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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
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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 September 30,
2022 |
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☐ |
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____to
_____ |
Commission File Number 001-35476
Air T, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
52-1206400 |
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(State or other jurisdiction of incorporation or
organization) |
(I.R.S. Employer Identification No.) |
5930 Balsom Ridge Road, Denver, North Carolina 28037
(Address of principal executive offices, including zip
code)
(828) 464 – 8741
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock |
AIRT |
NASDAQ Global Market |
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Alpha Income Preferred Securities (also referred to as 8%
Cumulative Capital Securities) (“AIP”) |
AIRTP |
NASDAQ Global Market |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
x No
☐
Indicate by check mark whether the registrant has submitted
electronically, every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such
files).
Yes
x No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
Accelerated filer |
☐ |
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
x
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
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Common Stock |
Common Shares, par value of $.25 per share |
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Outstanding Shares at October 31, 2022 |
2,843,276 |
AIR T, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Page |
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PART I
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Item 3. |
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Item 5. |
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Exhibit Index |
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Certifications |
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Interactive Data Files |
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Item 1. Financial
Statements
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME (LOSS)
(UNAUDITED)
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(in thousands, except (loss) income per share number) |
Three Months Ended
September 30, |
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Six Months Ended
September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Operating Revenues: |
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Overnight air cargo |
$ |
22,069 |
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$ |
18,847 |
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$ |
42,633 |
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$ |
37,697 |
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Ground equipment sales |
18,019 |
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9,189 |
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23,834 |
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17,371 |
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Commercial jet engines and parts |
18,986 |
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14,916 |
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41,841 |
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24,510 |
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Corporate and other |
1,614 |
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286 |
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3,242 |
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628 |
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60,688 |
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43,238 |
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111,550 |
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80,206 |
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Operating Expenses: |
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Overnight air cargo |
19,451 |
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16,553 |
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37,522 |
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33,297 |
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Ground equipment sales |
14,438 |
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8,033 |
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18,870 |
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13,562 |
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Commercial jet engines and parts |
13,443 |
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9,010 |
|
|
28,328 |
|
|
15,106 |
|
|
General and administrative |
10,664 |
|
|
8,615 |
|
|
22,396 |
|
|
16,836 |
|
|
Depreciation and amortization |
1,026 |
|
|
323 |
|
|
1,888 |
|
|
703 |
|
|
Inventory write-down |
1,003 |
|
|
— |
|
|
1,020 |
|
|
— |
|
|
Asset impairment |
485 |
|
|
— |
|
|
516 |
|
|
— |
|
|
(Gain) Loss on sale of property and equipment |
(1) |
|
|
— |
|
|
(2) |
|
|
3 |
|
|
|
60,509 |
|
|
42,534 |
|
|
110,538 |
|
|
79,507 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
179 |
|
|
704 |
|
|
1,012 |
|
|
699 |
|
|
|
|
|
|
|
|
|
|
|
Non-operating (Expense) Income: |
|
|
|
|
|
|
|
|
Interest expense |
(1,996) |
|
|
(1,167) |
|
|
(3,818) |
|
|
(2,105) |
|
|
Income from equity method investments |
266 |
|
|
14 |
|
|
798 |
|
97 |
|
|
Gain on forgiveness of Paycheck Protection Program (“PPP”)
loan |
— |
|
|
8,331 |
|
|
— |
|
|
8,331 |
|
|
Other |
(357) |
|
|
159 |
|
|
(509) |
|
|
1,340 |
|
|
|
(2,087) |
|
|
7,337 |
|
|
(3,529) |
|
|
7,663 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income before income taxes |
(1,908) |
|
|
8,041 |
|
|
(2,517) |
|
|
8,362 |
|
|
|
|
|
|
|
|
|
|
|
Income Taxes (Benefit) Expense |
(572) |
|
|
38 |
|
|
(380) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
(1,336) |
|
|
8,003 |
|
|
(2,137) |
|
|
8,329 |
|
|
|
|
|
|
|
|
|
|
|
Net Loss (Income) Attributable to Non-controlling
Interests |
$ |
104 |
|
|
$ |
(448) |
|
|
$ |
(528) |
|
|
$ |
(486) |
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income Attributable to Air T, Inc.
Stockholders |
$ |
(1,232) |
|
|
$ |
7,555 |
|
|
$ |
(2,665) |
|
|
$ |
7,843 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income per share (Note 6) |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.43) |
|
|
$ |
2.62 |
|
|
$ |
(0.93) |
|
|
$ |
2.72 |
|
|
Diluted |
$ |
(0.43) |
|
|
$ |
2.60 |
|
|
$ |
(0.93) |
|
|
$ |
2.71 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding: |
|
|
|
|
|
|
|
|
Basic |
2,865 |
|
|
2,882 |
|
|
2,866 |
|
|
2,882 |
|
|
Diluted |
2,865 |
|
|
2,901 |
|
|
2,866 |
|
|
2,893 |
|
See notes to condensed consolidated financial
statements.
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE
INCOME
(LOSS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
|
(In Thousands) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net (Loss) Income |
$ |
(1,336) |
|
|
$ |
8,003 |
|
|
$ |
(2,137) |
|
|
$ |
8,329 |
|
|
Foreign currency translation (loss) income |
(606) |
|
|
103 |
|
|
(1,135) |
|
|
54 |
|
|
Unrealized gain on interest rate swaps |
957 |
|
|
46 |
|
|
1,432 |
|
|
57 |
|
|
Reclassification of interest rate swaps into earnings |
17 |
|
|
(2) |
|
|
34 |
|
|
(3) |
|
|
Total Other Comprehensive Income |
368 |
|
|
147 |
|
|
331 |
|
|
108 |
|
|
Total Comprehensive (Loss) Income |
(968) |
|
|
8,150 |
|
|
(1,806) |
|
|
8,437 |
|
|
Comprehensive Loss (Income) Attributable to Non-controlling
Interests |
104 |
|
|
(448) |
|
|
(528) |
|
|
(486) |
|
|
Comprehensive (Loss) Income Attributable to Air T, Inc.
Stockholders |
$ |
(864) |
|
|
$ |
7,702 |
|
|
$ |
(2,334) |
|
|
$ |
7,951 |
|
See notes to condensed consolidated financial
statements.
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share amounts) |
September 30, 2022 |
|
March 31, 2022 |
|
ASSETS |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
$ |
7,071 |
|
|
$ |
5,616 |
|
|
Marketable securities |
788 |
|
|
859 |
|
|
Restricted cash |
2,394 |
|
|
2,752 |
|
|
Restricted investments |
1,589 |
|
|
1,691 |
|
|
Accounts receivable, net of allowance for doubtful accounts of
$1,328 and $1,368
|
22,571 |
|
|
19,684 |
|
|
Income tax receivable |
3,893 |
|
|
3,230 |
|
|
Inventories, net |
87,604 |
|
|
75,167 |
|
|
Employee retention credit receivable |
7,689 |
|
|
9,138 |
|
|
Other current assets |
12,932 |
|
|
10,106 |
|
|
Total Current Assets |
146,531 |
|
|
128,243 |
|
|
|
|
|
|
|
Assets on lease or held for lease, net of accumulated depreciation
of $1,041 and $780
|
14,574 |
|
|
14,509 |
|
|
Property and equipment, net of accumulated depreciation of $6,015
and $5,405
|
21,338 |
|
|
21,212 |
|
|
Intangible assets, net of accumulated amortization of $3,512 and
$2,947
|
10,722 |
|
|
13,260 |
|
|
Right-of-use ("ROU") assets |
6,755 |
|
|
7,354 |
|
|
Equity method investments |
11,559 |
|
|
9,864 |
|
|
Goodwill |
10,093 |
|
|
10,126 |
|
|
Other assets |
4,360 |
|
|
3,031 |
|
|
Total Assets |
225,932 |
|
|
207,599 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable |
13,249 |
|
|
9,397 |
|
|
Income tax payable |
252 |
|
|
194 |
|
|
Accrued expenses and other (Note 4) |
13,626 |
|
|
13,391 |
|
|
Current portion of long-term debt |
44,704 |
|
|
6,482 |
|
|
Short-term lease liability |
1,341 |
|
|
1,443 |
|
|
Total Current Liabilities |
73,172 |
|
|
30,907 |
|
|
|
|
|
|
|
Long-term debt |
107,979 |
|
|
129,326 |
|
|
Deferred income tax liabilities, net |
3,175 |
|
|
2,812 |
|
|
Long-term lease liability |
6,206 |
|
|
6,734 |
|
|
Other non-current liabilities |
1,208 |
|
|
1,342 |
|
|
Total Liabilities |
191,740 |
|
|
171,121 |
|
|
|
|
|
|
|
Redeemable non-controlling interest |
10,253 |
|
|
10,761 |
|
|
|
|
|
|
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
Air T, Inc. Stockholders' Equity: |
|
|
|
|
Preferred stock, $1.00 par value, 2,000,000 shares
authorized
|
— |
|
|
— |
|
|
Common stock, $.25 par value; 4,000,000 shares authorized,
3,026,495 and 3,022,745 shares issued, 2,850,748 and 2,866,418
shares outstanding
|
757 |
|
|
756 |
|
|
Treasury stock, 175,747 shares at $19.07 and 156,327 shares at
$19.20
|
(3,353) |
|
|
(3,002) |
|
|
Additional paid-in capital |
571 |
|
|
393 |
|
|
Retained earnings |
24,802 |
|
|
26,729 |
|
|
Accumulated other comprehensive income (loss) |
68 |
|
|
(263) |
|
|
Total Air T, Inc. Stockholders' Equity |
22,845 |
|
|
24,613 |
|
|
Non-controlling Interests |
1,094 |
|
|
1,104 |
|
|
Total Equity |
23,939 |
|
|
25,717 |
|
|
Total Liabilities and Equity |
$ |
225,932 |
|
|
$ |
207,599 |
|
See notes to condensed consolidated financial
statements.
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
Six Months Ended
September 30, |
|
|
2022 |
|
2021 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
Net (Loss) Income |
$ |
(2,137) |
|
|
$ |
8,329 |
|
|
Adjustments to reconcile Net (Loss) Income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
1,888 |
|
|
703 |
|
|
Gain on forgiveness of PPP loan |
— |
|
|
(8,331) |
|
|
Inventory write-down |
1,020 |
|
|
— |
|
|
Asset impairment |
516 |
|
|
— |
|
|
Other |
(190) |
|
|
(1,169) |
|
|
Change in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
(2,848) |
|
|
(10,637) |
|
|
Inventories |
(14,246) |
|
|
(10,120) |
|
|
Accounts payable |
3,852 |
|
|
2,721 |
|
|
Accrued expenses |
84 |
|
|
(3,782) |
|
|
Other |
(1,885) |
|
|
(467) |
|
|
Net cash used in operating activities |
(13,946) |
|
|
(22,753) |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
Investment in unconsolidated entities |
(1,187) |
|
|
(1,085) |
|
|
Capital expenditures related to property &
equipment |
(763) |
|
|
(842) |
|
|
Capital expenditures related to assets on lease or held for
lease |
(28) |
|
|
— |
|
|
Other |
202 |
|
|
(449) |
|
|
Net cash used in investing activities |
(1,776) |
|
|
(2,376) |
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from lines of credit |
68,532 |
|
|
36,742 |
|
|
Payments on lines of credit |
(55,322) |
|
|
(31,892) |
|
|
Proceeds from term loan |
8,177 |
|
|
4,667 |
|
|
Payments on term loan |
(4,112) |
|
|
(2,012) |
|
|
Proceeds received from issuance of Trust Preferred Securities
("TruPs") |
— |
|
|
7,810 |
|
|
Other |
(518) |
|
|
110 |
|
|
Net cash provided by financing activities |
16,757 |
|
|
15,425 |
|
|
Effect of foreign currency exchange rates on cash and cash
equivalents |
62 |
|
|
51 |
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH |
1,097 |
|
|
(9,653) |
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF
PERIOD |
8,368 |
|
|
15,927 |
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF
PERIOD |
$ |
9,465 |
|
|
$ |
6,274 |
|
See notes to condensed consolidated financial
statements.
AIR T, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2021 |
3,023 |
|
|
$ |
756 |
|
|
141 |
|
|
$ |
(2,617) |
|
|
$ |
— |
|
|
$ |
16,270 |
|
|
$ |
(684) |
|
|
$ |
989 |
|
|
$ |
14,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income* |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
289 |
|
|
— |
|
|
153 |
|
|
442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(49) |
|
|
— |
|
|
(49) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to fair value of redeemable non-controlling
interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(238) |
|
|
— |
|
|
— |
|
|
(238) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swaps, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11 |
|
|
— |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of interest rate swaps into earnings |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1) |
|
|
— |
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
3,023 |
|
|
$ |
756 |
|
|
141 |
|
|
$ |
(2,617) |
|
|
$ |
— |
|
|
$ |
16,321 |
|
|
$ |
(723) |
|
|
$ |
1,142 |
|
|
$ |
14,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)* |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,555 |
|
|
— |
|
|
(12) |
|
|
7,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
236 |
|
|
— |
|
|
— |
|
|
— |
|
|
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
103 |
|
|
— |
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to fair value of redeemable non-controlling
interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
183 |
|
|
— |
|
|
— |
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swaps, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
46 |
|
|
— |
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of interest rate swaps into earnings |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2) |
|
|
— |
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021 |
3,023 |
|
|
$ |
756 |
|
|
141 |
|
|
$ |
(2,617) |
|
|
$ |
236 |
|
|
$ |
24,059 |
|
|
$ |
(576) |
|
|
$ |
1,130 |
|
|
$ |
22,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2022 |
3,023 |
|
|
$ |
756 |
|
|
156 |
|
|
$ |
(3,002) |
|
|
$ |
393 |
|
|
$ |
26,729 |
|
|
$ |
(263) |
|
|
$ |
1,104 |
|
|
$ |
25,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss* |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,433) |
|
|
— |
|
|
(6) |
|
|
(1,439) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
79 |
|
|
— |
|
|
— |
|
|
— |
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(529) |
|
|
— |
|
|
(529) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to fair value of redeemable non-controlling
interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
926 |
|
|
— |
|
|
— |
|
|
926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swaps, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
475 |
|
|
— |
|
|
475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of interest rate swaps into earnings |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17 |
|
|
— |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
3,023 |
|
|
$ |
756 |
|
|
156 |
|
|
$ |
(3,002) |
|
|
$ |
472 |
|
|
$ |
26,222 |
|
|
$ |
(300) |
|
|
$ |
1,098 |
|
|
$ |
25,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss* |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,232) |
|
— |
|
|
(4) |
|
(1,236) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
— |
|
|
— |
|
|
19 |
|
(351) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(351) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
3 |
|
1 |
|
— |
|
|
— |
|
|
20 |
|
— |
|
|
— |
|
|
— |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
79 |
|
— |
|
|
— |
|
|
— |
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(606) |
|
— |
|
|
(606) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to fair value of redeemable non-controlling
interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(188) |
|
— |
|
|
— |
|
|
(188) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swaps, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
957 |
|
— |
|
|
957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of interest rate swaps into earnings |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17 |
|
— |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2022 |
3,026 |
|
|
$ |
757 |
|
|
175 |
|
|
$ |
(3,353) |
|
|
$ |
571 |
|
|
$ |
24,802 |
|
|
$ |
68 |
|
|
$ |
1,094 |
|
|
$ |
23,939 |
|
*Excludes amount attributable to redeemable non-controlling
interests in Contrail Aviation Support, LLC ("Contrail") and
Shanwick B.V. ("Shanwick")
See notes to condensed consolidated financial
statements.
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Financial
Statement Presentation
The condensed consolidated financial statements of Air T, Inc.
(“Air T”, the “Company”, “we”, “us” or “our”) have been prepared,
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
following disclosures are adequate to make the information
presented not misleading. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation of the results for the
periods presented have been made.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for
the year ended March 31, 2022. The results of operations for
the period ended September 30, 2022 are not necessarily
indicative of the operating results for the full year.
Impacts from Geopolitical, Macroeconomic, and COVID-19
Challenges
COVID-19 and its impact on the current financial, economic and
capital markets environment, and future developments in these and
other areas present uncertainty and risk with respect to our
financial condition and results of operations. Each of our
businesses implemented measures to attempt to limit the impact of
COVID-19 but we still experienced a number of disruptions, and we
experienced and continue to experience to a lesser degree a
reduction in demand for commercial aircraft, jet engines and parts
compared to historical periods. Many of our businesses may continue
to generate reduced operating cash flow and may continue to operate
at a loss from time to time during fiscal 2023. We expect that the
impact of COVID-19 will continue to some extent. The fluidity of
this situation precludes any prediction as to the ultimate adverse
impact of COVID-19 on economic and market conditions, and, as a
result, present material uncertainty and risk with respect to us
and our results of operations. The Company believes the estimates
and assumptions underlying the Company’s condensed consolidated
financial statements are reasonable and supportable based on the
information available as of September 30, 2022; however,
uncertainty over the ultimate direct and indirect impact COVID-19
will have on the global economy generally, and the Company’s
businesses in particular, makes any estimates and assumptions as of
September 30, 2022 inherently less certain than they would be
absent the current and potential impacts of COVID-19.
The war in Eastern Europe and related sanctions imposed on Russia
and related actors have resulted in interest rate acceleration and
inflation, including, but not limited to, a significant increase in
the price of commodities. We expect that these factors will
continue to negatively impact our businesses at least in the
short-term. The ultimate impact on our overall financial condition
and operating results will depend on the currently unknowable
duration and severity of these activities. We continue to evaluate
the long-term impact that these may have on our business model,
however there can be no assurance that the measures we have taken
or will take will completely offset the negative
impact.
Recently Adopted Accounting Pronouncements
In July 2021, the FASB updated the Leases (Topic 842):
Lessors—Certain Leases with Variable Lease Payments. The amendments
in this Update address stakeholders’ concerns by amending the lease
classification requirements for lessors to align them with practice
under Topic 840. Lessors should classify and account for a lease
with variable lease payments that do not depend on a reference
index or a rate as an operating lease if both of the following
criteria are met:
1.The
lease would have been classified as a sales-type lease or a direct
financing lease in accordance with the classification criteria in
paragraphs 842-10-25-2 through 25-3.
2.The
lessor would have otherwise recognized a day-one loss.
When a lease is classified as operating, the lessor does not
recognize a net investment in the lease, does not derecognize the
underlying asset, and, therefore, does not recognize a selling
profit or loss. The leased asset continues to be subject to the
measurement and impairment requirements under other applicable
GAAP. The amendments in this Update are effective for fiscal years
beginning after December 15, 2021, for all entities, and interim
periods within those fiscal years for public business entities. The
Company adopted this amendment on April 1, 2022. As of the date of
the adoption, the amendment did not have a material impact on the
Company's consolidated financial statements and
disclosures.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04- Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting. The amendments in this Update provide
optional expedients and exceptions for applying generally accepted
accounting principles (GAAP) to contracts, hedging relationships,
and other transactions affected by reference rate reform if certain
criteria are met. The amendments in this Update apply only to
contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be
discontinued because of reference rate reform. The expedients and
exceptions provided by the amendments do not apply to contract
modifications made and hedging relationships entered into or
evaluated after December 31, 2022, except for hedging relationships
existing as of December 31, 2022, that an entity has elected
certain optional expedients for and that are retained through the
end of the hedging relationship. The amendments are effective for
all entities from the beginning of an interim period that includes
the issuance date of this ASU. An entity may elect to apply the
amendments prospectively through December 31, 2022. The Company is
currently evaluating the impact of this amendment on our contracts,
hedging relationships, and other transactions affected by reference
rate reform.
2. Acquisitions
Wolfe Lake HQ, LLC
On December 2, 2021, the Company, through its wholly-owned
subsidiary Wolfe Lake HQ, LLC, completed the purchase of the real
estate located at 5000 36th Street West, St. Louis Park, Minnesota
pursuant to a real estate purchase agreement with WLPC East, LLC, a
Minnesota limited liability company (an unaffiliated third-party)
dated October 11, 2021. The real estate purchased consists of a
2-story office building, asphalt-paved driveways and parking areas,
and landscaping. The building was constructed in 2004 with an
estimated 54,742 total square feet of space. The real estate
purchased is where Air T's Minnesota executive office is currently
located. With this purchase, the Company assumed 11 leases from
existing tenants occupying the building.
The total amount recorded for the real estate was $13.4 million,
which included the purchase price of $13.2 million and total
direct capitalized acquisition costs of $0.2 million. The
consideration paid for the real estate consisted of approximately
$3.3 million in cash and a new secured loan from Bridgewater
Bank ("Bridgewater") with an aggregate principal amount of
$9.9 million and a fixed interest rate of 3.65% which matures
on December 2, 2031. See
Note
12.
In accordance with ASC 805, the purchase price consideration was
allocated as follows (in thousands):
|
|
|
|
|
|
|
Land |
$ |
2,794 |
|
|
Building |
8,439 |
|
|
Site Improvements |
798 |
|
|
Tenant Improvements |
269 |
|
|
In-place lease and other intangibles |
1,108 |
|
|
|
$ |
13,408 |
|
GdW Beheer B.V.
On February 10, 2022, the Company acquired GdW, a Dutch holding
company in the business of providing global aviation data and
information. The acquisition was completed through a wholly-owned
subsidiary of the Company, Air T Acquisition 22.1, LLC ("Air T
Acquisition 22.1"), a Minnesota limited liability company, through
its Dutch subsidiary, Shanwick, and was funded with cash,
investment by executive management of the underlying business, and
the loans described in
Note
12.
As part of the transaction, the executive management of the
underlying business purchased 30% of Shanwick. Air T Acquisition
22.1 and its consolidated subsidiaries are included within the
Corporate and other segment.
Subsequent to the acquisition date, the Company made certain
measurement period adjustments to the preliminary purchase price
allocation, which resulted in an increase to goodwill of $0.3
million. The increase is attributable to a measurement period
adjustment of $0.3 million related to certain intangible assets
acquired and related deferred tax liabilities assumed due to
clarification of information utilized to determine fair value
during the measurement period. As of June 30, 2022, the measurement
period was completed and all adjustments are reflected in the
tables below.
Total consideration is summarized in the table below (in
thousands):
|
|
|
|
|
|
|
|
February 10, 2022 |
|
Consideration paid |
$ |
15,256 |
|
|
Less: Cash acquired |
(2,452) |
|
|
Less: Net assets acquired |
(6,520) |
|
|
Goodwill |
$ |
6,284 |
|
The transaction was accounted for as a business combination in
accordance with ASC Topic 805 "Business Combinations." Assets
acquired and liabilities assumed were recorded in the accompanying
consolidated balance sheet at their fair values as of February 10,
2022, with the excess of total consideration over fair value of net
assets acquired recorded as goodwill. The following table outlines
the consideration transferred and purchase price allocation at the
respective fair values as of February 10, 2022 (in
thousands):
|
|
|
|
|
|
|
|
February 10, 2022 |
|
ASSETS |
|
|
Accounts Receivable |
$ |
715 |
|
|
Other current assets |
67 |
|
Property, plant and equipment, net |
40 |
|
Intangible - Proprietary Database |
2,576 |
|
Intangible - Customer Relationships |
7,267 |
|
Total assets |
10,665 |
|
|
|
|
LIABILITIES |
|
|
Accounts payable |
15 |
|
Accrued expenses and deferred revenue |
1,670 |
|
Deferred income tax liabilities, net |
2,460 |
|
Total liabilities |
4,145 |
|
|
|
|
|
Net assets acquired |
$ |
6,520 |
|
The following table sets forth the revenue and expenses of GdW,
prior to intercompany eliminations, that are included in the
Company’s condensed consolidated statement of income for the fiscal
year ended March 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
Income Statement
Post-Acquisition |
|
Revenue |
$ |
887 |
|
|
Cost of Sales |
145 |
|
|
Operating Expenses |
701 |
|
|
Operating Income |
41 |
|
|
Non-operating income |
19 |
|
|
Net income |
$ |
60 |
|
Pro forma financial information is not presented as the results are
not material to the Company’s consolidated financial
statements.
3. Revenue
Recognition
Substantially all of the Company’s non-lease revenue is derived
from contracts with an initial expected duration of one year or
less. As a result, the Company has applied the practical expedient
to exclude consideration of significant financing components from
the determination of transaction price, to expense costs incurred
to obtain a contract, and to not disclose the value of unsatisfied
performance obligations.
The following is a description of the Company’s performance
obligations:
|
|
|
|
|
|
|
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. |
In addition to the above type of revenues, the Company also has
Leasing Revenue, which is in scope under Topic 842 (Leases) and out
of scope under Topic 606 and Other Revenues (Freight, Management
Fees, etc.) which are immaterial for disclosure under Topic
606.
The following table summarizes disaggregated revenues by type (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Product Sales |
|
|
|
|
|
|
|
|
Air Cargo |
$ |
7,533 |
|
|
$ |
5,615 |
|
|
$ |
13,887 |
|
|
$ |
12,188 |
|
|
Ground equipment sales |
17,639 |
|
|
8,928 |
|
|
23,216 |
|
|
16,926 |
|
|
Commercial jet engines and parts |
15,720 |
|
|
13,157 |
|
|
36,030 |
|
|
20,449 |
|
|
Corporate and other |
19 |
|
|
37 |
|
|
135 |
|
|
114 |
|
|
Support Services |
|
|
|
|
|
|
|
|
Air Cargo |
14,520 |
|
|
13,222 |
|
|
28,580 |
|
|
25,494 |
|
|
Ground equipment sales |
159 |
|
|
69 |
|
|
300 |
|
|
134 |
|
|
Commercial jet engines and parts |
2,555 |
|
|
1,554 |
|
|
4,529 |
|
|
3,656 |
|
|
Corporate and other |
974 |
|
|
54 |
|
|
1,998 |
|
|
117 |
|
|
Leasing Revenue |
|
|
|
|
|
|
|
|
Air Cargo |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Ground equipment sales |
29 |
|
|
39 |
|
|
73 |
|
|
78 |
|
|
Commercial jet engines and parts |
669 |
|
|
177 |
|
|
1,210 |
|
|
343 |
|
|
Corporate and other |
483 |
|
|
37 |
|
|
870 |
|
|
76 |
|
|
Other |
|
|
|
|
|
|
|
|
Air Cargo |
16 |
|
|
10 |
|
|
166 |
|
|
15 |
|
|
Ground equipment sales |
192 |
|
|
153 |
|
|
245 |
|
|
233 |
|
|
Commercial jet engines and parts |
42 |
|
|
28 |
|
|
72 |
|
|
62 |
|
|
Corporate and other |
138 |
|
|
158 |
|
|
239 |
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
60,688 |
|
|
$ |
43,238 |
|
|
$ |
111,550 |
|
|
$ |
80,206 |
|
See
Note
14 for
the Company's disaggregated revenues by geographic region
and
Note
15 for
the Company’s disaggregated revenues by segment. These notes
disaggregate revenue recognized from contracts with customers into
categories that depict how the nature, amount, timing, and
uncertainty of revenue and cash flows are affected by economic
factors.
Contract Balances and Costs
Contract liabilities relate to deferred income and advanced
customer deposits with respect to product sales. The following
table presents outstanding contract liabilities as of April 1, 2022
and September 30, 2022 and the amount of contract liabilities
as of April 1, 2022 that were recognized as revenue during the
six-month period ended September 30, 2022 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding contract liabilities |
|
Outstanding contract liabilities as of April 1, 2022
Recognized as Revenue |
|
As of September 30, 2022 |
$ |
4,676 |
|
|
|
|
As of April 1, 2022 |
$ |
4,727 |
|
|
|
|
For the six months ended September 30, 2022 |
|
|
$ |
3,636 |
|
4. Accrued
Expenses and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30, 2022 |
|
March 31, 2022 |
|
|
|
|
|
|
Salaries, wages and related items |
$ |
4,505 |
|
|
$ |
4,232 |
|
|
Profit sharing and bonus |
879 |
|
|
1,365 |
|
|
Other Deposits |
2,644 |
|
|
2,948 |
|
|
Other |
5,598 |
|
|
4,846 |
|
|
Total |
$ |
13,626 |
|
|
$ |
13,391 |
|
5. Income
Taxes
During the three-month period ended September 30, 2022, the
Company recorded global income tax benefit of $0.6 million at an
effective tax rate of 30.0%. The Company records income taxes using
an estimated annual effective tax rate for interim reporting. The
primary factors contributing to the difference between the federal
statutory rate of 21.0% and the Company's effective tax rate for
the three-month period ended September 30, 2022 were the
change in valuation allowance related to the Company's subsidiaries
in the corporate and other segment, Delphax Solutions, Inc. and
Delphax Technologies, Inc. (collectively known as "Delphax"), other
capital losses, the estimated benefit for the exclusion of income
for the Company's captive insurance company subsidiary ("SAIC")
under Section 831(b), and the exclusion from the tax provision of
the minority owned portion of the pretax income of
Contrail.
During the three-month period ended September 30, 2021, the
Company recorded $38.0 thousand in income tax expense at an ETR of
0.5%. The primary factors contributing to the difference between
the federal statutory rate of 21.0% and the Company's effective tax
rate for the three-month period ended September 30, 2021 were
the change in valuation allowance related to Delphax, the estimated
benefit for the exclusion of income for SAIC under Section 831(b),
the exclusion from the tax provision of the minority owned portion
of the pretax income of Contrail, and the exclusion of taxable
income of the PPP loan forgiveness income, as directed by the CARES
Act enacted in 2020, and any accrued interest forgiven as a part of
that Act.
During the six-month period ended September 30, 2022, the
Company recorded global income tax benefit of $0.4 million at an
effective tax rate of 15.1%. The Company records income taxes using
an estimated annual effective tax rate for interim reporting. The
primary factors contributing to the difference between the federal
statutory rate of 21% and the Company's effective tax rate for the
six-month period ended September 30, 2022 were the change in
valuation allowance related to Delphax, other capital losses, the
estimated benefit for the exclusion of income for SAIC under
Section 831(b), and the exclusion from the tax provision of the
minority owned portion of the pretax income of
Contrail.
During the six-month period ended September 30, 2021, the
Company recorded $33.0 thousand in income tax expense at an
effective rate of 0.4%. The primary factors contributing to the
difference between the federal statutory rate of 21.0% and the
Company's effective tax rate for the six-month period ended
September 30, 2021 were the change in valuation allowance
related to Delphax, the estimated benefit for the exclusion of
income for SAIC under Section 831(b), the exclusion from the tax
provision of the minority owned portion of the pretax income of
Contrail, the exclusion from taxable income of the PPP loan
forgiveness income, as directed by the CARES Act enacted in 2020,
and any accrued interest forgiven as a part of that
Act.
6. Net
Earnings (Loss) Per Share
Basic earnings (loss) per share has been calculated by dividing net
income (loss) attributable to Air T, Inc. stockholders by the
weighted average number of common shares outstanding during each
period. For purposes of calculating diluted earnings (loss) per
share, shares issuable under stock options were considered
potential common shares and were included in the weighted average
common shares unless they were anti-dilutive.
During the three months ended September 30, 2022, 3,750
options were exercised under the Air T's 2012 Stock Option Plan at
$5.75 per share, which was disclosed within our condensed
consolidated statement of equity. 7,500 unexpired options remain
outstanding under this plan.
The computation of basic and diluted earnings per common share is
as follows (in thousands, except for per share
figures):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net (loss) income |
$ |
(1,336) |
|
|
$ |
8,003 |
|
|
$ |
(2,137) |
|
|
$ |
8,329 |
|
|
Net loss (income) attributable to non-controlling
interests |
104 |
|
|
(448) |
|
|
(528) |
|
|
(486) |
|
|
Net (loss) income attributable to Air T, Inc.
Stockholders |
$ |
(1,232) |
|
|
$ |
7,555 |
|
|
$ |
(2,665) |
|
|
$ |
7,843 |
|
|
(Loss) Income per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.43) |
|
|
$ |
2.62 |
|
|
$ |
(0.93) |
|
|
$ |
2.72 |
|
|
Diluted |
$ |
(0.43) |
|
|
$ |
2.60 |
|
|
$ |
(0.93) |
|
|
$ |
2.71 |
|
|
Antidilutive shares excluded from computation of (loss) income per
share |
4 |
|
|
— |
|
|
4 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding: |
|
|
|
|
|
|
|
|
Basic |
2,865 |
|
|
2,882 |
|
|
2,866 |
|
|
2,882 |
|
|
Diluted |
2,865 |
|
|
2,901 |
|
|
2,866 |
|
|
2,893 |
|
7. Intangible
Assets and Goodwill
Intangible assets as of September 30, 2022 and March 31,
2022 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Book Value |
|
Purchased software |
$ |
447 |
|
|
$ |
(406) |
|
|
$ |
41 |
|
|
Internally developed software |
3,418 |
|
(281) |
|
3,137 |
|
|
In-place lease and other intangibles |
1,094 |
|
(151) |
|
943 |
|
|
Customer relationships |
6,651 |
|
(555) |
|
6,096 |
|
|
Patents |
1,112 |
|
(1,103) |
|
9 |
|
|
Other |
1,408 |
|
(1,016) |
|
392 |
|
|
|
14,130 |
|
(3,512) |
|
10,618 |
|
|
In-process software |
104 |
|
— |
|
104 |
|
|
Intangible assets, total |
$ |
14,234 |
|
|
$ |
(3,512) |
|
|
$ |
10,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Book Value |
|
Purchased software |
$ |
447 |
|
|
$ |
(386) |
|
|
$ |
61 |
|
|
Internally developed software |
4,112 |
|
(139) |
|
3,973 |
|
In-place lease and other intangibles |
1,108 |
|
(63) |
|
1,045 |
|
Customer relationships |
7,694 |
|
(339) |
|
7,355 |
|
Patents |
1,112 |
|
(1,101) |
|
11 |
|
Other |
1,391 |
|
(919) |
|
472 |
|
|
15,864 |
|
(2,947) |
|
12,917 |
|
In-process software |
343 |
|
— |
|
343 |
|
Intangible assets, total |
$ |
16,207 |
|
|
$ |
(2,947) |
|
|
$ |
13,260 |
|
During the quarter ended September 30, 2022, the Company
impaired $0.3 million of previously capitalized costs related to a
software project that was deemed no longer probable to be completed
and placed in service.
Based on the intangible assets recorded at September 30, 2022
and assuming no subsequent additions to or impairment of the
underlying assets, the remaining estimated annual amortization
expense is expected to be as follows:
|
|
|
|
|
|
|
(In thousands) |
|
|
Year ending March 31, |
Amortization |
|
2023 (excluding the six months ended September 30,
2022) |
$ |
567 |
|
|
2024 |
1,027 |
|
2025 |
955 |
|
2026 |
887 |
|
2027 |
846 |
|
2028 |
799 |
|
Thereafter |
5,537 |
|
|
|
$ |
10,618 |
|
The carrying amount of goodwill as of September 30, 2022 and
March 31, 2022 was $10.1 million. There was no impairment on
goodwill during the quarter ended September 30,
2022.
8. Investments
in Securities and Derivative Instruments
As part of the Company’s interest rate risk management strategy,
the Company, from time to time, uses derivative instruments to
minimize significant unanticipated earnings fluctuations that may
arise from rising variable interest rate costs associated with
existing borrowings (Air T Term Note A and Term Note D). To meet
these objectives, the Company entered into interest rate swaps with
notional amounts consistent with the outstanding debt to provide a
fixed rate of 4.56% and 5.09%, respectively, on Term Notes A and D.
The swaps mature in January 2028.
On August 31, 2021, Air T and Minnesota Bank & Trust ("MBT")
refinanced Term Note A and fixed its interest rate at 3.42%. As a
result of this refinancing, the Company determined that the
interest rate swap on Term Note A was no longer an effective hedge.
The Company will amortize the fair value of the interest-rate swap
contract included in accumulated other comprehensive income (loss)
associated with Term Note A at the time of de-designation into
earnings over the remainder of its term. In addition, any changes
in the fair value of Term Note A's swap after August 31, 2021 are
recognized directly into earnings. The remaining swap contract
associated with Term Note D is designated as an effective cash flow
hedging instrument in accordance with ASC 815.
On January 7, 2022, Contrail completed an interest rate swap
transaction with Old National Bank ("ONB") with respect to the
$43.6 million loan made to Contrail in November 2020 pursuant
to the Main Street Priority Loan Facility as established by the
U.S. Federal Reserve ("Contrail - Term Note G"). The purpose of the
floating-to-fixed interest rate swap transaction was to effectively
fix the loan interest rate at 4.68%. As of February 24, 2022, this
swap contract has been designated as a cash flow hedging instrument
and qualified as an effective hedge in accordance with ASC 815.
During the period between January 7, 2022 and February 24, 2022,
the Company recorded a loss of approximately $0.1 million in
the consolidated statement of income (loss) due to the changes in
the fair value of the instrument prior to the designation and
qualification of this instrument as an effective hedge. After it
was deemed an effective hedge, the Company recorded changes in the
fair value of the instrument in the consolidated statement of
comprehensive income (loss).
For the swaps related to Air T Term Note D and Contrail - Term Note
G, the effective portion of changes in the fair value on these
instruments is recorded in other comprehensive income (loss) and is
reclassified into the consolidated statement of income (loss) as
interest expense in the same period in which the underlying hedged
transactions affect earnings. The interest rate swaps are
considered Level 2 fair value measurements. As of
September 30, 2022 and March 31, 2022, the fair
value of these interest-rate swap contracts was an asset of $3.0
million and $0.9 million, respectively, which is included within
other assets in the condensed consolidated balance sheets. During
the three and six months ended September 30, 2022, the Company
recorded a gain of approximately $1.0 million and
$1.4 million, net of tax, respectively. During the three and
six months ended September 30, 2021, the Company recorded a
gain of approximately $46.0 thousand and $57.0 thousand, net of
tax, respectively. These gains are included in the condensed
consolidated statement of comprehensive income (loss) for changes
in the fair value of these instruments.
The Company may, from time to time, employ trading strategies
designed to profit from market anomalies and opportunities it
identifies. Management uses derivative financial instruments to
execute those strategies, which may include options, and futures
contracts. These derivative instruments are priced using publicly
quoted market prices and are considered Level 1 fair value
measurements. During the three and six months ended
September 30, 2022, related to these derivative instruments,
the Company had a gross gain aggregating to $46.0 thousand and
no gross loss. During the three and six months ended September 30,
2021, the Company did not record any gain or loss related to
derivative instruments.
The following table presents these derivative instruments at fair
value in the condensed consolidated balance sheets as of
September 30, 2022 and March 31, 2022 (in
thousands):
|
|
|
|
|
|
|
|
|
|
(In thousands) |
September 30, 2022 |
March 31, 2022 |
|
Assets: |
|
|
|
Exchange-traded options & futures |
|
|
|
Other current assets |
$ |
401 |
|
$ |
— |
|
|
Total assets |
401 |
|
— |
|
|
Liabilities: |
|
|
|
Exchange-traded options & futures |
|
|
|
Accrued Expenses and other |
119 |
|
— |
|
|
Total liabilities |
$ |
119 |
|
$ |
— |
|
The Company also invests in exchange-traded marketable securities
and accounts for that activity in accordance with ASC 321,
Investments- Equity Securities. Marketable equity securities are
carried at fair value, with changes in fair market value included
in the determination of net income. The fair market value of
marketable equity securities is determined based on quoted market
prices in active markets and are therefore, considered Level 1 fair
value measurements. During the three months ended
September 30, 2022, the Company had a gross unrealized gain
aggregating to $43.0 thousand and a gross unrealized loss
aggregating to $0.2 million. During the six months ended
September 30, 2022, the Company had a gross unrealized gain
aggregating to $86.0 thousand and a gross unrealized loss
aggregating to $0.3 million. During the three months ended
September 30, 2021, the Company had a gross unrealized gain
aggregating to $0.4 million and a gross unrealized loss aggregating
to $0.1 million. During the six months ended September 30,
2021, the Company had a gross unrealized gain aggregating to $0.8
million and a gross unrealized loss aggregating to $0.2 million.
These unrealized gains and losses are included in other income
(loss) on the condensed consolidated statement of income
(loss).
The market value of the Company’s equity securities and cash held
by the broker are periodically used as collateral against any
outstanding margin account borrowings. As of September 30,
2022 and 2021, the Company had no outstanding borrowings under its
margin account.
9. Equity
Method Investments
The Company’s investment in Insignia Systems, Inc. - NASDAQ: ISIG
(“Insignia”) is accounted for under the equity method of
accounting. The Company has elected a three-month lag upon adoption
of the equity method. As of September 30, 2022, the number of
Insignia's shares owned by the Company was 0.5 million,
representing approximately 27% of the outstanding shares. During
the fiscal year ended March 31, 2021, due to loss attributions and
impairments taken in prior fiscal years, the Company's net
investment basis in Insignia was reduced to $0. As such, the
Company did not record as of September 30, 2022 any additional
share of Insignia's net loss for the three months ended June 30,
2022. On August 23, 2021, Insignia restated its 10-K for the fiscal
year ended December 31, 2020 and its 10-Q for the quarter ended
March 31, 2021. The Company evaluated these restatements and
determined that they would not result in any additional impact on
the Company's condensed consolidated financial
statements.
The Company's 20.91% investment in Cadillac Casting, Inc. ("CCI")
is accounted for under the equity method of accounting. Due to the
differing fiscal year-ends, the Company has elected a three-month
lag to record the CCI investment at cost, with a basis difference
of $0.3 million. The Company recorded income of $0.4 million
and $0.7 million as its share of CCI's net income for the three and
six months ended September 30, 2022, along with a basis
difference adjustment of $12.0 thousand and $25.0 thousand,
respectively. The Company's net investment basis in CCI is $3.4
million as of September 30, 2022. The Company also executed a
$2.0 million promissory note payable to CCI on September 30,
2022. See
Note
12.
Summarized unaudited financial information for the Company's equity
method investees for the three and six months ended June 30,
2022 and 2021 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
|
Revenue |
$ |
38,388 |
|
|
$ |
27,715 |
|
|
$ |
73,989 |
|
|
$ |
57,988 |
|
|
Gross Profit |
4,791 |
|
|
1,097 |
|
|
9,166 |
|
|
1,904 |
|
|
Operating income (loss) |
1,809 |
|
|
(2,110) |
|
|
3,790 |
|
|
(5,205) |
|
|
Net income (loss) |
1,055 |
|
|
(2,268) |
|
|
2,805 |
|
|
(4,413) |
|
|
Net income (loss) attributable to Air T, Inc.
stockholders |
$ |
435 |
|
|
$ |
(273) |
|
|
$ |
743 |
|
|
$ |
(568) |
|
10. Inventories
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
March 31,
2022 |
|
Overnight air cargo |
$ |
27 |
|
|
$ |
28 |
|
|
Ground equipment manufacturing: |
|
|
|
|
Raw materials |
8,181 |
|
|
4,688 |
|
|
Work in process |
3,631 |
|
|
2,437 |
|
|
Finished goods |
6,885 |
|
|
9,264 |
|
|
Corporate and other: |
|
|
|
|
Raw materials |
675 |
|
|
705 |
|
|
Finished goods |
727 |
|
|
728 |
|
|
Commercial jet engines and parts |
71,467 |
|
|
60,439 |
|
|
Total inventories |
91,593 |
|
|
78,289 |
|
|
Reserves |
(3,989) |
|
|
(3,122) |
|
|
Total inventories, net of reserves |
$ |
87,604 |
|
|
$ |
75,167 |
|
|
|
|
|
|
11. Leases
The Company has operating leases for the use of real estate,
machinery, and office equipment. The majority of our leases have a
lease term of 2 to 5 years; however, we have certain leases with
longer terms of up to 30 years. Many of our leases include options
to extend the lease for an additional period.
The lease term for all of the Company’s leases includes the
non-cancellable period of the lease, plus any additional periods
covered by either a Company option to extend the lease that the
Company is reasonably certain to exercise, or an option to extend
the lease controlled by the lessor that is considered likely to be
exercised.
Payments due under the lease contracts include fixed payments plus,
for some of our leases, variable payments. Variable payments are
typically operating costs associated with the underlying asset and
are recognized when the event, activity, or circumstance in the
lease agreement on which those payments are assessed occurs. Our
leases do not contain residual value guarantees.
The Company has elected to combine lease and non-lease components
as a single component and not to recognize leases on the balance
sheet with an initial term of one year or less.
The interest rate implicit in lease contracts is typically not
readily determinable, and as such the Company utilizes the
incremental borrowing rate to calculate lease liabilities, which is
the rate incurred to borrow on a collateralized basis over a
similar term an amount equal to the lease payments in a similar
economic environment.
The components of lease cost for the three and six months ended
September 30, 2022 and 2021 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Operating lease cost |
$ |
498 |
|
|
$ |
420 |
|
|
$ |
989 |
|
|
$ |
867 |
|
|
Short-term lease cost |
139 |
|
|
376 |
|
|
275 |
|
|
658 |
|
|
Variable lease cost |
189 |
|
|
143 |
|
|
374 |
|
|
290 |
|
|
Total lease cost |
$ |
826 |
|
|
$ |
939 |
|
|
$ |
1,638 |
|
|
$ |
1,815 |
|
Amounts reported in the consolidated balance sheets for leases
where we are the lessee as of September 30, 2022 and
March 31, 2022 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
March 31, 2022 |
|
Operating leases |
|
|
|
|
Operating lease ROU assets |
$ |
6,755 |
|
|
$ |
7,354 |
|
|
Operating lease liabilities |
$ |
7,547 |
|
|
$ |
8,177 |
|
|
|
|
|
|
|
Weighted-average remaining lease term |
|
|
|
|
Operating leases |
|
|
13 years, 8 months |
|
|
|
|
|
|
Weighted-average discount rate |
|
|
|
|
Operating leases |
|
|
4.36 |
% |
Maturities of lease liabilities under non-cancellable leases where
we are the lessee as of September 30, 2022 are as follows (in
thousands):
|
|
|
|
|
|
|
|
Operating Leases |
|
2023 (excluding the six months ended September 30,
2022) |
$ |
886 |
|
|
2024 |
1,434 |
|
|
2025 |
1,135 |
|
|
2026 |
870 |
|
|
2027 |
704 |
|
|
2028 |
273 |
|
|
Thereafter |
5,028 |
|
|
Total undiscounted lease payments |
10,330 |
|
|
Less: Interest |
(2,333) |
|
|
Less: Discount |
(450) |
|
|
Total lease liabilities |
$ |
7,547 |
|
12. Financing
Arrangements
Borrowings of the Company and its subsidiaries are summarized below
at September 30, 2022 and March 31, 2022,
respectively.
On June 9, 2022, the Company, Jet Yard and MBT entered into
Amendment No. 1 to Third Amended and Restated Credit Agreement
(“Amendment”) and a related Overline Note (“Overline Note”) in the
original principal amount of $5.0 million. The Amendment and
Note memorialize an increase to the amount that may be drawn by the
Company on the MBT revolving credit agreement from
$17.0 million to $22.0 million. As of September 30,
2022, the unused commitment on the Overline Note was
$4.1 million and there was no unused commitment on the MBT
Revolver. The total amount of borrowings under the facility as
revised is now the Company’s calculated borrowing base or
$22.0 million. The borrowing base calculation methodology
remains unchanged.
The interest rate on borrowings under the facility that are less
than $17.0 million remains at the greater of 2.50% or Prime
minus 1.00%. The interest rate applicable to borrowings under the
facility that exceed $17.0 million is the greater of 2.50% or
Prime plus 0.50%. The commitment fee on unused borrowings below
$17.0 million remains at 0.11%. The commitment fee on unused
borrowings above $17.0 million is 0.20%. The Amendment also
includes an additional covenant to the credit agreement, namely the
requirement that the Company provide inventory appraisals for
AirCo, AirCo Services and Worthington to MBT twice a
year.
The Overline loan and commitment mature on the earlier of March 31,
2023 or the date on which the Company receives all funds from the
Company’s Employee Retention Credit ("ERC") application (estimated
at approximately $9.1 million) filed on or about January 24,
2022 plus the full receipt of the Company’s carryback tax refund
for the year (estimated at approximately $2.6 million) filed
on or about August 19, 2021. Both were applied for under different
components of the CARES Act. As of September 30, 2022, the
Company has received $1.4 million of the ERC and none of the
carryback tax refunds. It is not possible to estimate when, or if,
the remainder of these funds may be received.
Each of the Company subsidiaries that has guaranteed the MBT
revolving facility executed a guaranty acknowledgment in which they
agreed to guaranty the Overline Loan and acknowledged, among other
things, that the Overline Loan would not impair the lenders rights
under the previously executed guaranty or security
agreement.
On September 30, 2022, the Company executed a promissory note
payable to CCI ("Promissory Note - CCI") for $2.0 million that
bears interest at 10% per annum and matures on December 30, 2022.
The note may be prepaid at any time without penalty. The note is
subordinate and junior to any and all indebtedness of the Company
to MBT.
The following table provides certain information about the current
financing arrangements of the Company and its subsidiaries as of
September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
September 30,
2022 |
|
March 31,
2022 |
|
Maturity Date |
|
Interest Rate |
|
Unused commitments at September 30, 2022 |
|
Air T Debt |
|
|
|
|
|
|
|
|
|
|
Revolver - MBT |
$ |
17,000 |
|
|
$ |
10,969 |
|
|
8/31/2023 |
|
Greater of 2.50% or Prime - 1.00%
|
|
$ |
— |
|
|
Overline Note - MBT |
879 |
|
|
— |
|
|
3/31/20231
|
|
Greater of 2.50% or Prime + 0.50%
|
|
$ |
4,121 |
|
|
Term Note A - MBT |
8,157 |
|
|
8,542 |
|
|
8/31/2031 |
|
3.42% |
|
|
|
Term Note B - MBT |
2,878 |
|
|
3,014 |
|
|
8/31/2031 |
|
3.42% |
|
|
|
Term Note D - MBT |
1,371 |
|
|
1,405 |
|
|
1/1/2028 |
|
1-month LIBOR + 2.00%
|
|
|
|
Promissory Note - CCI |
2,000 |
|
|
— |
|
|
12/30/2022 |
|
10.00% |
|
|
|
Term Note E - MBT |
1,997 |
|
|
2,316 |
|
|
6/25/2025 |
|
Greater of LIBOR + 1.50% or 2.50%
|
|
|
|
Debt - Trust Preferred Securities |
25,590 |
|
|
25,567 |
|
|
6/7/2049 |
|
8.00% |
|
|
|
Total |
59,872 |
|
|
51,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AirCo 1 Debt |
|
|
|
|
|
|
|
|
|
|
Term Loan - Park State Bank |
6,393 |
|
|
6,393 |
|
|
12/11/2025 |
|
3-month LIBOR + 3.00%
|
|
|
|
Total |
6,393 |
|
|
6,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jet Yard Debt |
|
|
|
|
|
|
|
|
|
|
Term Loan - MBT |
1,894 |
|
|
1,943 |
|
|
8/31/2031 |
|
4.14% |
|
|
|
Total |
1,894 |
|
|
1,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contrail Debt |
|
|
|
|
|
|
|
|
|
|
Revolver - Old National Bank ("ONB") |
10,143 |
|
|
3,843 |
|
|
9/5/2023 |
|
1-month LIBOR + 3.45%
|
|
$ |
14,857 |
|
|
Term Loan G - ONB |
44,918 |
|
|
44,918 |
|
|
11/24/2025 |
|
1-month LIBOR + 3.00%
|
|
|
|
Term Loan H - ONB |
12,101 |
|
|
8,698 |
|
|
8/18/2023 |
|
Wall Street Journal (WSJ) Prime Rate + 0.75%
|
|
|
|
Total |
67,162 |
|
|
57,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delphax Solutions Debt |
|
|
|
|
|
|
|
|
|
|
Canadian Emergency Business Account Loan |
29 |
|
|
32 |
|
|
12/31/2025 |
|
5.00% |
|
|
|
Total |
29 |
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wolfe Lake Debt |
|
|
|
|
|
|
|
|
|
|
Term Loan - Bridgewater |
9,714 |
|
|
9,837 |
|
|
12/2/2031 |
|
3.65% |
|
|
|
Total |
9,714 |
|
|
9,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Air T Acquisition 22.1 |
|
|
|
|
|
|
|
|
|
|
Term Loan - Bridgewater |
5,000 |
|
|
5,000 |
|
|
2/8/2027 |
|
4.00% |
|
|
|
Term Loan A - ING |
2,632 |
|
|
3,341 |
|
|
2/1/2027 |
|
3.50% |
|
|
|
Term Loan B - ING |
975 |
|
|
1,114 |
|
|
5/1/2027 |
|
4.00% |
|
|
|
Total |
8,607 |
|
|
9,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt |
153,671 |
|
|
136,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized Debt Issuance Costs |
(988) |
|
|
(1,124) |
|
|
|
|
|
|
|
|
Total Debt, net |
$ |
152,683 |
|
|
$ |
135,808 |
|
|
|
|
|
|
|
1
Earlier of 8/31/23 or the date on which Air T has received the
payment from the federal income tax refunds in the amount of
approximately $2.6 million and Employee Retention Tax Credits
in an amount not less than $9.1 million. As of
September 30, 2022, the Company has received $1.4 million of
the ERC and none of the federal income tax refunds.
At September 30, 2022, our contractual financing obligations,
including payments due by period, are as follows (in
thousands):
|
|
|
|
|
|
|
Due by |
Amount |
|
September 30, 2023 |
$ |
44,704 |
|
|
September 30, 2024 |
10,130 |
|
|
September 30, 2025 |
12,183 |
|
|
September 30, 2026 |
39,085 |
|
|
September 30, 2027 |
5,982 |
|
|
Thereafter |
41,587 |
|
|
|
153,671 |
|
|
Less: Unamortized Debt Issuance Costs |
(988) |
|
|
|
$ |
152,683 |
|
During the second quarter ended September 30, 2022 the Company
did not sell any TruPs. The amount outstanding on the Company's
Debt - Trust Preferred Securities is $25.6 million as of
September 30, 2022.
13. Shares
Repurchased
On May 14, 2014, the Company announced that its Board of Directors
had authorized a program to repurchase up to 750,000
(retrospectively adjusted to 1,125,000 after the stock split on
June 10, 2019) shares of the Company’s common stock from time to
time on the open market or in privately negotiated transactions, in
compliance with SEC Rule 10b-18, over an indefinite period. During
the three months ended September 30, 2022, the Company
repurchased 19,420 shares at an aggregate cost of
$0.4 million. All of these repurchased shares were recorded as
treasury shares as of September 30, 2022.
14. Geographical
Information
Total tangible long-lived assets, net of accumulated depreciation,
located in the United States, the Company's country of domicile,
and held outside the United States are summarized in the following
table as of September 30, 2022 and March 31, 2022 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
March 31, 2022 |
|
United States |
$ |
21,319 |
|
|
$ |
34,067 |
|
|
Foreign |
14,593 |
|
|
1,654 |
|
|
Total tangible long-lived assets, net |
$ |
35,912 |
|
|
$ |
35,721 |
|
The Company's tangible long-lived assets, net of accumulated
depreciation, held outside of the United States represent engines
and aircraft on lease at September 30, 2022. The net book
value located within each individual country at September 30,
2022 and March 31, 2022 is listed below (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
March 31, 2022 |
|
Lithuania |
13,292 |
|
|
— |
|
|
Macau |
1,232 |
|
|
1,351 |
|
|
Other |
69 |
|
|
303 |
|
|
Total tangible long-lived assets, net |
$ |
14,593 |
|
|
$ |
1,654 |
|
Total revenue, in and outside the United States, is summarized in
the following table for the six months ended September 30,
2022 and September 30, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
September 30, 2021 |
|
United States |
$ |
91,323 |
|
|
$ |
69,225 |
|
|
Foreign |
20,227 |
|
|
10,981 |
|
|
Total revenue |
$ |
111,550 |
|
|
$ |
80,206 |
|
15. Segment
Information
The Company has four business segments: overnight air cargo, ground
equipment sales, commercial jet engine and parts segment and
corporate and other. Segment data is summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Operating Revenues by Segment: |
|
|
|
|
|
|
|
|
Overnight Air Cargo |
|
|
|
|
|
|
|
|
Domestic |
$ |
22,069 |
|
|
$ |
18,607 |
|
|
$ |
42,633 |
|
|
$ |
37,375 |
|
|
International |
— |
|
|
240 |
|
|
— |
|
|
322 |
|
|
Total Overnight Air Cargo |
22,069 |
|
|
18,847 |
|
|
42,633 |
|
|
37,697 |
|
|
Ground Equipment Sales: |
|
|
|
|
|
|
|
|
Domestic |
14,913 |
|
|
8,178 |
|
|
18,821 |
|
|
14,156 |
|
|
International |
3,106 |
|
|
1,011 |
|
|
5,013 |
|
|
3,215 |
|
|
Total Ground Equipment Sales |
18,019 |
|
|
9,189 |
|
|
23,834 |
|
|
17,371 |
|
|
Commercial Jet Engines and Parts: |
|
|
|
|
|
|
|
|
Domestic |
11,611 |
|
|
10,461 |
|
|
28,343 |
|
|
17,230 |
|
|
International |
7,375 |
|
|
4,455 |
|
|
13,498 |
|
|
7,280 |
|
|
Total Commercial Jet Engines and Parts |
18,986 |
|
|
14,916 |
|
|
41,841 |
|
|
24,510 |
|
|
Corporate and Other: |
|
|
|
|
|
|
|
|
Domestic |
778 |
|
|
210 |
|
|
1,526 |
|
|
464 |
|
|
International |
836 |
|
|
76 |
|
|
1,716 |
|
|
164 |
|
|
Total Corporate and Other |
1,614 |
|
|
286 |
|
|
3,242 |
|
|
628 |
|
|
Total |
60,688 |
|
|
43,238 |
|
|
111,550 |
|
|
80,206 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss): |
|
|
|
|
|
|
|
|
Overnight Air Cargo |
845 |
|
|
857 |
|
|
1,922 |
|
|
1,589 |
|
|
Ground Equipment Sales |
1,887 |
|
|
43 |
|
|
2,029 |
|
|
1,465 |
|
|
Commercial Jet Engines and Parts |
(204) |
|
|
1,902 |
|
|
2,870 |
|
|
1,664 |
|
|
Corporate and Other |
(2,349) |
|
|
(2,098) |
|
|
(5,809) |
|
|
(4,019) |
|
|
Total |
179 |
|
|
704 |
|
|
1,012 |
|
|
699 |
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures: |
|
|
|
|
|
|
|
|
Overnight Air Cargo |
92 |
|
|
44 |
|
|
191 |
|
|
68 |
|
|
Ground Equipment Sales |
6 |
|
|
4 |
|
|
16 |
|
|
17 |
|
|
Commercial Jet Engines and Parts |
278 |
|
|
646 |
|
|
352 |
|
|
738 |
|
|
Corporate and Other |
43 |
|
|
12 |
|
|
232 |
|
|
19 |
|
|
Total |
419 |
|
|
706 |
|
|
791 |
|
|
842 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization: |
|
|
|
|
|
|
|
|
Overnight Air Cargo |
23 |
|
|
14 |
|
|
42 |
|
|
27 |
|
|
Ground Equipment Sales |
46 |
|
|
32 |
|
|
95 |
|
|
64 |
|
|
Commercial Jet Engines and Parts |
563 |
|
|
214 |
|
|
996 |
|
|
479 |
|
|
Corporate and Other |
394 |
|
|
62 |
|
|
755 |
|
|
133 |
|
|
Total |
$ |
1,026 |
|
|
$ |
322 |
|
|
$ |
1,888 |
|
|
$ |
703 |
|
The table below provides a reconciliation of operating income
(loss) to Adjusted EBITDA by reportable segment for the six months
ended September 30, 2022 and 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended September 30, 2022 |
|
|
|
|
Overnight Air Cargo |
|
Ground Equipment Sales |
|
Commercial Jet Engines and Parts |
|
Corporate and Other |
|
Total |
|
Operating income (loss) |
$ |
1,922 |
|
|
$ |
2,029 |
|
|
$ |
2,870 |
|
|
$ |
(5,809) |
|
|
$ |
1,012 |
|
|
Depreciation and amortization (excluding leased engines
depreciation) |
42 |
|
|
95 |
|
|
360 |
|
|
755 |
|
|
1,252 |
|
|
Asset impairment, restructuring or impairment charges |
337 |
|
|
— |
|
|
1,020 |
|
|
179 |
|
|
1,536 |
|
|
Gain on sale of property and equipment |
(1) |
|
|
— |
|
|
(2) |
|
|
1 |
|
|
(2) |
|
|
Security expenses |
— |
|
|
— |
|
|
— |
|
|
34 |
|
34 |
|
|
Adjusted EBITDA |
$ |
2,300 |
|
|
$ |
2,124 |
|
|
$ |
4,248 |
|
|
$ |
(4,840) |
|
|
$ |
3,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended September 30, 2021 |
|
|
|
|
Overnight Air Cargo |
|
Ground Equipment Sales |
|
Commercial Jet Engines and Parts |
|
Corporate and Other |
|
Total |
|
Operating income (loss) |
$ |
1,589 |
|
|
$ |
1,465 |
|
|
$ |
1,664 |
|
|
$ |
(4,019) |
|
|
$ |
699 |
|
|
Depreciation and amortization (excluding leased engines
depreciation) |
27 |
|
|
64 |
|
|
360 |
|
|
133 |
|
|
584 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of property and equipment |
1 |
|
|
2 |
|
|
— |
|
|
— |
|
|
3 |
|
|
Security expenses |
— |
|
|
— |
|
|
— |
|
|
65 |
|
|
65 |
|
|
Adjusted EBITDA |
$ |
1,617 |
|
|
$ |
1,531 |
|
|
$ |
2,024 |
|
|
$ |
(3,821) |
|
|
$ |
1,351 |
|
16. Commitments
and Contingencies
Redeemable Non-controlling Interests
Contrail entered into an Operating Agreement (the “Contrail
Operating Agreement”) in connection with the acquisition of
Contrail providing for the governance of and the terms of
membership interests in Contrail and including put and call options
with the Seller of Contrail (“Contrail Put/Call Option”). The
Contrail Put/Call Option permits the Seller or the Company to
require Contrail to purchase all of the Seller’s equity membership
interests in Contrail commencing on the fifth anniversary of the
acquisition, which occurred on July 18, 2021. The Company has
presented this redeemable non-controlling interest in Contrail
("Contrail RNCI") between the liabilities and equity sections of
the accompanying condensed consolidated balance sheets. In
addition, the Company has elected to recognize changes in the
redemption value immediately as they occur and adjust the carrying
amount of the instrument to equal the redemption value at the end
of each reporting period. The Contrail RNCI is a Level 3 fair value
measurement that is valued at $6.5 million as of September 30,
2022. The change in the redemption value compared to March 31,
2022 is a decrease of $0.7 million, which was driven by the
decrease in fair value of $0.7 million and distributions to
non-controlling interest of $0.2 million, partially offset by net
income attributable to non-controlling interest of $0.2
million.
As of the date of this filing, neither the Seller nor the Company
has indicated an intent to exercise the put and call options. If
either side were to exercise the option, the Company anticipates
that the price would approximate the fair value of the Contrail
RNCI, as determined on the transaction date. The Company currently
expects that it would fund any required payment from cash provided
by operations.
On May 5, 2021, the Company formed an aircraft asset management
business called Contrail Asset Management, LLC ("CAM"), and an
aircraft capital joint venture called Contrail JV II LLC ("CJVII").
The venture focuses on acquiring commercial aircraft and jet
engines for leasing, trading and disassembly. CJVII targets
investments in current generation narrow-body aircraft and engines,
building on Contrail’s origination and asset management expertise.
The Company and Mill Road Capital (“MRC”) agreed to become common
members in CAM. CAM serves two separate and distinct functions: 1)
to direct the sourcing, acquisition and management of aircraft
assets owned by CJVII, and 2) to directly invest into CJVII
alongside other institutional investment partners. CAM has an
initial commitment to CJVII of approximately $53.0 million,
which is comprised of an $8.0 million initial commitment from
the Company and an approximately $45.0 million initial
commitment from MRC. As of September 30, 2022, CAM's remaining
capital commitments are approximately $0.8 million from the Company
and $17.3 million from MRC. In connection with the formation of
CAM, MRC has a fixed price put option of $1.0 million to sell
its common equity in CAM to the Company at each of the first 3
anniversary dates. At the later of (a) five years after execution
of the agreement and (b) distributions to MRC per the waterfall
equal to their capital contributions, the Company has a call option
and MRC has a put option on the MRC common interests in CAM. If
either party exercises the option, the exercise price will be fair
market value if the Company pays in cash at closing or 112.5% of
fair market value if the Company opts to pay in three equal annual
installments after exercise. The Company recorded MRC's
$1.0 million put option within "Other non-current liabilities"
on our consolidated balance sheets.
In February 2022, in connection with the Company's acquisition of
GdW, a consolidated subsidiary of Shanwick, the Company entered
into a shareholder agreement with the 30% non-controlling interest
owners of Shanwick, providing for the governance of and the terms
of membership interests in Shanwick. The shareholder agreement
includes the Shanwick Put/Call Option with regard to the 30%
non-controlling interest. The non-controlling interest holders are
the executive management of the underlying business. The Shanwick
Put/Call Option grants the Company an option to purchase the 30%
interest at the call option price that equals to the average EBIT
over the 3 Financial Years prior to the exercise of the Call Option
multiplied by 8. In addition, the Shanwick Put/Call Option also
grants the non-controlling interest owners an option to require the
Company to purchase from them their respective ownership interests
at the Put Option price, that is equal to the average EBIT over the
3 Financial Years prior to the exercise of the Put Option
multiplied by 7.5. The Call Option and the Put Option may be
exercised at any time from the fifth anniversary of the shareholder
agreement and then only at the end of each fiscal year of Air T
("Shanwick RNCI").
The Company has presented this redeemable non-controlling interest
in Shanwick between the liabilities and equity sections of the
accompanying condensed consolidated balance sheets. In addition,
the Company has elected to recognize changes in the redemption
value immediately as they occur and adjust the carrying amount of
the instrument to equal the estimated redemption value at the end
of each reporting period. As the Shanwick RNCI will be redeemed at
established multiples of EBIT, it is considered redeemable at other
than fair value. Changes in its estimated redemption value are
recorded on our consolidated statements of operations within
non-controlling interests. The Shanwick RNCI's estimated redemption
value is $3.8 million as of September 30, 2022, which was
comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Shanwick RNCI |
|
Beginning Balance as of April 1, 2022 |
|
$ |
3,583 |
|
|
Contribution from non-controlling members |
|
— |
|
|
Distribution to non-controlling members |
|
(158) |
|
|
Net income attributable to non-controlling interests |
|
112 |
|
|
Redemption value adjustments |
|
232 |
|
|
Ending Balance as of September 30, 2022 |
|
$ |
3,769 |
|
2020 Omnibus Stock and Incentive Plan
On December 29, 2020, the Company’s Board of Directors unanimously
approved the Omnibus Stock and Incentive Plan (the "Plan"), which
was subsequently approved by the Company's stockholders at the
August 18, 2021 Annual Meeting of Stockholders. The total number of
shares authorized under the Plan is 420,000. Among other
instruments, the Plan permits the Company to grant stock option
awards. As of September 30, 2022, options to purchase up to
293,400 shares are outstanding under the Plan. Vesting of options
is based on the grantee meeting specified service conditions.
Furthermore, the number of vested options that a grantee is able to
exercise, if any, is based on the Company’s stock price as of the
vesting dates specified in the respective option grant agreements.
For the three and six months ended September 30, 2022, total
compensation cost recognized under the Plan was $79.0 thousand
and $0.2 million, respectively.
17. Subsequent
Events
On November 8, 2022, Contrail entered into the Second Amendment to
Master Loan Agreement (the “Amendment”) with ONB. The Amendment
amends the Master Loan Agreement dated as of June 24, 2019, as
amended.
The principal revisions made in the Amendment are: (i) the tangible
net worth covenant was revised to require that Contrail maintain a
tangible net worth of at least $12.0 million at all times
prior to March 31, 2024 and $15.0 million at all times on or
following March 31, 2024; and, (ii) that all proceeds from certain
asset sales during the period beginning on October 1, 2022 and
ending on March 31, 2023 be applied as prepayments on Term Loan G.
The effectiveness of the Amendment is conditioned on Contrail
executing a Collateral Assignment of two Aircraft Engine Lease
Agreements. The form of Collateral Assignment is attached as an
exhibit to the Amendment.
The foregoing summary of the terms of the Amendment is qualified in
its entirety by reference to the form of Second Amendment to Master
Loan Agreement with Exhibit filed as Exhibit 10.2 herewith, which
is incorporated herein by reference.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
This section entitled "Management’s Discussion and Analysis of
Financial Condition and Results of Operations" (“MD&A”) is
intended to provide a reader of our financial statements with a
narrative from the perspective of management on our financial
condition, results of operations, liquidity, and certain other
factors that may affect our future results. The MD&A provides a
narrative analysis explaining the reasons for material changes in
the Company’s (i) financial condition during the period from the
most recent fiscal year-end, March 31, 2022, to and including
September 30, 2022 and (ii) results of operations during the
current fiscal period(s) as compared to the corresponding period(s)
of the preceding fiscal year.
This Quarterly Report on Form 10-Q, including the MD&A,
contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
reflect our current views with respect to future events and
financial performance. The words “believe,” “expect,” “anticipate,”
“intend,” “estimate,” “forecast,” “project,” “should,” "will,"
"continue" and similar expressions are intended to identify
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Any and all forecasts and
projections in this document are “forward looking statements” and
are based on management’s current expectations or beliefs. From
time to time, we may also provide oral and written forward-looking
statements in other materials we release to the public, such as
press releases, presentations to securities analysts or investors,
or other communications by us. Any or all of our forward-looking
statements in this report and in any public statements we make
could be materially different from actual results. Accordingly, we
wish to caution investors that any forward-looking statements made
by or on behalf of us are subject to uncertainties and other
factors that could cause actual results to differ materially from
such statements.
We also wish to caution investors that other factors might in the
future prove to be important in affecting our results of
operations. New factors emerge from time to time; it is not
possible for management to predict all of such factors, nor can it
assess the impact of each such factor on the business or the extent
to which any factor, or a combination of factors, may cause actual
results to differ materially from those contained in any
forward-looking statements.
We undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Our MD&A should be read in conjunction with the Consolidated
Financial Statements and related Notes included in Item 1 of Part 1
of this Quarterly Report on Form 10-Q and our Annual Report on Form
10-K for the fiscal year ended March 31, 2022 (including the
information presented therein under Risk Factors), as well other
publicly available information.
Overview
Air T, Inc. (the “Company,” “Air T,” “we” or “us”) is a holding
company with a portfolio of operating businesses and financial
assets. Our goal is to prudently and strategically diversify Air
T’s earnings power and compound the growth in its free cash flow
per share over time.
We currently operate in four industry
segments:
•Overnight
air cargo, which operates in the air express delivery services
industry;
•Ground
equipment sales, which manufactures and provides mobile deicers and
other specialized equipment products to passenger and cargo
airlines, airports, the military and industrial
customers;
•Commercial
aircraft, engines and parts, which manages and leases aviation
assets; supplies surplus and aftermarket commercial jet engine
components; provides commercial aircraft disassembly/part-out
services; commercial aircraft parts sales; procurement services and
overhaul and repair services to airlines and,
•Corporate
and other, which acts as the capital allocator and resource for
other consolidated businesses. Further, Corporate and other also
comprises insignificant businesses and business interests that do
not pertain to other reportable segments.
Each business segment has separate management teams and
infrastructures that offer different products and services. We
evaluate the performance of our business segments based on
operating income and Adjusted EBITDA.
Results of Operations
Impacts from Geopolitical, Macroeconomic, and COVID-19
Challenges
We continue to be exposed to macroeconomic pressures as a result of
the lingering impacts of the COVID-19 pandemic, supply chain
challenges, foreign currency fluctuations, and spikes in commodity
prices as a result of geopolitical challenges, including the war
in
Eastern Europe. We continue to navigate through these challenges
with a sharp focus on and goal of safeguarding our employees,
helping our customers and managing impacts on our supply
chain.
COVID-19 and its impact on the current financial, economic and
capital markets environment, and future developments in these and
other areas present uncertainty and risk with respect to our
financial condition and results of operations. Each of our
businesses implemented measures to attempt to limit the impact of
COVID-19 but we still experienced a number of disruptions, and we
experienced and continue to experience to a lesser degree a
reduction in demand for commercial aircraft, jet engines and parts
compared to historical periods. Many of our businesses may continue
to generate reduced operating cash flow and may continue to operate
at a loss from time to time during fiscal 2023. We expect that the
impact of COVID-19 will continue to some extent. The fluidity of
this situation precludes any prediction as to the ultimate adverse
impact of COVID-19 on economic and market conditions, and, as a
result, present material uncertainty and risk with respect to us
and our results of operations. The Company believes the estimates
and assumptions underlying the Company’s condensed consolidated
financial statements are reasonable and supportable based on the
information available as of September 30, 2022; however,
uncertainty over the ultimate direct and indirect impact COVID-19
will have on the global economy generally, and the Company’s
businesses in particular, makes any estimates and assumptions as of
September 30, 2022 inherently less certain than they would be
absent the current and potential impacts of COVID-19.
The war in Eastern Europe and related sanctions imposed on Russia
and related actors have resulted in interest rate acceleration and
inflation, including, but not limited to, a significant increase in
the price of commodities. We expect that these factors will
continue to negatively impact our businesses at least in the
short-term. The ultimate impact on our overall financial condition
and operating results will depend on the currently unknowable
duration and severity of these activities. We continue to evaluate
the long-term impact that these may have on our business model,
however there can be no assurance that the measures we have taken
or will take will completely offset the negative
impact.
Second Quarter Fiscal 2023 Compared to Second Quarter Fiscal
2022
Consolidated revenue for the three-month period ended
September 30, 2022 increased by $17.5 million (40%) compared
to the same quarter in the prior fiscal year.
Following is a table detailing revenue by segment, net of
intercompany during the three months ended September 30, 2022
compared to the same quarter in the prior fiscal year (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change |
|
|
2022 |
|
2021 |
|
|
|
Overnight Air Cargo |
$ |
22,069 |
|
|
$ |
18,847 |
|
|
$ |
3,222 |
|
17 |
% |
|
Ground Equipment Sales |
18,019 |
|
|
9,189 |
|
|
8,830 |
|
96 |
% |
|
Commercial Jet Engines and Parts |
18,986 |
|
|
14,916 |
|
|
4,070 |
|
27 |
% |
|
Corporate and Other |
1,614 |
|
|
286 |
|
|
1,328 |
|
464 |
% |
|
|
$ |
60,688 |
|
|
$ |
43,238 |
|
|
$ |
17,450 |
|
40 |
% |
Revenues from the air cargo segment for the three-month period
ended September 30, 2022 increased by $3.2 million (17%)
compared to the second quarter of the prior fiscal year. The
increase was principally attributable to higher administrative
fees, maintenance labor and pass-through revenues from
FedEx.
The ground equipment sales segment contributed approximately $18.0
million and $9.2 million to the Company’s revenues for the
three-month periods ended September 30, 2022 and 2021
respectively, representing a $8.8 million (96%) increase in the
current quarter. The increase was primarily driven by significantly
higher commercial ultimate deicers sales this quarter compared to
prior year comparable quarter. At September 30, 2022, the
ground equipment sales segment’s order backlog was $21.1 million
compared to $10.9 million at September 30, 2021.
The commercial jet engines and parts segment contributed $19.0
million of revenues in the quarter ended September 30, 2022
compared to $14.9 million in the comparable prior year quarter,
which is an increase of $4.1 million (27%). The increase was
primarily driven by higher component part sales across all
companies within the segment in the current quarter compared to
prior year comparable quarter.
Revenues from the corporate and other segment for the three-month
period ended September 30, 2022 increased by $1.3 million
(464%) compared to the second quarter of the prior fiscal year. The
increase was primarily attributable to the acquisitions mentioned
in
Note
2
of the Notes to Condensed Consolidated Financial Statements of this
report.
Following is a table detailing operating income (loss) by segment
during the three months ended September 30, 2022 compared to
the same quarter in the prior fiscal year (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change |
|
|
2022 |
|
2021 |
|
|
|
Overnight Air Cargo |
$ |
845 |
|
|
$ |
857 |
|
|
$ |
(12) |
|
|
Ground Equipment Sales |
1,887 |
|
|
43 |
|
|
1,844 |
|
|
Commercial Jet Engines and Parts |
(204) |
|
|
1,902 |
|
|
(2,106) |
|
|
Corporate and Other |
(2,349) |
|
|
(2,098) |
|
|
(251) |
|
|
|
$ |
179 |
|
|
$ |
704 |
|
|
$ |
(525) |
|
Consolidated operating income for the quarter ended
September 30, 2022 was $0.2 million, compared to an operating
income of $0.7 million in the comparable quarter of the prior
year.
The air cargo segment's operating income for the three-month period
ended September 30, 2022 was relatively flat compared to the
same quarter in the prior fiscal year. The increase in revenue
discussed above was offset by the impairment of previously
capitalized costs on a software project that was deemed no longer
probable to be completed and placed in service.
The ground equipment sales segment's operating income for the
quarter ended September 30, 2022 increased by $1.8 million
from the prior year comparable quarter to $1.9 million. This
increase was primarily attributable to the increased sales noted in
the segment revenue discussion above.
The commercial jet engines and parts segment generated an operating
loss of $0.2 million in the current-year quarter compared to
an operating income of $1.9 million in the prior-year quarter. The
change was primarily attributable to the sale of an airframe with
higher profit margin in the prior-year quarter that did not recur
in the current-year quarter. In addition, this segment incurred an
inventory write-down of $1.0 million in the current quarter
compared to none in the prior-year comparable quarter.
The corporate and other segment's operating loss for the
three-month period ended September 30, 2022 was relatively
flat compared to the same quarter in the prior fiscal
year.
Following is a table detailing non-operating income (expense)
during the three months ended September 30, 2022 compared to
the same quarter in the prior fiscal year (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change |
|
|
2022 |
|
2021 |
|
|
|
Interest expense |
(1,996) |
|
|
(1,167) |
|
|
$ |
(829) |
|
|
Income from equity method investments |
266 |
|
|
14 |
|
|
252 |
|
|
Gain on forgiveness of Paycheck Protection Program (“PPP”)
loan |
— |
|
|
8,331 |
|
|
(8,331) |
|
|
Other |
(357) |
|
|
159 |
|
|
(516) |
|
|
|
$ |
(2,087) |
|
|
$ |
7,337 |
|
|
$ |
(9,424) |
|
The Company had a net non-operating loss of $2.1 million during the
quarter ended September 30, 2022, compared to net
non-operating income of $7.3 million in the prior-year quarter. In
the second quarter 2021, the Company recorded a $8.3 million gain
recognized on the SBA's forgiveness of the Company's PPP loan. In
the current-year quarter, the Company had higher interest expense
due to having more outstanding TruPs shares and more indebtedness
at Contrail compared to the prior-year quarter. In addition, the
Company recorded a $0.2 million unrealized loss due to fair value
adjustments on our marketable investments in the current year
compared to the prior year's $0.3 million unrealized
gain.
During the three-month period ended September 30, 2022, the
Company recorded global income tax benefit of $0.6 million at an
effective tax rate ("ETR") of 30.0%. The Company records income
taxes using an estimated annual effective tax rate for interim
reporting. The primary factors contributing to the difference
between the federal statutory rate of 21.0% and the Company's
effective tax rate for the three-month period ended
September 30, 2022 were the change in valuation allowance
related to Delphax, other capital losses, the estimated benefit for
the exclusion of income for SAIC under Section 831(b), and the
exclusion from the tax provision of the minority owned portion of
the pretax income of Contrail.
During the three-month period ended September 30, 2021, the Company
recorded $38.0 thousand in income tax expense at an ETR of 0.5%.
The primary factors contributing to the difference between the
federal statutory rate of 21.0% and the Company's effective
tax
rate for the three-mo