Air T, Inc. Reports Second Quarter Fiscal 2019 Results
DENVER, N.C., Nov. 13, 2018 /PRNewswire/ -- 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 | |||||
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SOURCE Air T, Inc.
