Q1 2019 Overview
- Revenues rose to $60.9 million for the fiscal quarter ended June 30, 2018, a 28% increase over the prior year comparable quarter
- Operating income increased to $2.6 million, as compared to the prior quarter’s operating income of $2.2 million
- Non-cash bargain purchase gain of $2.0 million in the first quarter of fiscal 2019 versus non-cash bargain purchase gain of $0.5 million in the same quarter of the prior year
- Net income attributable to Air T stockholders increased to $2.8 million, as compared to net income of $1 million in Q1 2018, with the increase primarily due to the $2.0 million non-cash bargain purchase gain recognized as part of the acquisition of the assets of Worthington Aviation
- Diluted earnings per share increased to $1.38 compared to prior comparable quarter’s $0.47
Business Segment Results
Commercial Jet Engines and Parts
- This segment provides surplus and aftermarket commercial jet engine parts, airframes, avionics, other aircraft parts and logistics to the aviation industry.
- Recent acquisitions in this segment include the acquisition of the assets of AirCo in May 2017 and the acquisition of the assets of Worthington Aviation Parts in May 2018.
- Revenues for this segment totaled $27.3 million in Q1 2019, an increase of 115% over the same period of fiscal 2018. This increase is due to higher volume sales as this segment sold 4 whole jet engines in the current quarter as compared to none in the prior year comparable quarter, as well as the incremental revenue associated with our recent acquisitions.
Overnight Air Cargo
- The segment provides air express delivery services, substantially all for FedEx.
- Revenues for this segment rose 5% to $17.6 million in Q1 2019 compared to $16.7 million in Q1 2018.
- The revenue increase was due to a variety of factors including increases in pass-through expenses and the administrative fee effective with the contract renewal on June 1, 2018, as well as additional billable maintenance hours.
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 $9.0 million in Q1 2019, a slight decline of 1% over Q1 2018.
- The revenue decrease was due to the closing of two unprofitable locations in the second half of fiscal 2018.
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 $6.4 million for the fiscal quarter ended June 30, 2018. This represents an increase of 7% over the revenue of $5.9 millionin the prior comparable quarter.
- The segment has a sales backlog of $17.5 million as of June 30, 2018 compared to $16.4 million a year-ago.
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 $5.7 million as of June 30, 2018
- As of June 30, 2018, Air T had $9.6 million of securities (including Insignia at market value of $5.7 million)
- Working capital as of June 30, 2018 totaled $25.2 million compared to $30.5 million as of March 31, 2018
Consideration of Trust Preferred Offering
Air T is considering issuing and distributing $3 million in face value of a new 8% fixed income security, Alpha Income Preferred (AIP), pro rata to existing holders of Air T common stock. At this time, it is contemplated that Air T stockholders would also receive warrants to purchase up to an additional $17 million in 8% AIP at a discount to face value, exercisable for up to one year. If the warrants are all exercised, there will be $20 million in face amount of 8% AIP outstanding. The 8% AIP will be preferred securities of a subsidiary trust to be formed by Air T. Air T currently expects that both the AIP and the warrants would be listed for trading upon issuance on The Nasdaq Stock Market or another exchange or quotation service. Air T anticipates completing the distribution in the third or fourth quarter of calendar 2018. However, Air T’s Board has not yet approved this distribution nor has Air T yet engaged a trustee or finalized the plans for the distribution, which are subject to delay or cancellation.
Air T believes the distribution and issuance of the 8% AIP, if successfully implemented, will benefit Air T and its stockholders by increasing Air T’s financial flexibility. Exercises of warrants will provide additional cash resources for Air T’s investments and operations. In addition, the distribution will provide holders of Air T’s securities with the ability to adjust their portfolios of securities according to their investment priorities.
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 (UNAUDITED) |
||||||
|
Three Months Ended June 30, |
||||||
|
2018 |
2017 |
|||||
|
Operating Revenues: |
||||||
|
Overnight air cargo |
$ |
17,640,658 |
$ |
16,742,175 |
||
|
Ground equipment sales |
6,384,781 |
5,949,656 |
||||
|
Ground support services |
9,047,640 |
9,113,073 |
||||
|
Printing equipment and maintenance |
298,823 |
3,131,381 |
||||
|
Commercial jet engines and parts |
27,320,175 |
12,725,341 |
||||
|
Corporate |
175,392 |
35,747 |
||||
|
60,867,469 |
47,697,373 |
|||||
|
Operating Expenses: |
||||||
|
Overnight air cargo |
15,174,396 |
14,562,143 |
||||
|
Ground equipment sales |
4,937,312 |
4,754,215 |
||||
|
Ground support services |
7,805,209 |
7,418,393 |
||||
|
Printing equipment and maintenance |
145,528 |
1,501,056 |
||||
|
Commercial jet engines and parts |
20,121,118 |
10,069,850 |
||||
|
Research and development |
– |
195,653 |
||||
|
General and administrative |
8,584,803 |
6,584,668 |
||||
|
Depreciation, amortization and impairment |
1,495,401 |
398,827 |
||||
|
58,263,767 |
45,484,805 |
|||||
|
Operating Income |
2,603,702 |
2,212,568 |
||||
|
Non-operating Income (Expense): |
||||||
|
Foreign currency gain (loss), net |
(2,182) |
(188,624) |
||||
|
Other-than-temporary impairment loss on investments |
– |
(771,173) |
||||
|
Other investment income (loss), net |
(315,507) |
30,651 |
||||
|
Interest expense and other |
(707,199) |
(149,519) |
||||
|
Unrealized gain on interest rate swap |
97,337 |
– |
||||
|
Bargain purchase acquisition gain, net of tax |
1,983,777 |
501,880 |
||||
|
Equity in income (loss) of associated company |
9,183 |
(31,903) |
||||
|
1,065,409 |
(608,688) |
|||||
|
Income Before Income Taxes |
3,669,111 |
1,603,880 |
||||
|
Income Taxes |
387,000 |
374,000 |
||||
|
Net Income |
3,282,111 |
1,229,880 |
||||
|
Net (Income) Attributable to Non-controlling |
||||||
|
Interests |
$ |
(453,417) |
$ |
(261,491) |
||
|
Net Income Attributable to Air T, Inc. Stockholders |
$ |
2,828,694 |
$ |
968,389 |
||
|
Income Per Share: |
||||||
|
Basic |
$ |
1.38 |
$ |
0.47 |
||
|
Diluted |
$ |
1.38 |
$ |
0.47 |
||
|
Weighted Average Shares Outstanding: |
||||||
|
Basic |
2,043,607 |
2,042,789 |
||||
|
Diluted |
2,049,698 |
2,047,623 |
||||
|
AIR T, INC. AND SUBSIDIARIES |
||||||
|
CONSOLIDATED BALANCE SHEET (UNAUDITED) |
||||||
|
June 30, 2018 |
March 31, 2018* |
|||||
|
ASSETS |
(Unaudited) |
|||||
|
Current Assets: |
||||||
|
Cash and cash equivalents (Delphax $371,831 and $241,430)** |
$ |
5,746,521 |
$ |
4,803,238 |
||
|
Marketable securities |
1,055,075 |
290,449 |
||||
|
Restricted cash |
18,832 |
269,659 |
||||
|
Restricted investments |
1,119,490 |
1,235,405 |
||||
|
Accounts receivable, less allowance for doubtful accounts |
||||||
|
of $755,865 and $801,000 (Delphax $41,150 and $317,000)** |
19,120,159 |
15,157,855 |
||||
|
Costs and estimated earnings in excess of billings on uncompleted projects |
– |
2,012,121 |
||||
|
Notes and other receivables-current |
2,880,560 |
658,630 |
||||
|
Income tax receivable |
1,351,597 |
1,557,180 |
||||
|
Inventories, net (Delphax $0 and $0)** |
27,619,851 |
34,231,005 |
||||
|
Prepaid expenses and other (Delphax $58,898 and $72,269)** |
1,147,368 |
1,455,566 |
||||
|
Total Current Assets |
60,059,453 |
61,671,108 |
||||
|
Investments in securities |
2,840,175 |
1,026,920 |
||||
|
Property and equipment, net |
19,417,752 |
20,273,171 |
||||
|
Cash surrender value of life insurance policies |
2,372,289 |
2,356,507 |
||||
|
Other tax receivables-long-term (Delphax $311,000 and $311,000)** |
311,000 |
311,000 |
||||
|
Investments in funds |
314,026 |
324,854 |
||||
|
Equity method investments |
5,238,982 |
5,032,268 |
||||
|
Other assets |
772,109 |
420,981 |
||||
|
Intangible assets, net |
1,371,561 |
1,312,472 |
||||
|
Goodwill |
4,417,605 |
4,417,605 |
||||
|
Total Assets |
$ |
97,114,952 |
$ |
97,146,886 |
||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
|
Current Liabilities: |
||||||
|
Accounts payable (Delphax $2,160,817 and $2,145,847)** |
$ |
14,887,263 |
$ |
10,181,143 |
||
|
Income tax payable (Delphax $11,312 and $11,312)** |
23,000 |
23,000 |
||||
|
Accrued expenses (Delphax $3,180,724 and $3,244,514)** |
10,418,865 |
11,743,973 |
||||
|
Short-term debt |
9,544,732 |
9,229,690 |
||||
|
Total Current Liabilities |
34,873,860 |
31,177,806 |
||||
|
Long-term debt (Delphax $0 and $0)* |
31,322,098 |
38,855,260 |
||||
|
Deferred income taxes |
681,000 |
92,000 |
||||
|
Other non-current liabilities |
719,252 |
785,797 |
||||
|
Total Liabilities |
67,596,210 |
70,910,863 |
||||
|
Redeemable non-controlling interest |
2,445,563 |
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, |
||||||
|
2,043,607 shares issued and outstanding |
510,901 |
510,901 |
||||
|
Additional paid-in capital |
4,171,869 |
4,171,869 |
||||
|
Retained earnings |
23,418,334 |
20,695,981 |
||||
|
Accumulated other comprehensive loss |
(124,051) |
(260,900) |
||||
|
Total Air T, Inc. Stockholders’ Equity |
27,977,053 |
25,117,851 |
||||
|
Non-controlling Interests |
(903,874) |
(874,767) |
||||
|
Total Equity |
27,073,179 |
24,243,084 |
||||
|
Total Liabilities and Equity |
$ |
97,114,952 |
$ |
97,146,886 |
||
|
* Derived from audited consolidated financial statements |
||||||
|
** Amounts related to Delphax as of June 30, 2018 and March 31, 2018, respectively. |
||||||
|
AIR T, INC. AND SUBSIDIARIES |
|||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
|||||
|
Three Months Ended June 30, |
|||||
|
2018 |
2017 |
||||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||
|
Net income |
$ |
3,282,111 |
$ |
1,229,880 |
|
|
Adjustments to reconcile net income to net |
|||||
|
cash provided by (used in) operating activities: |
|||||
|
Gain on sale of marketable securities |
10,828 |
– |
|||
|
Gain on sale of property and equipment |
1,661 |
(1,091) |
|||
|
Change in inventory reserves |
91,547 |
(405,302) |
|||
|
Change in accounts receivable reserves |
(45,628) |
(20,950) |
|||
|
Depreciation, amortization and impairment |
1,495,401 |
398,827 |
|||
|
Change in cash surrender value of life insurance |
(15,782) |
(14,335) |
|||
|
Bargain purchase acquisition gain, net of tax |
(1,983,777) |
(501,880) |
|||
|
Warranty reserve |
(980) |
27,706 |
|||
|
Other-than-temporary impairment loss on investments |
– |
771,173 |
|||
|
Unrealized loss on marketable securities |
322,477 |
– |
|||
|
Unrealized gain on interest rate swap |
(97,337) |
– |
|||
|
Change in operating assets and liabilities: |
|||||
|
Accounts receivable |
29,564 |
(1,071,687) |
|||
|
Notes receivable and other non-trade receivables |
(2,221,930) |
811,207 |
|||
|
Inventories |
11,319,597 |
(1,896,441) |
|||
|
Prepaid expense and other assets |
288,286 |
380,030 |
|||
|
Accounts payable |
3,942,185 |
(1,047,556) |
|||
|
Accrued expenses |
(1,982,397) |
(1,206,518) |
|||
|
Income taxes payable/receivable |
205,583 |
355,186 |
|||
|
Non-current liabilities |
75,525 |
47,240 |
|||
|
Total adjustments |
11,434,823 |
(3,374,391) |
|||
|
Net cash provided by (used in) operating activities |
14,716,934 |
(2,144,511) |
|||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||
|
Purchases of marketable securities |
(784,443) |
(30,476) |
|||
|
Acquisition of businesses, net of cash acquired |
(3,325,700) |
(2,900,000) |
|||
|
Net cash used for equity method investments |
(197,532) |
– |
|||
|
Purchase of debt security |
(2,000,000) |
– |
|||
|
Capital expenditures |
(459,575) |
(489,995) |
|||
|
Proceeds from sale of property and equipment |
50,602 |
1,861 |
|||
|
Increase (decrease) in restricted cash |
– |
– |
|||
|
Net cash used in investing activities |
(6,716,648) |
(3,418,610) |
|||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||
|
Proceeds from lines of credit |
28,933,742 |
17,002,765 |
|||
|
Payments on lines of credit |
(38,156,091) |
(14,520,242) |
|||
|
Proceeds from term loan |
3,400,000 |
2,400,000 |
|||
|
Payments on term loan |
(1,404,800) |
(200,000) |
|||
|
Debt issuance costs |
(35,702) |
– |
|||
|
Distribution to non-controlling member |
(47,051) |
– |
|||
|
Net cash provided by (used in) financing activities |
(7,309,902) |
4,682,523 |
|||
|
Effect of foreign currency exchange rates on cash and cash equivalents |
2,072 |
6,057 |
|||
|
NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
692,456 |
(874,541) |
|||
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD |
5,072,897 |
2,763,365 |
|||
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD |
$ |
5,765,353 |
$ |
1,888,824 |
|
|
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 |
$ |
629,264 |
$ |
160,191 |
|
|
Income taxes |
181,417 |
18,814 |
|||