance

(102,710)

(118,254)



Gain on asset retirement obligation

-

(562,500)



Gain on bargain purchase, net of tax

(1,983,777)

(501,880)



Deferred income taxes

-

(102,566)



Change in warranty reserve

156,253

53,092



Other-than-temporary impairment loss on investments

2,000,000

1,559,972



Unrealized loss on marketable securities

854,874

-



Unrealized (gain) loss on interest rate swap

(145,222)

199,122



Change in operating assets and liabilities:





  Accounts receivable

(718,690)

3,011,203



  Costs and estimated earnings in excess of billings and uncompleted projects

2,012,121

-



  Notes receivable and other non-trade receivables 

(3,638,929)

1,053,846



  Inventories

(75,059)

4,223,445



  Prepaid expense and other assets

(742,050)

145,640



  Accounts payable

(506,587)

(2,294,265)



  Accrued expenses

147,160

(538,232)



  Income taxes payable/receivable

(72,775)

(603,843)



  Non-current liabilities

356,541

165,039



Total adjustments  

1,736,453

7,306,324


 Net cash provided by operating activities

1,274,707

8,300,230








CASH FLOWS FROM INVESTING ACTIVITIES:




Purchases of marketable securities

(2,013,921)

(1,007,071)


Proceeds from sale of marketable securities

836,510

537,826


Acquisition of businesses, net of cash acquired

(3,375,700)

(2,900,000)


Cash used for equity method investments

(263,492)

-


Investment in reinsurance entity

(2,000,000)

-


Capital expenditures related to property & equipment

(1,010,330)

(1,655,551)


Capital expenditures related to assets on lease

(19,149,515)

(13,591,693)


Proceeds from sale of property and equipment

50,602

1,861


Proceeds from sale of assets on lease

4,180,208

-


 Net cash used in investing activities

(22,745,638)

(18,614,628)








CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from lines of credit

86,519,612

86,949,125


Payments on lines of credit

(83,566,277)

(88,817,034)


Proceeds from term loan

22,539,000

20,841,000


Payments on term loan

(6,787,210)

(2,436,225)


Debt issuance costs

(150,142)

(156,115)


Proceeds from loan against cash surrender value of life insurance policies

1,896,788

-


Distribution to non-controlling member

(65,672)

(1,100,000)


Contribution from non-controlling member

210,000

252,000


Payments for repurchase of stock

(693,136)

-


Proceeds from exercise of stock options

17,762

-


 Net cash provided by financing activities

19,920,725

15,532,751










Effect of foreign currency exchange rates on cash and cash equivalents

114,046

3,370








NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

(1,436,160)

5,221,723

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

5,072,897

3,653,734

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$                   3,636,737

$                   8,875,457








SUPPLEMENTAL DISCLOSURE OF INVESTING ACTIVITIES:



Non-cash capital expenditures related to property & equipment

$                          8,675

$                                -








SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:



Cash paid during the year for:




Interest

$                   2,084,085

$                      690,859


Income taxes

490,181

1,457,518








SOURCE Air T, Inc.

Related Links

http://www.airt.net

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