Air T Inc 10-Q for FY2022 Q3

Air T Inc (AIRT)

10-Q 2022-02-14 For: 2021-12-31

Added on April 09, 2026

About this 10-Q

Air T Inc filed this 10-Q on February 14, 2022, covering the quarter ended December 31, 2021 (FY2022 Q3).

Headline figures

Quarter ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $45.43M; down 18.6% from $55.82M a year earlier
Net loss: $1.26M; compared with net income of $2.1M a year earlier
Diluted EPS: -$0.44; compared with $0.73 a year earlier

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☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2021
☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____


Delaware			52-1206400
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AIRT	NASDAQ Global Market
Alpha Income Preferred Securities (also referred to as 8% Cumulative Capital Securities) (“AIP”)	AIRTP	NASDAQ Global Market


Common Stock			Common Shares, par value of $.25 per share
Outstanding Shares at January 31, 2022			2,876,953


		Page
	PART I

Item 1.	Financial Statements

	Condensed Consolidated Statements of Income (Loss) (Unaudited) For The Three and Nine Months Ended December 31, 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) For The Three and Nine Months Ended December 31, 2021 and 2020	5

	Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 2021 and March 31, 2021	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) For The Nine Months Ended December 31, 2021 and 2020	7

	Condensed Consolidated Statements of Equity (Unaudited) For The Nine Months Ended December 31, 2021 and 2020	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

	PART II

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 5.	Other Information	32

Item 6.	Exhibits	33
	Signatures	34
	Exhibit Index
	Certifications
	Interactive Data Files


(in thousands, except income (loss) per share number)	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2020		2021		2020
Operating Revenues:
Overnight air cargo	$	18,248	$	16,322	$	55,946	$	49,789
Ground equipment sales	15,232		20,769		32,603		48,656
Commercial jet engines and parts	11,392		18,078		35,902		28,886
Corporate and other	561		650		1,189		1,063
	45,433		55,819		125,640		128,394


Operating Expenses:
Overnight air cargo	16,209		14,505		49,506		43,906
Ground equipment sales	11,988		14,966		25,550		36,923
Commercial jet engines and parts	7,601		16,086		22,707		22,861
General and administrative	9,168		8,303		26,004		24,940
Depreciation and amortization	442		886		1,146		2,644
Loss on sale of property and equipment	—		5		3		1
	45,408		54,751		124,916		131,275

Operating Income (Loss) from continuing operations	25		1,068		724		(2,881)

Non-operating Income (Expense):
Interest expense	(1,236)		(1,172)		(3,341)		(3,413)
Income (Loss) from equity method investments	99		510		197		(546)
Gain on forgiveness of Paycheck Protection Program (“PPP”) loan	—		—		8,331		—
Other-than-temporary impairment loss on investments	(348)		—		(348)		—
Other	(11)		1,039		1,329		2,125
	(1,496)		377		6,168		(1,834)

(Loss) Income from continuing operations before income taxes	(1,471)		1,445		6,892		(4,715)

Income Taxes Benefit	(282)		(318)		(249)		(2,165)

Net (Loss) Income from continuing operations	(1,189)		1,763		7,141		(2,550)

Gain on sale of discontinued operations, net of tax	—		—		—		4

Net (Loss) Income	(1,189)		1,763		7,141		(2,546)

Net (Income) Loss Attributable to Non-controlling Interests	$	(73)	$	335	$	(559)	$	884

Net (Loss) Income Attributable to Air T, Inc. Stockholders	$	(1,262)	$	2,098	$	6,582	$	(1,662)

(Loss) Income from continuing operations per share (Note 6)
Basic	$	(0.44)	$	0.73	$	2.28	$	(0.58)
Diluted	$	(0.44)	$	0.73	$	2.28	$	(0.58)

Income from discontinued operations per share (Note 6)
Basic	$	—	$	—	$	—	$	—
Diluted	$	—	$	—	$	—	$	—

(Loss) Income per share (Note 6)
Basic	$	(0.44)	$	0.73	$	2.28	$	(0.58)
Diluted	$	(0.44)	$	0.73	$	2.28	$	(0.58)

Weighted Average Shares Outstanding:
Basic	2,882		2,882		2,882		2,882
Diluted	2,882		2,887		2,893		2,882


	Three Months Ended December 31,				Nine Months Ended December 31,
(In Thousands)	2021		2020			2021		2020
Net (Loss) Income	$	(1,189)	$	1,763		$	7,141	$	(2,546)
Foreign currency translation gain (loss)	19		(22)			73		(157)
Unrealized (loss) gain on interest rate swaps	(20)		71			37		100
Reclassification of interest rate swaps into earnings	22		(1)			19		(17)
Total Other Comprehensive Income (Loss)	21		48			129		(74)
Total Comprehensive (Loss) Income	(1,168)		1,811			7,270		(2,620)
Comprehensive (Income) Loss Attributable to Non-controlling Interests	(73)		335			(559)		884
Comprehensive (Loss) Income Attributable to Air T, Inc. Stockholders	$	(1,241)	$	2,146		$	6,711	$	(1,736)


(In thousands, except share amounts)	December 31, 2021		March 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	2,576	$	10,996
Marketable securities	2,630		1,407
Restricted cash	3,263		4,931
Restricted investments	714		1,507
Accounts receivable, net of allowance for doubtful accounts of $1,513 and $1,177	10,548		6,505
Income tax receivable	4,735		4,389
Inventories, net	76,446		71,971
Other current assets	5,884		4,068
Total Current Assets	106,796		105,774

Assets on lease or held for lease, net of accumulated depreciation of $728 and $436	5,896		2,131
Property and equipment, net of accumulated depreciation of $5,111 and $4,510	21,328		8,519
Right-of-use ("ROU") assets	7,099		7,757
Equity method investments	8,785		4,475
Goodwill	4,227		4,227
Other assets	9,665		7,867
Total Assets	$	163,796	$	140,750

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	7,952		8,344
Income tax payable	—		39
Accrued expenses and other (Note 4)	8,959		12,787
Current portion of long-term debt	2,962		5,639
Short-term lease liability	1,337		1,370
Total Current Liabilities	21,210		28,179

Long-term debt	105,436		81,857
Deferred income tax liabilities, net	607		595
Long-term lease liability	6,555		7,075
Other non-current liabilities	808		1,732
Total Liabilities	$	134,616	$	119,438

Redeemable non-controlling interest	7,885		6,598

Commitments and contingencies (Note 14)

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, 3,022,745 shares issued, 2,881,853 shares outstanding	756		756
Treasury stock, 140,892 shares at $18.58	(2,617)		(2,617)
Additional paid-in capital	315		—
Retained earnings	22,283		16,270
Accumulated other comprehensive loss	(555)		(684)
Total Air T, Inc. Stockholders' Equity	$	20,182	$	13,725
Non-controlling Interests	1,113		989
Total Equity	21,295		14,714
Total Liabilities and Equity	$	163,796	$	140,750


(In Thousands)	Common Stock			Treasury Stock				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interests		Total Equity
	Shares	Amount		Shares		Amount
Balance, March 31, 2020	3,023	$	756	141		$	(2,617)	$	2,636	$	23,768	$	(537)	$	1,005	$	25,011

Net loss*	—	—		—		—		—		(841)		—		(5)		(846)

Unrealized loss on interest rate swaps, net of tax	—	—		—		—		—		—		(26)		—		(26)

Foreign currency translation loss	—	—		—		—		—		—		(67)		—		(67)

Adjustment to fair value of redeemable non-controlling interests	—	—		—		—		429		—		—		—		429

Balance, June 30, 2020	3,023	$	756	$	141	$	(2,617)	$	3,065	$	22,927	$	(630)	$	1,000	$	24,501

Net loss*	—	—		—		—		—		(2,920)		—		(8)		(2,928)

Unrealized gain on interest rate swaps, net of tax	—	—		—		—		—		—		55		—		55

Foreign currency translation loss	—	—		—		—		—		—		(68)		—		(68)

Adjustment to fair value of redeemable non-controlling interests	—	—		—		—		(890)		—		—		—		(890)

Balance, September 30, 2020	3,023	$	756	$	141	$	(2,617)	$	2,175	$	20,007	$	(643)	$	992	$	20,670

Net income (loss)*	—	—		—		—		—		2,098		—		(1)		2,097

Unrealized gain on interest rate swaps, net of tax	—	—		—		—		—		—		71		—		71

Foreign currency translation loss	—	—		—		—		—		—		(22)		—		(22)

Adjustment to fair value of redeemable non-controlling interests	—	—		—		—		(888)		—		—		—		(888)

Balance, December 31, 2020	3,023	$	756	$	141	$	(2,617)	$	1,287	$	22,105	$	(594)	$	991	$	21,928


Land	$	2,794
Building	8,439
Site Improvements	798
Tenant Improvements	269
Above market leases	3
Below market leases	(139)
Intangible origination costs	512
Absorption period costs	732
	$	13,408


Type of Revenue			Nature, Timing of Satisfaction of Performance Obligations, and Significant Payment Terms
Product Sales			The Company generates revenue from sales of various distinct products such as parts, aircraft equipment, jet engines, airframes, and scrap metal to its customers. A performance obligation is created when the Company accepts an order from a customer to provide a specified product. Each product ordered by a customer represents a performance obligation. The Company recognizes revenue when obligations under the terms of the contract are satisfied; generally, this occurs at a point-in-time upon shipment or when control is transferred to the customer. Transaction prices are based on contracted terms, which are at fixed amounts based on standalone selling prices. While the majority of the Company's contracts do not have variable consideration, for the limited number of contracts that do, the Company records revenue based on the standalone selling price less an estimate of variable consideration (such as rebates, discounts or prompt payment discounts). The Company estimates these amounts based on the expected incentive amount to be provided to customers and reduces revenue accordingly. Performance obligations are short-term in nature and customers are typically billed upon transfer of control. The Company records all shipping and handling fees billed to customers as revenue. The terms and conditions of the customer purchase orders or contracts are dictated by either the Company’s standard terms and conditions or by a master service agreement or by the contract.
Support Services			The Company provides a variety of support services such as aircraft maintenance and short-term repair services to its customers. Additionally, the Company operates certain aircraft routes on behalf of FedEx. A performance obligation is created when the Company agrees to provide a particular service to a customer. For each service, the Company recognizes revenues over time as the customer simultaneously receives the benefits provided by the Company's performance. This revenue recognition can vary from when the Company has a right to invoice to the output or input method depending on the structure of the contract and management’s analysis. For repair-type services, the Company records revenue over-time based on an input method of costs incurred to total estimated costs. The Company believes this is appropriate as the Company is performing labor hours and installing parts to enhance an asset that the customer controls. The vast majority of repair-services are short term in nature and are typically billed upon completion of the service. Some of the Company’s contracts contain a promise to stand ready as the Company is obligated to perform certain maintenance or administrative services. For most of these contracts, the Company applies the 'as invoiced' practical expedient as the Company has a right to consideration from the customer in an amount that corresponds directly with the value of the entity's performance completed to date. A small number of contracts are accounted for as a series and recognized equal to the amount of consideration the Company is entitled to less an estimate of variable consideration (typically rebates). These services are typically ongoing and are generally billed on a monthly basis.


	Three Months Ended December 31,				Nine Months Ended December 31,
	2021		2020		2021		2020
Product Sales
Air Cargo	$	5,493	$	4,970	$	17,680	$	15,013
Ground equipment sales	14,674		20,365		31,600		47,935
Commercial jet engines and parts	9,379		16,471		29,827		23,450
Corporate and other	85		73		199		106
Support Services
Air Cargo	12,734		11,342		38,228		34,751
Ground equipment sales	173		109		306		193
Commercial jet engines and parts	1,686		1,191		5,342		3,771
Corporate and other	72		47		189		72
Leasing Revenue
Air Cargo	—		—		—		—
Ground equipment sales	141		39		219		110
Commercial jet engines and parts	298		373		642		1,537
Corporate and other	145		36		221		178
Other
Air Cargo	21		10		38		25
Ground equipment sales	244		256		478		418
Commercial jet engines and parts	29		43		91		128
Corporate and other	259		494		580		707

Total	$	45,433	$	55,819	$	125,640	$	128,394


	Outstanding contract liabilities		Outstanding contract liabilities as of April 1, 2021 Recognized as Revenue
As of December 31, 2021	$	1,585
As of April 1, 2021	$	1,358
For the nine months ended December 31, 2021			$	1,180


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Revenue	$	29,408	$	27,327	$	87,396	$	61,402
Gross Profit	1,256		3,231		3,160		5,196
Operating loss	(1,339)		891		(6,544)		(3,496)
Net loss	(1,434)		2,242		(5,847)		(2,075)
Net loss attributable to Air T, Inc. stockholders	$	(110)	$	355	$	(678)	$	(705)


	December 31, 2021		March 31, 2021
Overnight air cargo	$	30	$	—
Ground equipment manufacturing:
Raw materials	4,509		4,695
Work in process	2,120		5,820
Finished goods	8,714		1,691
Corporate and other:
Raw materials	650		462
Finished goods	728		889
Commercial jet engines and parts	61,583		60,516
Total inventories	$	78,334	$	74,073
Reserves	(1,888)		(2,102)
Total inventories, net of reserves	$	76,446	$	71,971


(In Thousands)	Nine Months Ended December 31,
	2021	2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	7,141	(2,546)
Gain on sale of discontinued operations, net of income tax	—	(4)
Net Income (Loss) from continuing operations	7,141	(2,550)
Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:
Depreciation and amortization	1,146	2,644
Gain on forgiveness of PPP loan	(8,331)	—
Other	(225)	668
Change in operating assets and liabilities:
Accounts receivable	(4,378)	(6,784)
Inventories	(8,593)	6,118
Accounts payable	(379)	(2,913)
Accrued expenses	(3,247)	(1,056)
Other	(2,824)	(2,788)
Net cash used in operating activities - continued operations	(19,690)	(6,661)
Net cash provided by operating activities - discontinued operations	—	4
Net cash used in operating activities	(19,690)	(6,657)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities	—	(659)
Sale of marketable securities	6	2,445
Proceeds from sale of assets on lease	—	1,900
Investment in unconsolidated entities	(4,461)	—
Acquisition of assets	(13,408)	—
Capital expenditures related to property & equipment	(1,205)	(3,415)
Capital expenditures related to assets on lease or held for lease	—	(124)
Other	(478)	(455)
Net cash used in investing activities	(19,546)	(308)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from lines of credit	59,247	47,886
Payments on lines of credit	(54,063)	(54,738)
Proceeds from term loan	16,080	59,277
Payments on term loan	(2,909)	(18,176)
Proceeds from PPP loan	—	8,215
Proceeds received from issuance of Trust Preferred Securities ("TruPs")	10,671	1
Other	53	(2,082)
Net cash provided by financing activities	29,079	40,383
Effect of foreign currency exchange rates on cash and cash equivalents	69	(164)


(in thousands)	December 31, 2021		March 31, 2021

Salaries, wages and related items	$	4,356	$	5,427
Profit sharing and bonus	387		2,706
Other Deposits	1,352		1,251
Other	2,864		3,403
Total	$	8,959	$	12,787


	Operating Leases
2022 (excluding the nine months ended December 31, 2021)	$	440
2023	1,733
2024	1,372
2025	1,116
2026	870
2027	704
Thereafter	5,300
Total undiscounted lease payments	$	11,535
Less: Interest	(3,144)
Less: Discount	(499)
Total lease liabilities	$	7,892


(In Thousands)	December 31, 2021		March 31, 2021		Maturity Date	Interest Rate	Unused commitments
Air T Debt
Revolver - MBT	$	3,680	$	—	August 31, 2023	Greater of 2.5% or Prime - 1%	$	13,320
Term Note A - MBT	8,734		6,750		August 31, 2031	3.42%
Term Note B - MBT	3,081		3,375		August 31, 2031	3.42%
Term Note D - MBT	1,422		1,472		January 1, 2028	1-month LIBOR + 2%
Term Note E - MBT	2,856		4,706		June 25, 2025	Greater of LIBOR + 1.5% or 2.5%
Debt - Trust Preferred Securities	24,960		14,289		June 7, 2049	8.00%
PPP Loan	—		8,215		December 24, 20221	1.00%
Total	44,733		38,807

AirCo 1 Debt
Term Loan - PSB	6,393		6,200		December 11, 2025	3-month LIBOR + 3.00%
Total	6,393		6,200

Jet Yard Debt
Term Loan - MBT	1,968		—		August 31, 2031	4.14%
Total	1,968		—

Contrail Debt
Revolver - Old National Bank ("ONB")	1,503		—		September 5, 2023	1-month LIBOR + 3.45%	23,497
Term Loan G - ONB	44,918		43,598		November 24, 2025	1-month LIBOR + 3.00%
Total	46,421		43,598

Delphax Solutions Debt
Canadian Emergency Business Account Loan	32		32		December 31, 2025	5.00%
Total	32		32

Wolfe Lake Debt
Term Loan - Bridgewater	9,900		—		December 2, 2031	3.65%
Total	9,900		—

Total Debt	109,447		88,637

Less: Unamortized Debt Issuance Costs	(1,049)		(1,141)
Total Debt, net	$	108,398	$	87,496


Due by	Amount
December 31, 2022	$	2,963
December 31, 2023	12,688
December 31, 2024	9,058
December 31, 2025	40,817
December 31, 2026	1,672
Thereafter	42,249
	109,447
Less: Unamortized Debt Issuance Costs	(1,049)
	$	108,398


	December 31, 2021		March 31, 2021
United States	$	25,683	$	8,632
Foreign	1,541		2,018
Total tangible long-lived assets, net	$	27,224	$	10,650


	December 31, 2021		March 31, 2021
Macau	$	1,430	$	1,896
Other	111		122
Total tangible long-lived assets, net	$	1,541	$	2,018


	December 31, 2021		December 31, 2020
United States	$	109,261	$	113,563
Foreign	16,379		14,831
Total revenue	$	125,640	$	128,394


	Three Months Ended December 31,				Change
	2021		2020
Overnight Air Cargo	$	18,248	$	16,322	$	1,926	12	%
Ground Equipment Sales	15,232		20,769		(5,537)		(27)	%
Commercial Jet Engines and Parts	11,392		18,078		(6,686)		(37)	%
Corporate and Other	561		650		(89)		(14)	%
	$	45,433	$	55,819	$	(10,386)	(19)	%


	Three months ended				Nine months ended
	12/31/2021		12/31/2020		12/31/2021		12/31/2020
Operating income (loss) from continuing operations	$	25	$	1,068	$	724	$	(2,881)
Depreciation and amortization (excluding leased engines depreciation)	372		259		956		917
Asset impairment, restructuring or impairment charges	—		—		—		664
Loss on disposition of assets	—		5		3		1
Security issuance expenses	150		—		215		—
Adjusted EBITDA	$	547	$	1,332	$	1,898	$	(1,299)


No.			Description

10.1			Opinion of Winthrop & Weinstine, P.A. incorporated by reference to Exhibit 5.1 to the Company's Current Report on Form 8-K dated November 19, 2021 (Commission file No. 001-35476).

10.2			First Amendment to At the Market Offering Agreement, dated November 18, 2021, by and between Air T, Inc., Air T Funding and Ascendiant Capital Markets, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated November 19, 2021 (Commission file No. 001-35476).

10.3			Promissory Note with Bridgewater Bank dated December 2, 2021 in the principal amount of $9,900,000, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated December 8, 2021 (Commission file No. 001-35476).

10.4			Combination Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement with Bridgewater Bank dated December 2, 2021., incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K dated December 8, 2021 (Commission file No. 001-35476).

10.5			International Swaps and Derivatives Association, Inc. 2002 Master Agreement dated as of December 28, 2021 between Old National Bank and Contrail Aviation Support, LLC & Contrail Aviation Leasing, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated January 13, 2021 (Commission file No. 001-35476).

10.6			Schedule to the 2002 Master Agreement dated as of December 28, 2021 between Old National Bank and Contrail Aviation Support, LLC & Contrail Aviation Leasing, LLC, including Swap Transaction Confirmation dated January 7, 2022, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated January 13, 2021 (Commission file No. 001-35476).

10.7			Form of Engine Sale Agreement between Finnair Aircraft Finance Oy and Contrail Aviation Support, LLC dated January 19, 2022.*, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated Jan uary 24 , 2021 (Commission file No. 001-35476).

31.1			Section 302 Certification of Chief Executive Officer and President

31.2			Section 302 Certification of Chief Financial Officer

32.1			Section 1350 Certifications

101			The following financial information from the Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Stockholders Equity, and (v) the Notes to the Condensed Consolidated Financial Statements.


			AIR T, INC.


Date: February 14, 2022
			/s/ Nick Swenson
			Nick Swenson, Chief Executive Officer and Director



			/s/ Brian Ochocki
			Brian Ochocki, Chief Financial Officer