AIR T, INC REPORTS SECOND QUARTER FISCAL 2019 RESULTS

DENVER, N.C., Nov. 13, 2018 — Air T, Inc. (NASDAQ: AIRT) is organized as a portfolio of powerful businesses and financial assets, each of which is independent yet interrelated. Today the Company announced results for its fiscal quarter ended September 30, 2018.

Fiscal Q2 2019 Overview

Revenues totaled $49.3 million for the fiscal quarter ended September 30, 2018, a 1% increase over the prior year comparable quarter
Operating loss was $1.6 million, a decline of $2.1 million from the prior quarter’s operating income of $0.5 million
Net loss attributable to Air T stockholders was $1.3 million as compared to net income of $0.4 million in Q2 2018
Diluted loss per share was $0.65 compared to prior comparable quarter’s diluted income per share of $0.21

“Air T’s results for the quarter were primarily driven by independent, yet negative, results at several of our operating businesses. We believe that the negative results at three of our operating businesses are due to timing and isolated to the quarter, one was the result of planned expenditure/investment, and one is more disruptive in nature and currently subject to focused management,” stated Nick Swenson, President & CEO of Air T.

A brief summary of the quarter by segment is as follows:

Aviation ground support equipment manufacturing – lower operating results in this segment were driven by product mix during the quarter, as well as production delays caused by slower-than-anticipated deliveries from critical parts suppliers. Order backlog in this segment was over $30 million as of September 30, 2018 compared to $20 million a year ago.
Commercial aircraft asset management and logistics – results for this segment in the second quarter reflect the significant fluctuations that are expected quarter-to-quarter in the business of leasing and trading commercial jet engines and parts. We firmly believe that “a single quarter does not a year make” within this segment, and we assess this segment on an annualized basis.
Overnight air cargo – this segment, like most other airlines, is currently facing an increasing pilot shortage. To maintain its scheduled flights, this segment is having to pay incentives and other ancillary fees to attract and retain its pilots. These types of fees are having a negative impact on operational costs and margins as the majority of these costs have not been passed through to the sole customer of this segment.
Corporate – our corporate-level spending rose as we continue to invest in people, processes and technology to position the Company for growth and investment opportunities in the future.
Aviation ground support maintenance services – most significantly from a financial perspective, operating margins at this segment were negative in the second quarter. Four airport locations within this segment drove the quarterly operating loss, and we are implementing improvement plans at these locations which will ultimately determine their viability. Higher employee costs – including higher wages as well as higher health insurance costs – also impacted second quarter results. Our many customers value the specialized skills that our mechanics bring to their day-to-day operational challenges, and we believe that our customers value our specialized mechanics even more in a tight labor market that threatens to disrupt their operations. We have paid a premium for skilled labor, thus temporarily depressing margins, in order to keep our customers from being disappointed.
The operating dynamic at Air T is not easy to discern on a 90-day horizon and we make no excuses for a decidedly disappointing quarter on the face of the income statement. Shareholders can rest assured that management thinks unsentimentally about generating shareholder value and consequently seeks to invest shareholder capital in businesses that grow, and which build defensible operational edges in time. The Company has many excellent managers and teams, going after compelling opportunities, in their respective domains.

ABOUT AIR T, INC.
Established in 1980, Air T Inc. is a powerful portfolio of businesses and financial assets, each of which is independent yet interrelated. Its four core segments are: overnight air cargo, aviation ground support equipment manufacturing, aviation ground support maintenance services, and commercial aircraft asset management and logistics. Our ownership interests are designed to expand, strengthen and diversify Air T’s cash earnings power. Our goal is to build on Air T’s core businesses, and when appropriate, to expand into adjacent and other industries that we believe fit into the Air T portfolio. For more information, visit www.airt.net.

FORWARD-LOOKING STATEMENTS
Statements in this press release, which 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 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 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, information technology disruptions, and the impact of future terrorist activities in the United States and abroad. 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.

AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


			Three Months Ended September 30,		Six Months Ended September 30,
			2018	2017	2018	2017
Operating Revenues:
	Overnight air cargo		$ 17,064,600	$ 18,081,073	$ 34,705,258	$ 34,823,248
	Ground equipment sales		12,838,796	15,516,109	19,223,577	21,465,765
	Ground support services		8,474,037	8,801,326	17,521,677	17,914,399
	Printing equipment and maintenance		139,945	1,302,922	438,768	4,434,303
	Commercial jet engines and parts		10,642,791	5,125,244	37,962,966	17,850,585
	Corporate		180,608	34,816	356,000	70,563
			49,340,777	48,861,490	110,208,246	96,558,863

Operating Expenses:
	Overnight air cargo		15,349,754	15,919,557	30,524,150	30,481,700
	Ground equipment sales		10,979,913	13,273,845	15,917,225	18,028,060
	Ground support services		8,022,462	6,982,270	15,827,671	14,400,663
	Printing equipment and maintenance		48,903	1,082,751	194,431	2,583,807
	Commercial jet engines and parts		5,662,788	3,321,385	25,783,906	13,391,235
	Research and development		–	–	–	195,653
	General and administrative		9,070,053	7,276,486	17,654,856	13,861,154
	Depreciation, amortization and impairment		1,826,905	529,538	3,322,306	928,365
			50,960,778	48,385,832	109,224,545	93,870,637

Operating Income (Loss)			(1,620,001)	475,658	983,701	2,688,226

Non-operating Income (Expense):

	Foreign currency gain (loss), net		50	(60,482)	(2,132)	(249,106)
	Other-than-temporary impairment loss on investments		–	–	–	(771,173)
	Other investment income (loss), net		277,923	42,150	(37,584)	72,801
	Interest expense		(714,091)	(322,199)	(1,421,290)	(471,718)
	Gain on asset retirement obligation		–	562,500	–	562,500
	Unrealized gain on interest rate swap		47,885	–	145,222	–
	Bargain purchase acquisition gain		–	–	1,983,777	501,880
	Income from equity method investments		160,558	61,840	169,741	29,937
	Other income, net		27,686	–	27,686	–
			(199,989)	283,809	865,420	(324,879)

Income (Loss) Before Income Taxes			(1,819,990)	759,467	1,849,121	2,363,347

Income Taxes (Benefit)			(393,000)	281,000	(6,000)	655,000

Net Income (Loss)			(1,426,990)	478,467	1,855,121	1,708,347

Net (Income) Loss Attributable to Non-controlling
	Interests		$ 105,805	$ (56,766)	$ (347,612)	$ (318,257)


Net Income (Loss) Attributable to Air T, Inc. Stockholders			$ (1,321,185)	$ 421,701	$ 1,507,509	$ 1,390,090


Income (Loss) Per Share:
		Basic	$ (0.65)	$ 0.21	$ 0.74	$ 0.68
		Diluted	$ (0.65)	$ 0.21	$ 0.74	$ 0.68

Weighted Average Shares Outstanding:
		Basic	2,043,823	2,042,789	2,043,716	2,042,789
		Diluted	2,043,823	2,046,945	2,049,393	2,047,305

AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)


		September 30, 2018	March 31, 2018
ASSETS
Current Assets:
	Cash and cash equivalents (Delphax $314,481 and $241,430)**	$ 5,612,472	$ 4,803,238
	Marketable securities	2,341,786	290,449
	Restricted cash	18,865	269,659
	Restricted investments	1,062,239	1,235,405
	Accounts receivable, less allowance for doubtful accounts
	of $727,169 and $801,000 (Delphax $298,199 and $317,000)**	18,634,629	15,157,855
	Costs and estimated earnings in excess of billings on uncompleted projects	–	2,012,121
	Income tax receivable	2,109,543	1,557,180
	Inventories, net	29,450,138	34,231,005
	Other current assets	3,393,812	658,630
	Prepaid expenses (Delphax $58,754 and $72,269)**	1,919,611	1,455,566
	Total Current Assets	64,543,095	61,671,108

Investments in securities		3,045,435	1,026,920
Property and equipment, net of accumulated depreciation of $8,749,057 and $6,347,253		37,071,213	20,273,171
Cash surrender value of life insurance policies, net of policy loans		481,764	2,356,507
Other tax receivables-long-term (Delphax $311,000 and $311,000)**		311,000	311,000
Investments in funds		342,619	324,854
Equity method investments		5,465,501	5,032,268
Other assets		687,973	420,981
Intangible assets, net of accumulated amortization of $1,960,734 and $1,788,598		1,347,606	1,312,472
Goodwill		4,417,605	4,417,605
	Total Assets	$ 117,713,811	$ 97,146,886

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable (Delphax $2,146,938 and $2,145,847)**	$ 14,730,946	$ 10,181,143
	Income tax payable (Delphax $11,312 and $11,312)**	34,312	23,000
	Accrued expenses (Delphax $3,234,808 and $3,244,514)**	13,769,010	11,743,973
	Deferred tax liabilities	–	–
	Current portion of long-term debt	15,242,526	9,229,690
	Total Current Liabilities	43,776,794	31,177,806

Long-term debt (Delphax $0 and $0)*		44,123,009	38,855,260
Deferred tax liabilities		689,655	92,000
Other non-current liabilities		775,046	785,797
	Total Liabilities	89,364,504	70,910,863

Redeemable non-controlling interest		2,583,162	1,992,939

Commitments and contingencies (Note 15)

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,
	2,044,614 and 2,043,607 shares issued and outstanding	511,152	510,901
	Additional paid-in capital	4,187,833	4,171,869
	Retained earnings	22,075,937	20,695,981
	Accumulated other comprehensive loss	(70,677)	(260,900)
	Total Air T, Inc. Stockholders’ Equity	26,704,245	25,117,851
Non-controlling Interests		(938,100)	(874,767)
	Total Equity	25,766,145	24,243,084
	Total Liabilities and Equity	$ 117,713,811	$ 97,146,886

** Amounts related to Delphax as of September 30, 2018 and March 31, 2018, respectively.

AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


				Six Months Ended September 30,
				2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$ 1,855,121	$ 1,708,347
		Adjustments to reconcile net income to net
		cash provided by operating activities:
			Gain (Loss) on sale of property and equipment	1,661	(1,091)
			Change in inventory reserves	(276,494)	24,946
			Change in accounts receivable reserves	(74,261)	(23,849)
			Depreciation, amortization and impairment	3,322,306	928,365
			Change in cash surrender value of life insurance	(22,045)	(20,599)
			Gain on asset retirement obligation	–	(562,500)
			Bargain purchase acquisition gain	(1,983,777)	(501,880)
			Change in warranty reserve	(980)	906
			Other-than-temporary impairment loss on investments	–	771,173
			Unrealized loss on marketable securities	99,471	–
			Unrealized gain on interest rate swap	(145,222)	–
			Change in operating assets and liabilities:
			Accounts receivable	(1,462,724)	(236,911)
			Costs and estimated earnings in excess of billings and uncompleted projects	2,012,121	–
			Notes receivable and other non-trade receivables	(2,735,178)	155,049
			Inventories	9,969,314	4,899,652
			Prepaid expense and other assets	(559,682)	488,537
			Accounts payable	3,262,959	129,166
			Accrued expenses	1,908,945	(196,594)
			Income taxes payable/receivable	(541,051)	(651,923)
			Non-current liabilities	240,745	125,278
			Total adjustments	13,016,108	5,327,725
		Net cash provided by operating activities		14,871,229	7,036,072

CASH FLOWS FROM INVESTING ACTIVITIES:
		Purchases of marketable securities		(2,013,921)	(734,600)
		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		(19,973,209)	(8,259,215)
		Proceeds from sale of property and equipment		50,602	1,861
		Net cash used in investing activities		(27,575,720)	(11,891,954)

CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from lines of credit		51,151,570	48,450,994
		Payments on lines of credit		(58,355,499)	(46,617,448)
		Proceeds from term loan		21,714,000	2,400,000
		Payments on term loan		(3,190,136)	(800,000)
		Debt issuance costs		(107,844)	–
		Proceeds from loan against cash surrender value of life insurance policies		1,896,788	–
		Distribution to non-controlling member		(55,837)	–
		Contribution from non-controlling member		210,000	–
		Payments for repurchase of stock		(22,759)	–
		Proceeds from exercise of stock options		17,762	–
		Net cash provided by financing activities		13,258,045	3,433,546

		Effect of foreign currency exchange rates on cash and cash equivalents		4,886	17,890

NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH				558,440	(1,404,446)
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				$ 5,631,337	$ 2,249,288

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
	Equipment leased to customers transferred to inventory			$ 234,151	–

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the year for:
		Interest		$ 1,149,603	$ 382,535
		Income taxes		358,051	1,312,980