DENVER, N.C., Oct. 23, 2017 — Air T, Inc. (Air T) (NASDAQ: AIRT) today reported a consolidated net loss attributable to Air T, Inc. stockholders of $3,214,000 ($1.51 per diluted share) for fiscal 2017, which ended March 31, 2017, compared to restated consolidated net income attributable to Air T, Inc. stockholders of $4,414,000 ($1.84 per diluted share) for fiscal 2016.
Consolidated revenues increased by $260,000 to $148,472,000 for the fiscal year ended March 31, 2017 compared to $148,212,000 in the prior fiscal year. Air T is reporting an operating loss of $3,101,000 for the fiscal year ended March 31, 2017, as compared to the $6,032,000 operating income generated in the prior fiscal year.
Ground equipment sales segment revenue decreased by $19,728,000 (39%) for fiscal 2017 compared to the prior fiscal year. The decrease in the segment’s revenue is attributable primarily to the large order of deicers from a major airline in the prior year that did not reoccur in the 2017 fiscal year. Operating income for the ground equipment sales segment, pre-intercompany eliminations, decreased by $4,108,000 (63%) to $2,379,000 for the 2017 fiscal year as a result of the decrease in revenue compared to the prior fiscal year. At March 31, 2017, ground equipment sales’ backlog was $2.8 million, as compared to $10.0 million at March 31, 2016.
Revenues in the overnight air cargo segment increased by $1,331,000 (2%) for fiscal 2017 compared to the prior fiscal year. This increase in the segment’s revenue is attributable to increased administrative fees paid under dry-lease agreements which became effective on June 1, 2015 and impacted the segment’s revenue for the full fiscal year 2017 compared to only ten months in the prior fiscal year. Somewhat offsetting the increased administrative fees, the segment’s maintenance revenues decreased as a result of lower pass-through maintenance revenues. Operating income for the air cargo segment decreased by $560,000 from the prior fiscal year due to higher operating costs not passed through to the customer, principally attributable to increased flight crew costs.
Revenues in the ground support services segment increased $5,619,000 (23%) primarily as a result of growth in new markets and services offered to new and existing customers. Operating results for the ground support services segment improved by $535,000 from the prior year to an operating loss of $501,000 for fiscal 2017 as increased revenues began to offset the costs of infrastructure improvements made in prior periods to position the segment for growth.
On November 24, 2015, Air T acquired from Delphax Technologies Inc. (“Delphax”) shares of its Series B Preferred Stock then convertible into approximately 38% of the shares of Delphax common stock outstanding after conversion and other equity and debt interests in Delphax and its Canadian subsidiary. Air T has concluded that as a result of its acquisition of these interests, Delphax is required to be consolidated with Air T for financial reporting purposes since the November 24, 2015 acquisition date and reports these results in its printing equipment and maintenance segment. Delphax’s net income or loss is attributed to Air T and the holders of non-controlling interests in Delphax. As described in greater detail below and in the Company’s Form 8-K dated October 5, 2017, Air T concluded it was not appropriate to base attribution of Delphax’s net income or loss to non-controlling interests solely on the Company’s ownership of the Series B Preferred Stock and that the attribution methodology should be based on consideration of all of Air T’s investments in Delphax. As a result of the application of the above-described attribution methodology reflecting consideration of all of Air T’s investments in Delphax, for the 2017 fiscal year Delphax’s net loss was attributed 30% to non-controlling interests and 70% to Air T, Inc. stockholders. For the 2016 fiscal year (as restated) Delphax’s net loss was attributed 33% to non-controlling interests and 67% attributable to Air T, Inc. stockholders. The net loss of Delphax included in consolidated net loss attributable to Air T, Inc. stockholders for the fiscal year ended March 31, 2017, pre-intercompany eliminations, was approximately $4,437,000 compared to a Delphax loss attributable to Air T, Inc. stockholders for the fiscal year ended March 31, 2016, pre-intercompany eliminations, of $1,332,000. This increased loss at Delphax was principally associated with asset impairments and severance charges related to a previously reported significant decline in Delphax’s business outlook during the first quarter of fiscal year 2017. Further, Delphax was consolidated in the Company’s results for only a portion of the prior fiscal year.
On July 18, 2016, Contrail Aviation Support, LLC (“Contrail Aviation”), a subsidiary of the Company, completed the purchase of substantially all of the assets of Contrail Aviation Support, Inc. The acquisition consideration included equity membership units in Contrail Aviation representing 21% of the total equity membership units in Contrail Aviation. Additionally, Air T, through a subsidiary, acquired 100% of the outstanding equity interests of Jet Yard, LLC (“Jet Yard”) on October 3, 2016. Contrail Aviation and Jet Yard comprised the commercial jet engines and parts segment of the Company’s operations during the 2017 fiscal year, which contributed revenues of $7,456,000 in the fiscal year. The operating income of the segment attributable to Air T, Inc. stockholders for the fiscal year ended March 31, 2017, pre-intercompany eliminations, was approximately $535,000.
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FINANCIAL HIGHLIGHTS (In thousands, except per share data) |
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Year Ended March 31 |
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2017 |
2016 |
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(As Restated)* |
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Operating Revenues |
$ 148,472 |
$ 148,212 |
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Operating Income (Loss) |
$ (3,101) |
$ 6,032 |
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Net Income (Loss) |
$ (4,944) |
$ 3,758 |
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Net Income (Loss) Attributable to Air T, Inc. Stockholders |
$ (3,214) |
$ 4,414 |
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Earnings (Loss) Per Share – Diluted |
$ (1.51) |
$ 1.84 |
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Weighted Average Shares Outstanding – Diluted |
2,125 |
2,397 |
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* |
As described below, the Company’s financial statements at and for the fiscal year ended March 31, 2016 have been restated. |
For a more detailed presentation and discussion of the Company’s results of operations and financial condition, please read the Company’s Annual Report on Form 10-K for the year ended March 31, 2017 filed today with the Securities and Exchange Commission. Copies of the Form 10-K may be accessed on the Internet at the SEC’s website: http://www.sec.gov.
Restatement of Prior Period Financial Statements
As reported in Air T’s Form 8-K dated October 5, 2017, the Company had concluded that the Company’s consolidated financial statements previously issued for periods ending after the Company’s acquisition of debt and equity investments in Delphax in November 2015 could no longer be relied upon due to an error in the attribution of Delphax net income or loss to non-controlling interests. Such consolidated financial statements reflected an attribution for relevant periods of 62% of Delphax’s net income or loss to non-controlling interests in the determination of consolidated net income attributable to Air T, Inc. stockholders. Such attribution was based on the Company’s ownership of the Series B Preferred Stock, which represented approximately 38% of the shares of Delphax common stock that would be outstanding assuming conversion of Series B Preferred Stock held by the Company. Air T has concluded that it was not appropriate to base attribution of Delphax’s net income or loss to non-controlling interests solely on the Company’s ownership of the Series B Preferred Stock and that the attribution methodology should be based on consideration of all of Air T’s investments in Delphax. As a result of the application of an attribution methodology based on such a consideration of all of Air T’s investments in Delphax, for the relevant periods of the financial statements listed below the attribution of Delphax net income or losses to non-controlling interests should have been 33%, except that for the three months ended June 30, 2016, the attribution of Delphax losses to non-controlling interests should have been 32%. As a result, Air T has today filed amendments to its periodic reports listed below to restate its financial statements at and for the periods listed below and to otherwise amend and expand related disclosures:
- at and for the three and nine months ended December 31, 2015 included in the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2015 (the “Q3 2016 Form 10-Q”),
- at and for the fiscal year ended March 31, 2016 included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 (the “2016 Form 10-K”),
- at June 30, 2016 and March 31, 2016 and for the three months ended June 30, 2016 included in the Company’s Quarterly report on Form 10-Q for the period ended June 30, 2016 (the “Q1 2017 Form 10-Q”),
- at September 30, 2016 and March 31, 2016 and for the three and six months ended September 30, 2016 included in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016 (the “Q2 2017 Form 10-Q”), and
- at December 31, 2016 and March 31, 2016 and for the three and nine months ended December 31, 2016 and 2015 included in the Company’s Form 10-Q for the period ended December 31, 2016 (together with the Q1 2017 Form 10-Q and the Q2 2017 Form 10-Q, the “2017 Form 10-Qs,” and such financial statements in the Q3 2016 Form 10-Q, the 2016 Form 10-K and the 2017 Form 10-Qs being collectively referred to as the “Subject Financial Statements”).
The amount of the Company’s consolidated net income (loss) (which is presented prior to attribution of net loss (income) attributable to non-controlling interests in the Company’s consolidated statements of income) presented in such restated financial statements does not differ from the consolidated net income (loss) previously reported in the respective Subject Financial Statements. Similarly, the correction of the attribution of Delphax’s net income or loss for the relevant periods reflected in such restated financial statements did not affect the Company’s assets, liabilities or cash flows at and for each of these periods from the amounts previously reported in the respective Subject Financial Statements.
For a more detailed presentation and discussion of the restatement of the Subject Financial Statements, please read the Company’s Amendment No. 1 on Form 10-Q/A for the period ended December 31, 2015, the Company’s Amendment No. 1 on Form 10-K/A for the fiscal year ended March 31, 2016, the Company’s Amendment No. 1 on Form 10-Q/A for the period ended June 30, 2016, the Company’s Amendment No. 1 on Form 10-Q/A for the period ended September 30, 2016, and the Company’s Amendment No. 1 on Form 10‑Q/A for the period ended December 31, 2016, each filed today with the Securities and Exchange Commission. These filings may be accessed on the Internet at the SEC’s website: http://www.sec.gov.
About Air T, Inc.
Established in 1980, Air T, Inc. is a diversified holding company with four core industry segments: overnight air cargo, aviation ground support equipment manufacturing, aviation ground support maintenance services, and commercial jet engines and parts. Our ownership interests consist of a broad set of operating and financial assets that are designed to expand, strengthen and diversify Air T’s cash earnings power. Our goal is to build on Air T’s core businesses, to expand into adjacent industries, and when appropriate, to acquire companies that we believe fit into the Air T family. For more information, visit www.airt.net.
Forward-looking Statements
Statements in this press release that contain more than historical information may be considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which are subject to risks and uncertainties. Actual results may differ materially from those expressed in the forward-looking statements because of important potential risks and uncertainties, including but not limited to, 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, the timing and amounts of future orders under the Company’s Global Ground Support subsidiary’s contract with the United States Air Force, inflation rates, competition, changes in technology or government regulation, information technology disruptions, the impact of future terrorist activities in the United States and abroad and other risks and uncertainties described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. The Company is under no obligation, and it expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.