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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
Form 10-K
_________________
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _____________
commission file number 0-11720
Air T, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
3524 Airport Road
Maiden, North Carolina 28650
(Address of principal executive offices) (Zip Code)
(704) 377-2109
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.25 per share
(Title of Class)
__________________
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 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 5, 2001, computed by reference to the average of the
closing bid and asked prices for such stock on such date, was $3,101,748. As of
the same date, 2,705,153 shares of Common Stock were outstanding.
PART I
Item 1. Business.
Air T, Inc., incorporated under the laws of the State of Delaware in 1980
(the "Company"), operates in three industry segments, providing overnight air
cargo services to the air express delivery industry through its wholly owned
subsidiaries, Mountain Air Cargo, Inc. ("MAC") and CSA Air, Inc. ("CSA"),
aviation related parts brokerage and overhaul services through its wholly owned
subsidiary, Mountain Aircraft Services, LLC ("MAS"), and aviation ground support
equipment products through its wholly owned subsidiary, Global Ground Support,
LLC ("Global"). For the fiscal year ended March 31, 2001 the Company's air
cargo services through MAC and CSA accounted for approximately 43.1% of the
Company's consolidated revenues, aircraft deice and other ground support
equipment products through Global accounted for 44.7% of consolidated revenues
and aviation related parts brokerage and overhaul services through MAS accounted
for 12.2% of consolidated revenues. The Company's air cargo services are
provided exclusively to one customer -- Federal Express Corporation ("Federal
Express"). Revenues from contracts with Federal Express accounted for
approximately 43.1% of the Company's consolidated revenues for the year ended
March 31, 2001. Certain financial data with respect to the Company's overnight
air cargo, aviation services and ground support equipment segments are set forth
in Note 14 of Notes to Consolidated Financial Statements included under Part II,
Item 8 of this report. Such data are incorporated herein by reference.
The principal place of business of the Company and MAC is Maiden, North
Carolina; the principal places of business of CSA, MAS and Global are,
respectively, Iron Mountain, Michigan, Kinston, North Carolina and Olathe,
Kansas.
Diversification and Acquisition.
In October 1993, the Company organized MAS to diversify its customer base
and business mix. MAS provides aircraft maintenance, parts and other aviation
related services to the commercial and military aviation industries. MAS is
organized as a limited liability company, of which the Company and MAC are
members (99% of the profits and losses are allocated to the Company and 1% to
MAC).
In August 1997, the Company organized Global to acquire the Simon Deicer
Division of Terex Aviation Ground Equipment, and the acquisition was completed
that month. Global is located in Olathe, Kansas and manufactures, sells and
services aircraft ground support equipment sold to domestic and international
passenger and cargo airlines, as well as to airports. During the fiscal year
ended March 31, 2000, the Company diversified Global's product line to include
additional model aircraft deicers and scissor-lift ground support equipment.
Global is organized as a limited liability company, of which the Company and MAS
are members (99% of the profits and losses are allocated to MAS and 1% to the
Company).
The organization of MAS and Global reflects the Company's strategy to
diversify its operations within the aviation industry to reduce its dependence
on the air cargo service segment.
Overnight Air Cargo Services.
MAC and CSA provide small package overnight air freight delivery services
on a contract basis throughout the eastern half of the United States and Canada,
and in Puerto Rico and the U.S. Virgin Islands. MAC and CSA's revenues are
derived principally pursuant to "dry-lease" service contracts. Under the dry-
lease service contracts, the customer leases its aircraft to MAC (or CSA) for a
nominal amount and pays an administrative fee to MAC (or CSA). Under these
arrangements, all direct costs related to the operation of the aircraft
(including fuel, maintenance, landing fees and pilot costs) are passed through
to the customer. For the most recent fiscal year, operations under dry-lease
service contracts accounted for 98.0% of MAC and CSA's revenues (42.2% of the
Company's consolidated revenues).
For the fiscal year ended March 31, 2001, MAC and CSA provided air delivery
service exclusively to Federal Express. As of March 31, 2001, MAC and CSA
operated an aggregate of 95 aircraft under agreements with Federal Express.
Separate agreements cover the three types of aircraft operated by MAC and CSA
for Federal Express -- Cessna Caravan, Fokker F-27 and Short Brothers SD3-30.
Cessna Caravan and Fokker F-27 aircraft are dry-leased from Federal Express, and
Short Brothers SD3-30 aircraft are owned by the Company and operated under "wet-
lease" arrangements with Federal Express which provide for a fixed fee per
flight regardless of the amount of cargo carried. Pursuant to such agreements,
Federal Express determines the schedule of routes to be flown by MAC and CSA.
Agreements with Federal Express are renewable annually and may be
terminated by Federal Express any time upon 15 to 30 days' notice. The Company
believes that the short term and other provisions of its agreements with Federal
Express are standard within the air freight contract delivery service industry.
Loss of Federal Express as a customer would have a material adverse effect on
MAC, CSA and the Company.
MAC and CSA operate under separate aviation certifications. MAC is
certified to operate under Part 121, Part 135 and Part 145 of the regulations of
the Federal Aviation Administration (the "FAA"). These certifications permit
MAC to operate and maintain aircraft that can carry up to 18,000 pounds of
cargo and provide maintenance services to third party operators. CSA is certi-
fied to operate under Part 135 of the FAA regulations. This certification
permits CSA to operate aircraft with a maximum cargo capacity of 7,500 pounds.
MAC and CSA, together, operated or held for sale the following aircraft as
of March 31, 2001:
Form of Number of
Type of Aircraft Model Year Ownership Aircraft
Cessna Caravan, 208A and 208B
(single turbo prop) 1985-1996 dry lease 73
Fokker F-27 (twin turbo prop) 1968-1981 dry lease 20
Short Brothers SD3-30
(twin turbo prop) 1981 owned 2
Total 95
Of the 95 aircraft fleet, 93 aircraft (the Cessna Caravan and Fokker F-27
aircraft) are owned by Federal Express. Under the dry-lease service contracts,
certain maintenance expense, including cost of parts inventory, and maintenance
performed by personnel not employed by the Company, is passed directly to the
customer, and the expense of daily, routine maintenance and aircraft service
checks is charged to the customer on an hourly basis. Accordingly, the Company
does not anticipate maintenance expense, such as engine overhauls, to be
material to the Company's operating results.
All FAA Part 135 aircraft, including Cessna Caravan models 208A and 208B,
and Short Brothers SD3-30 aircraft are maintained on FAA approved inspection
programs. The inspection intervals range from 100 to 200 hours. The engines
are produced by Pratt & Whitney, and overhaul periods are based on FAA approved
schedules. The current overhaul period on the Cessna aircraft is 7,500 hours.
The Short Brothers manufactured aircraft are maintained on an "on condition"
maintenance program (i.e., maintenance is performed when performance deviates
from certain specifications) with engine inspections at each phase inspection
and in-shop maintenance at predetermined intervals.
The Fokker F-27 aircraft are maintained under a FAA Part 121 maintenance
program. The program consists of A, B, C, D and I service checks. The engine
overhaul period is 6,700 hours.
In May 2000, MAC completed its FAA certification to commence operation of a
Part 145 maintenance facility at its Kinston, N.C. location. MAC's future plans
include the ability to perform heavy maintenance for regional/trunk FAA Part 121
certified carriers.
The Company operates in highly competitive markets and competes with
approximately 50 other contract cargo carriers in the United States. MAC and
CSA's contracts are renewed on an annual basis. Accurate industry data is not
available to indicate the Company's position within its marketplace (in large
measure because most of the Company's competitors are privately held), but
management believes that MAC and CSA, combined, constitute one of the largest
contract carriers of the type described immediately above.
The Company's air cargo operations are not materially seasonal.
Aircraft Deice and Other Equipment Products.
In August 1997, the Company organized Global to acquire the Simon Deicer
Division of Terex Aviation Ground Equipment to further diversify the Company's
customer base and business mix within the aviation industry. Global
manufactures, sells, services and supports aircraft devices on a worldwide
basis. During the fiscal year ended March 31, 2000, the Company diversified
Global's product line to include additional models of aircraft deicers and
scissor-lift ground support equipment. Global's primary customers are passenger
and cargo airlines, the U.S. Airforce, as well as airports located in the
United States and in international markets. Global's operations are located in
Olathe, Kansas.
In the manufacture of its ground service equipment, Global assembles
components acquired from third party suppliers. Components are readily
available from a number of different suppliers. The primary components are the
chassis (which is similar to the chassis of a medium to heavy truck) and heating
equipment.
Global manufactures five basic models of mobile deicing equipment ranging
from 700 to 3,200 gallon capacity models in addition to fixed pedestal mounted
deicers. Each model can be customized as requested by the customer, including
the addition of twin engine deicing systems, fire suppressant equipment,
modifications for open or enclosed cab design, a recently patented forced-air
deicing nozzle to substantially reduce glycol usage and color and style of the
exterior finish. Global also manufactures three models of scissor-lift
equipment, for catering, cabin service and maintenance service of aircraft.
Global competes primarily on the basis of reliability of its products,
prompt delivery and price. The market for aviation ground service equipment is
highly competitive.
Global's mobile deicing equipment business has historically been highly
seasonal, with the bulk of deicing equipment being purchased by customers in the
late summer and fall in preparation for winter months. Historically, the bulk
of Global's revenues have occurred during the second and third fiscal quarters,
and comparatively little revenue has occurred during the first and fourth fiscal
quarters. The Company has reduced Global's seasonal fluctuation in revenues by
the introduction of a line of non-deicer related ground support equipment, the
January 2000 commencement of a long-term contract to provide deicing equipment
to the U.S. Air Force and the recent award of a $7.1 million pedestal-mounted
deicer contract with the Philadelphia International Airport, expected to be
completed in the third quarter of the current fiscal year.
Revenue from Global's contract with the U.S. Air Force accounted
for approximately 13.9% of the Company's consolidated revenue for the
year ended March 31, 2001.
Aviation Related Parts Brokerage and Overhaul Services.
In October 1993, the Company organized MAS to diversify its customer base
and business mix. MAS provides aircraft maintenance and parts and other
aviation related services to the commercial and military aviation industries.
MAS's principal offices and primary overhaul facilities are located at the
Global TransPark in Kinston, North Carolina and Miami, Florida.
Services offered by MAS include engine overhaul management, aircraft
maintenance and component repair. Services are provided under standard purchase
contracts.
In addition, MAS sells aircraft parts, of which approximately 1% of the
amount sold in the fiscal year ended March 31, 2001 were used in connection with
maintenance performed by MAS. Sales of parts by MAS do not include any parts
purchased for maintenance of aircraft operated by MAC or CSA.
MAS's inventory of parts held for sale was approximately $5.3 million at
March 31, 2001 and included parts for use in primarily 15 types of commercial
and military aircraft, all of which are generally in current use. MAS maintains
its own inventory controls and documentation, sets stocking levels and
determines the conditions for surplus parts disposal.
MAS's customers include the commercial air cargo and passenger aviation
industries and manufacturers of commercial and military aircraft and contract
maintenance companies serving the commercial and military aviation industry.
MAS also provides parts or services under contracts directly with the U.S.
government. For the fiscal year ended March 31, 2001, MAS provided services or
parts to over 75 customers, with five customers accounting for approximately 95%
of MAS's revenues for the year.
MAS's operations are not materially seasonal.
Backlog.
The Company's backlog consists of "firm" orders supported by customer
purchase orders with fixed delivery dates for the deicing equipment sold by
Global and for parts and equipment sold by MAS. At March 31, 2001, the
Company's backlog of orders was $20.6 million, of which $19.5 million was
attributable to Global and approximately $1.1 million was attributable to MAS,
all of which the Company expects to be filled in the current fiscal year.
Governmental Regulation.
Under the Federal Aviation Act of 1958, as amended, the FAA has safety
jurisdiction over flight operations generally, including flight equipment,
flight and ground personnel training, examination and certification, certain
ground facilities, flight equipment maintenance programs and procedures,
examination and certification of mechanics, flight routes, air traffic control
and communications and other matters. The FAA also has power to suspend or
revoke for cause the certificates it issues and to institute proceedings for
imposition and collection of fines for violation of federal aviation
regulations. The Company has secured appropriate operating certificates and
airworthiness certificates for all aircraft operated by it.
The FAA periodically conducts routine reviews of MAC and CSA's operating
procedures and flight and maintenance records.
The Airline Deregulation Act of 1978 created a new class of domestic
certificated all-cargo carriers. Pursuant to such certificate, aircraft of
specified size may be operated within the United States, without restriction on
routes.
The Company has been subject to FAA regulation since the commencement of
its business activities. The FAA is concerned with safety and the regulation of
flight operations generally, including equipment used, ground facilities,
maintenance, communications and other matters. The FAA can suspend or revoke
the authority of air carriers or their licensed personnel for failure to comply
with its regulations and can ground aircraft if questions arise concerning
airworthiness. The Company, through its subsidiaries, holds all operating
airworthiness and other FAA certificates that are currently required for the
conduct of its business, although these certificates may be suspended or revoked
for cause.
The FAA has authority under the Noise Control Act of 1972, as amended, to
monitor and regulate aircraft engine noise. The aircraft operated by the
Company are in compliance with all such regulations promulgated by the FAA.
Moreover, because the Company does not operate jet aircraft, noncompliance is
not likely. Such aircraft also comply with standards for aircraft exhaust
emissions promulgated by the Environmental Protection Agency pursuant to the
Clean Air Act of 1970, as amended.
Because of the extensive use of radio and other communication facilities in
its aircraft operations, the Company is subject to the Federal Communications
Act of 1934, as amended.
Maintenance and Insurance.
The Company, through its subsidiaries, maintains its aircraft under the
appropriate FAA standards and regulations.
The Company has secured public liability and property damage insurance in
excess of minimum amounts required by the United States Department of
Transportation. The Company has also obtained all-risk hull insurance on
Company-owned aircraft.
The Company maintains cargo liability insurance, workers' compensation
insurance and fire and extended coverage insurance, for leased as well as owned
facilities and equipment.
Employees.
At June 5, 2001, the Company and its subsidiaries had 472 full-time and
full-time-equivalent employees, of which 9 are employed by the Company, 292 are
employed by MAC, 60 are employed by CSA, 31 are employed by MAS and 80 are
employed by Global. None of the Company's employees are represented by a union.
The Company believes its relations with its employees are good.
Item 2. Properties.
The Company leases the Little Mountain Airport in Maiden, North Carolina
from a corporation whose stock is owned in part by J. Hugh Bingham, William H.
Simpson and John J. Gioffre, officers and directors of the Company, and the
estate of David Clark, of which, Walter Clark, the Company's chairman and Chief
Executive Officer, is a co-executor and beneficiary, and Allison Clark, a
director, is a beneficiary. The facility consists of approximately 65 acres
with one 3,000 foot paved runway, approximately 20,000 square feet of hangar
space and approximately 10,300 square feet of office space. The operations of
the Company and MAC are headquartered at this facility. The lease for this
facility was renewed in May 1996, expired on May 31, 2001. Subsequent to year-
end the lease was renewed through May 31, 2006, and the monthly lease payment
was increased to $9,147 from $8,073.
The Company also leases approximately 800 square feet of office space and
approximately 6,000 square feet of hangar space at the Ford Airport in Iron
Mountain, Michigan. CSA's operations are headquartered at these facilities.
These facilities are leased, from a third party, under an annually renewable
agreement with a monthly rental payment, as of March 31, 2001, of approximately
$1,698.
On November 16, 1995, the Company entered into a twenty-one and a half year
premises and facilities lease with Global TransPark Foundation, Inc. to lease
approximately 53,000 square feet of a new 66,000 square foot aircraft hangar
shop and office facility at the North Carolina Global TransPark in Kinston,
North Carolina. On August 10, 1996, MAS's component repair services and part of
MAC's aircraft maintenance operations were relocated to this facility. Rent
under this lease increases over time as follows: the first 18 months, no rent;
the next 5-year period, $2.25 per square foot; the next 5-year period, $3.50 per
square foot; the next 5-year period, $4.50 per square foot; and the final 5-year
period, $5.90 per square foot. This lease is cancelable under certain
conditions at the Company's option. The Company began operations at this
facility in August 1996.
MAS operates an engine overhaul management facility in Miami, Florida,
leasing, from a third party, approximately 4,700 square feet of shop space. The
lease expires in March 31, 2002, and the monthly rental payment is $3,118. MAS
also operates a 145 inventory repair shop facility in Kinston. The lease
expires in March 31, 2002 and the monthly rental payment is $5,941.
Global leases a 112,500 square foot production facility in Olathe, Kansas.
The facility is leased, from a third party, under a three-year lease agreement
which expires in August 2001. The monthly rental payment, as of March 31, 2001,
was $35,903. In April 2001 the lease was renewed through August 2006, monthly
rental will increase from $28,967 to $30,842 over the life of the lease.
As of March 31, 2001, the Company leased hangar space from third parties at
35 other locations for aircraft storage. Such hangar space is leased, from
third parties, at prevailing market terms.
The table of aircraft presented in Item 1 lists the aircraft operated by
the Company's subsidiaries and the form of ownership.
Item 3. Legal Proceedings.
The Company is currently aware of certain employee, product liability and
environmental matters, some of which involve pending or threatened lawsuits. If
adversely decided, management believes the results of these pending or
threatened lawsuits would not have a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
PART II
Item 5. Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock is publicly traded in the over-the-counter
market under the NASDAQ symbol "AIRT."
As of May 29, 2001, the number of holders of record of the Company's Common
Stock was approximately 364. Over-the-counter market quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions. The range of high and low bid
quotations per share for the Company's common stock from April 1999 through
March 2001 is as follows:
Common Stock
Quarter Ended High Low
June 30, 1999 6 1/2 3
September 30, 1999 5 1/2 3
December 31, 1999 4 1/8 2 1/2
March 31, 2000 4 3 1/5
June 30, 2000 3 7/8 3
September 30, 2000 3 3/4 2 3/4
December 31, 2000 4 2.250
March 31, 2001 4.438 3.000
The Company's Board of Directors has adopted a policy to pay a regularly
scheduled annual cash dividend in the first quarter of each fiscal year. The
$0.15 per share cash dividend, declared on May 10, 2001, was paid on June 13,
2001 to stockholders of record on May 29, 2001.
Item 6. Selected Financial Data
(In thousands except per share data)
Year Ended March 31,
2001 2000 1999 1998 1997
Operating revenues $70,246 $58,846 $52,120 $51,001 $34,979
Net earnings $ 1,289 $ 362 $ 523 $ 1,706 $ 1,323
Earnings per share-Basic $ 0.47 $ 0.13 $ 0.19 $ 0.64 $ 0.51
Earnings per share-Diluted $ 0.46 $ 0.13 $ 0.19 $ 0.61 $ 0.47
Total assets $28,533 $23,936 $20,852 $18,289 $11,118
Long-term obligations, including
current portion $ 5,969 $ 1,486 $ 1,364 $ 1,144 $ 222
Stockholders' equity $10,170 $ 9,383 $ 9,636 $ 9,712 $ 8,254
Average common shares
outstanding-Basic 2,733 2,758 2,698 2,660 2,619
Average common shares
outstanding-Diluted 2,781 2,837 2,794 2,788 2,794
Dividend declared per common share
(1)(2)(3)(4) $ 0.10 $ 0.08 $ 0.14 $ 0.10 $ -
Dividend paid per common share
(1)(2)(3)(4) $ 0.10 $ 0.08 $ 0.14 $ 0.10 $ 0.08
_____________________________
(1) On May 14, 1998, the Company declared a cash dividend of $0.14 per common
share payable on June 12, 1998 to stockholders of record on May 19, 1998.
(2) On April 30, 1999,the Company declared a cash dividend of $0.08 per common
share payable on June 9, 1999 to stockholders of record on May 14, 1999.
(3) On May 18, 2000, the Company declared a cash dividend of $0.10 per common
share payable on June 13, 2000 to stockholders of record on May 29, 2000.
(4) On May 10, 2001,the Company declared a cash dividend of $0.15 per common
share that was paid on June 13, 2001 to stockholders of record on
May 29, 2001.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's two most significant components of revenue, which accounted
for 43.1% and 44.7% of revenue, respectively, were generated through its air
cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA),
which are short-haul express air freight carriers flying nightly contracts for a
major express delivery company out of 80 cities, principally located in 30
states in the eastern half of the United States and in Puerto Rico, Canada and
the Virgin Islands and its ground support equipment subsidiary, Global Ground
Support, LLC (Global). Global manufactures, sells and services aircraft deicers
and other ground support equipment.
Separate agreements cover the three types of aircraft operated by MAC and
CSA-Cessna Caravan, Fokker F-27, and Short Brothers SD3-30. Cessna Caravan and
Fokker F-27 aircraft (a total of 93 aircraft at March 31, 2001) are owned by and
dry-leased from a major air express company (Customer), and Short Brothers SD3-
30 aircraft (two aircraft at March 31, 2001) are owned by the Company and
operated under wet-lease arrangements with the Customer. Pursuant to such
agreements, the Customer determines the type of aircraft and schedule of routes
to be flown by MAC and CSA, with all other operational decisions made by the
Company. Under the terms of the dry-lease service agreements, which currently
cover approximately 98% of the revenue aircraft operated, the Company passes
through to its customer certain cost components of its operations without
markup. The cost of fuel, flight crews, landing fees, outside maintenance,
parts and certain other direct operating costs are included in operating
expenses and billed to the customer as cargo and maintenance revenue, at cost.
Agreements are renewable annually and may be terminated by the Customer at
any time upon 15 to 30 days' notice. The Company believes that the short term
and other provisions of its agreements with the Customer are standard within the
air freight contract delivery service industry. The Company is not
contractually precluded from providing such services to other firms, and has
done so in the past. Loss of its contracts with the Customer would have a
material adverse effect on the Company.
Mountain Aircraft Services, LLC's (MAS) aircraft component repair services
contributed approximately $8,578,000 and $9,169,000 to the Company's revenues in
fiscal 2001 and 2000, respectively, and are included in Aircraft Services and
Other in the accompanying consolidated statement of earnings.
Global Ground Support, LLC (Global), manufactures, services and supports
aircraft deicers and other ground support equipment on a worldwide basis.
Global is operated as a subsidiary of MAS. Global's revenue contributed
approximately $31,406,000 and $17,009,000 to the Company's revenues in fiscal
2001 and 2000, respectively. The significant increase in revenues in 2001 was
primarily related to the June 1999 award of a four-year, $25,000,000 contract
to supply deicing equipment to the United States Air Force. The Company was
subsequently made aware that a competing bidder had filed a protest opposing the
awarding of the contract to Global. In September 1999 the General
Accounting Office finalized the denial of the protest and upheld the awarding
of the Air Force contract to Global. As a result of the delays created by
this protest, revenue originally anticipated to commence during the quarter
ending December 31, 1999 was delayed until the quarter ending March 31, 2000.
Additionally, the protest and its resulting delay caused Global to incur
substantial legal fees and additional overhead costs relating to fixed
production costs which would have been absorbed by operations but were
reallocated to other product lines during fiscal 2000 resulting in lower
margins in the existing product lines.
The Company's four subsidiaries operate in three business segments. Each
business segment has separate management teams and infrastructures that offer
different products and services. The subsidiaries have been combined into the
following reportable segments: air cargo, aviation services and aviation ground
equipment.
The accounting policies for all reportable segments are the same as those
described in Footnote 1 of Notes to Consolidated Financial Statements.
The Company evaluates the performance of its operating segments based on
operating income.
The following table summarizes the changes and trends in the Company's
expenses as a percentage of revenue:
Fiscal Year Ended March 31,
2001 2000 1999
Operating revenue (in thousands) $70,246 $58,846 $52,120
Expense as a percentage of revenue:
Flight operations 21.30% 23.31% 27.20%
Maintenance and brokerage 24.06 35.11 33.87
Ground equipment 37.43 25.58 22.03
General and administrative 12.44 12.78 13.84
Depreciation and amortization 1.18 1.57 1.25
Total costs and expenses 96.41% 98.35% 98.19%
Seasonality
Global's business has historically been highly seasonal. Due to the nature
of its product line, the bulk of Global's revenues and earnings have typically
occurred during the second and third fiscal quarters in anticipation of the
winter season, and comparatively little has occurred during the first and fourth
fiscal quarters. The Company has continued its efforts, started in fiscal 1999,
to reduce Global's seasonal fluctuation in revenues and earnings by broadening
its product line to increase revenues and earnings in the first and fourth
fiscal quarters. The Company expended exceptional effort in fiscal 1999 and
2000 to design and produce prototype equipment to expand its product line to
include additional deicer models and three models of scissor-lift equipment for
catering, cabin service and maintenance service of aircraft. These costs were
expensed as incurred. As indicated above, in June 1999, Global was awarded a
four-year contract to supply deicing equipment to the United States Air Force
for a total amount of approximately $25 million, and in January 2001 Global
received a $7.1 million pedestal-mounted deicer contract with the Philadelphia
International Airport, expected to be completed in the third quarter of
fiscal 2002. The Company anticipates that revenue from these contracts
will contribute to management's plan to reduce Global's seasonal fluctuation in
revenues. The remainder of the Company's business is not materially seasonal.
Results of Operations
Fiscal 2001 vs. 2000
Consolidated revenue increased $11,400,000 (19.4%) to $70,246,000 for the
fiscal year ended March 31, 2001 compared to the prior fiscal year. The
increase in 2001 revenue primarily resulted from increases in revenue from
Global of $14,397,000 (84.6%) to $31,406,000 partially offset by decreases in
MAS revenue of $591,000 (6.4%) to $8,578,000 and a $2,405,000 (7.4%) decrease in
air cargo revenue to $30,262,000.
Operating expenses increased $9,857,000 (17.0%) to $67,729,000 for fiscal
2001 compared to fiscal 2000. The net increase in operating expenses consisted
of the following changes: cost of flight operations increased $1,248,000 (9.1%)
as a result of increases in fuel, landing fees, pilot and flight personnel and
costs associated with pilot travel; maintenance and brokerage expenses decreased
$3,755,000 (18.2%) primarily as a result of decreases associated with cost of
parts stock purchases and labor related to the decreased revenue of MAS's repair
facility and by lower outside maintenance costs at MAC; ground equipment costs
increased $11,244,000 (74.7%), as a result of increased sales at Global;
depreciation and amortization decreased $96,000 (10.4%) as a result of certain
assets becoming fully depreciated, or written off during fiscal 2001; the
general and administrative expense increase of $1,217,000 (16.2%) is primarily
the result of increases in general wages and benefits, professional fees and
staff expense.
On a segment basis, the most significant impacts on the Company's operating
results comparing the fiscal year ended March 31, 2001 to the prior period
resulted from changes in parent company revenue and expense, the ground
equipment operation at Global and the aircraft services operation at MAS.
Current year corporate operating loss increased $420,000 due to increased
general and administrative expense over the prior year and decreased investment
income. In the fiscal year ended March 31, 2001, Global had an operating income
of $2,049,000 compared to a prior period loss of $591,000, MAS had
operating income of $274,000 compared to $650,000 in the prior year.
Several factors contributed to the changes in Global's and MAS's operating
results. Global's current fiscal year revenue increased 84.6% compared to its
prior fiscal year primarily due to commencement of the U.S. Air Force contract.
MAS's current fiscal year revenue decreased 6.4% compared to its prior fiscal
year revenue. The decrease in MAS revenue, and operating income, was primarily
due to decreased brokerage sales and parts overhaul revenue. Operating income
for the Company's overnight air cargo operations was $2,476,000 in the fiscal
year ended March 31, 2001, a decrease of 7.6% from $2,680,000 in the prior
fiscal year. The MAC decrease resulted from decreased levels of aircraft
maintenance.
Non-operating expense increased a net $225,000 due to increased current
year interest expense related to higher levels of borrowing on the Company's
line of credit to fund the expanded operations of Global and MAS and a decrease
in investment income.
Provision for income taxes increased $390,000 (146.9%) due to increased
taxable income. The provision for income taxes for the fiscal years ended March
31, 2001, 2000 and 1999 were different from the Federal statutory rates due to
state tax provisions and a reduction in the Company's excise tax accrual
due to a favorable tax ruling.
Fiscal 2000 vs. 1999
Consolidated revenue increased $6,726,000 (12.9%) to $58,846,000 for the
fiscal year ended March 31, 2000 compared to the prior fiscal year. The
increase in 2000 revenue primarily resulted from increases in revenue from MAS
of $3,878,000 (73.3%) to $9,169,000 and an increase at Global of $3,614,000
(27.0%) to $17,009,000, partly offset by a $723,000 decrease in air cargo
revenue.
Operating expenses increased $6,698,000 (13.1%) to $57,872,000 for fiscal
2000 compared to fiscal 1999. The net increase in operating expenses consisted
of the following changes: cost of flight operations decreased $459,000 (3.2%) as
a result of decreases in pilot and flight personnel and costs associated with
pilot travel; maintenance and brokerage expenses increased $3,005,000 (17.0%)
primarily as a result of increases associated with cost of parts and labor
related to the expansion of MAS's repair facility offset in part by lower
outside maintenance costs; ground equipment costs increased $3,571,000 (31.1%),
as a result of increased sales at Global; depreciation and amortization
increased $273,000 (42.1%) as a result additional depreciable assets acquired
throughout the Company's operations during fiscal 2000; the general and
administrative expense increase of $309,000 (4.3%) is primarily the result of
costs associated with the expansion of MAS's repair shop operations and
increases in general wages and benefits, professional fees and staff expense.
On a segment basis, the most significant impacts on the Company's operating
results comparing the fiscal year ended March 31, 2000 to the prior period
resulted from changes in parent company revenue and expense, the ground
equipment operation at Global and the aircraft services operation at MAS.
The corporate operating loss for the fiscal year-ended March 31,
2000 increased $622,000 due to the elimination of aircraft rental revenue and
increased general and administrative and depreciation expense over the prior
year. In the fiscal year ended March 31, 2000, Global had an operating loss of
$591,000 compared to a prior period loss of $498,000, MAS had
operating income of $650,000 compared to an operating loss of $79,000 in
the prior year. Several factors contributed to the changes in Global's and
MAS's operating results. Although Global's revenue for the fiscal year ended
March 31, 2000 was 27.0% greater than revenue for the prior fiscal year, unused
productive capacity and legal cost associated with the protest and delay in
finalizing the Air Force contract and higher than normal production, engineering
and design cost associated with the introduction of new products caused an
increase in Global's current period loss. MAS's current fiscal year revenue
increased 73.3% compared to its prior fiscal year. The increase in revenue, and
operating income, was primarily due to increased brokerage sales and revenue and
income generated by the expansion of aircraft component repair service offered
by MAS's 145 repair facility located in Kinston, N.C.
Operating income for the Company's overnight air cargo operations was
$2,680,000 in the fiscal year ended March 31, 2000, up 0.5% from $2,666,000 in
the prior fiscal year.
Non-operating expense increased a net $307,000 due to increased current
year interest expense related to higher levels of borrowing on the Company's
line of credit to fund the expanded operations of Global and MAS.
Provision for income taxes decreased $118,000 (30.8%) due to decreased
taxable income. The provision for income taxes for the fiscal years ended March
31, 2000 and 1999 were different from the Federal statutory rates due to state
tax provisions.
Liquidity and Capital Resources
As of March 31, 2001 the Company's working capital amounted to $12,249,000,
an increase of $5,673,000 compared to March 31, 2000. The net increase
primarily resulted from changes made to the payment terms of the Company's line
of credit which transferred $5,162,000 from notes payable to long term
obligations.
On May 31, 2001 the Company expanded its bank financing line to a
$10,000,000 credit facility. Under the terms of the agreement, a $7,000,000
secured long-term revolving credit line which expires on August 31, 2002
replaced the Company's existing $8,500,000 unsecured short-term revolving credit
line which was due to expire in August 2001. The remaining $3,000,000 of the
credit facility was set up as a five-year term loan which expires on May 31,
2006 and is scheduled to be repaid in quarterly principal payments of $150,000,
plus accrued interest.
The credit facility contains customary events of default and restrictive
covenants that, among other matters, require the Company to maintain certain
financial ratios. As of March 31 2001, the Company was in compliance with all
of the restrictive covenants. The amount of credit available to the Company
under the agreement at any given time is determined by an availability
calculation, based on the eligible borrowing base, as defined in the credit
agreement, which includes the Company's outstanding receivables, inventories and
equipment, with certain exclusions. The credit facility is secured by
substantially all of the Company's assets.
Amounts advanced under the credit facility bear interest at the 30-day
"LIBOR" rate plus 137 basis points. The LIBOR rate at March 31, 2001 was 5.28%.
At March 31, 2001 and 2000, the amounts outstanding against the line were
$5,763,000 and $3,988,000, respectively. At March 31, 2001, $2,737,000 was
available under the entire credit facility.
The Company has classified $5,162,000 of its outstanding balance on the
credit line as of March 31, 2001 as long-term to reflect the terms included
under the agreement signed on May 31, 2001. The Company also entered into a
swap agreement on May 31, 2001 to fix the interest rate on the $3,000,000 term
portion and $2,000,000 of the revolving portion of the credit facility at
respective interest rates of 6.97% and 6.50%.
The respective years ended March 31, 2001, 2000 and 1999 resulted in the
following changes in cash flow: operating activities used $1,129,000
and $1,531,000, respectively in 2001 and 1999 and provided $262,000 in
2000. Investing activities used $227,000, $172,000, and $733,000, respect-
ively, in 2001, 2000 and 1999 and financing activities provided $1,310,000 and
$2,533,000, respectively, in 2001 and 1999 and used $209,000 in 2000. Net
cash decreased $47,000 and $119,000, respectively, in 2001 and 2000 and
increased $69,000 for 1999.
Cash used in operating activities was $1,392,000 more for the year ended
March 31, 2001 compared to 2000 principally due to increases in accounts receiv-
able and inventory partially offset by increases in net earnings and accrued
expenses. Cash used in investing activities for the year ended March 31, 2001
was approximately $55,000 more than 2000, principally due to increased capital
expenditures. Cash provided by financing activities was $1,519,000 more in
2001 compared to 2000 principally due to an increase in proceeds relating to
borrowings under the line of credit.
During the fiscal year ended March 31, 2001 the Company repurchased 61,200
shares of its common stock at a total cost of $186,783. Pursuant to its
previously announced stock repurchase program, $189,919 remains available for
repurchase of common stock.
There are currently no commitments for significant capital expenditures.
The Company's Board of Directors, on August 7, 1997, adopted the policy to pay
an annual cash dividend in the first quarter of each fiscal year, in an amount
to be determined by the board. The Company paid a $0.10 per share cash dividend
in June 2000 and declared a $0.15 per share cash dividend on May 10, 2001,
paid on June 13, 2001 to shareholders of record dated May 29, 2001.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, ("SFAS 133") "Accounting
for Derivative Instruments and Hedging Activities", which requires all
derivative instruments to be recognized on the balance sheet at their fair
value. Changes in the fair value of derivatives are to be recorded each period
either in other comprehensive income or in current earnings depending on the use
of the derivatives and whether it qualifies for hedge accounting. SFAS No. 133
was effective for the Company beginning on April 1, 2001. The adoption of SFAS
No. 133 did not significantly impact the Company's financial statements.
Impact of Inflation
The Company believes that due to the current low levels of inflation the
impact of inflation and changing prices on its revenues and net earnings will
not have a material effect on its manufacturing operations, or on its air cargo
business since the major cost components of its operations, consisting
principally of fuel, crew and certain maintenance costs are reimbursed, without
markup, under current contract terms.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold or issue derivative financial instruments for
trading purposes. On May 31, 2001 the Company entered into swap agreements to
fix the interest rates on the $3 million term portion and $2 million of
the revolving portion of its credit facility at respective interest rates of
6.97% and 6.50% to reduce its exposure to the fluctuations of LIBOR-based
variable interest rates. The Company is exposed to changes in interest rates on
certain portions of its line of credit, which bears interest based on the
30-day LIBOR rate plus 137 basis points. If the LIBOR interest rate had been
increased by one percentage point, based on the year-end balance of the
line of credit, annual interest expense would have increased by approximately
$58,000.
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Air T, Inc.
Denver, North Carolina
We have audited the accompanying consolidated balance sheets of Air T, Inc. and
subsidiaries (the "Company") as of March 31, 2001 and 2000, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 2001. These financial
statements are the responsibility of the Company's management. Our respons-
ibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Air T, Inc. as of March 31, 2001
and 2000, and the results of its operations and its cash flows for each of the
three years in the period ended March 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
June 1, 2001
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended March 31,
2001 2000 1999
Operating Revenues (Note 9):
Cargo $ 20,258,595 $ 18,823,692 $ 19,546,633
Maintenance 9,917,749 13,712,681 13,603,365
Ground equipment 31,405,711 17,009,311 13,395,761
Aircraft services and other 8,663,818 9,300,454 5,574,258
70,245,873 58,846,138 52,120,017
Operating Expenses:
Flight operations 14,965,001 13,717,147 14,176,484
Maintenance and brokering 16,903,938 20,658,917 17,653,906
Ground equipment 26,295,686 15,052,477 11,481,881
General and administrative 8,738,131 7,521,446 7,212,251
Depreciation and amortization 826,018 921,791 648,929
67,728,774 57,871,778 51,173,451
Operating Income 2,517,099 974,360 946,566
Non-operating Expense (Income):
Interest 745,077 638,138 330,821
Deferred retirement expense (Note 11) 24,996 24,996 24,996
Investment income (114,467) (183,227) (196,624)
Increase in Cash surrender value
of life insurance (95,457) (133,378) (121,929)
Other 12,075 256 2,828
572,224 346,785 40,092
Earnings Before Income Taxes 1,944,875 627,575 906,474
Income Taxes (Note 10) 655,950 265,718 383,770
Net Earnings $ 1,288,925 $ 361,857 $ 522,704
Net Earnings Per Share (Note 12):
Basic $ 0.47 $ 0.13 $ 0.19
Diluted $ 0.46 $ 0.13 $ 0.19
Weighted Average Shares Outstanding:
Basic 2,733,428 2,757,549 2,697,509
Diluted 2,780,732 2,837,398 2,793,954
See notes to consolidated financial statements.
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
2001 2000
ASSETS (Note 6)
Current Assets:
Cash and cash equivalents $ 97,799 $ 144,513
Marketable securities (Note 2) 875,836 1,295,678
Accounts receivable, less allowance for
doubtful accounts of $163,862 in 2001 and
$159,058 in 2000 11,089,528 7,960,978
Costs and estimated earnings in excess of billings on
uncompleted contracts (Note 4) 194,067 210,178
Inventories (Note 3) 10,783,686 9,545,879
Deferred tax asset (Note 10) 444,764 321,097
Prepaid expenses and other 203,765 228,757
Total Current Assets 23,689,445 19,707,080
Property And Equipment (Note 1):
Furniture, fixtures and improvements 6,472,103 5,600,249
Flight equipment and rotables inventory 1,153,301 1,057,531
7,625,404 6,657,780
Less depreciation (4,371,232) (3,867,778)
Property and equipment, net 3,254,172 2,790,002
Deferred Tax Asset (Note 10) 567,282 438,554
Intangible Pension Asset (Note 11) 361,631 430,778
Other Assets 660,682 570,032
Total Assets $28,533,212 $23,936,447
See notes to consolidated financial statements.
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
2001 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank (Note 6) $ - $ 3,988,191
Accounts payable 8,879,628 7,517,640
Accrued expenses (Note 5) 1,573,468 1,090,838
Income taxes payable (Note 10) 287,846 470,247
Current portion of long-term obligations
(Notes 6 & 7) 699,719 64,833
Total Current Liabilities 11,440,661 13,131,749
Capital Lease Obligations (less current
portion) (Note 7) 105,007 36,440
Long-term Debt (less current portion) (Note 6) 5,163,829 -
Deferred Retirement Obligations (less current
portion) (Note 11) 1,653,400 1,512,377
Stockholders' Equity (Note 8):
Preferred stock, $1 par value, authorized
10,000,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,705,153 and
2,740,353 shares issued and outstanding
in 2001 and 2000, respectively 676,288 684,416
Additional paid in capital 6,828,640 6,976,795
Retained earnings 3,206,642 2,192,574
Accumulated other comprehensive loss (541,255) (597,904)
Total Stockholders' Equity 10,170,315 9,255,881
Total Liabilities and Stockholders' Equity $28,533,212 $23,936,447
See notes to consolidated financial statements.
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31,
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,288,925 $ 361,857 $ 522,704
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 826,018 921,791 648,929
Deferred tax provision (252,395) (101,046) (233,625)
Net periodic pension cost 240,385 219,456 166,853
Changes in assets and liabilities which
provided (used) cash:
Accounts receivable, net of doubtful
accounts provision (3,128,550) (951,991) (335,886)
Inventories (1,666,185) (2,816,130) (1,599,932)
Prepaid expense and other (49,547) (461,826) (85,338)
Accounts payable 1,361,988 3,249,750 292,257
Accrued expenses 432,626 (629,703) (143,728)
Income taxes payable (182,401) 470,247 (762,961)
Total adjustments (2,418,061) (99,452) (2,053,431)
Net cash provided by (used in)
operating activities (1,129,136) 262,405 (1,530,727)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of fixed assets 30,581 - -
Capital expenditures (720,545) (647,074) (1,248,318)
Purchase of marketable securities - (100,000) (189,250)
Sale and maturity of marketable securities 462,617 575,143 504,503
Net cash used in investing activities (227,347) (171,941) (933,065)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit, net 1,775,638 94,689 2,977,423
Payment of cash dividend (274,858) (220,278) (377,687)
Repurchase of common stock (186,783) (78,437) (149,500)
Other (4,228) (5,287) 83,000
Net cash provided by (used in) financing
activities 1,309,769 (209,313) 2,533,236
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (46,714) (118,849) 69,444
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 144,513 263,362 193,918
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 97,799 $ 144,513 $ 263,362
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Capital leases entered into during
fiscal year $ 138,181 $ 30,236 $ -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 722,885 $ 608,938 $ 349,560
Income taxes paid/
(refunds received) 1,091,684 (596,993) 1,566,436
See notes to consolidated financial statements.
AIR T, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Common Stock (Note 8) Other
Additional Comprehen- Total
Paid-In Retained sive Stock-
Shares Amount Capital Earnings Income holders'
(Loss) Equity
Balance,
March 31, 1998 2,711,653 $ 677,241 $7,128,907 $1,905,978 $ - $9,712,126
Comprehensive Income:
Net earnings 522,704
Other Comprehensive Loss:
Unrealized loss on
available-for-sale securities (154,745)
Total Comprehensive Income 367,959
Repurchase and
retirement of
common stock (23,000) (5,750) (143,750) - - (149,500)
Exercise of stock
options 76,000 19,000 64,000 - - 83,000
Cash dividend
($.14 per share) - - - (377,687) - (377,687)
Balance, March
31, 1999 2,764,653 690,491 7,049,157 2,050,995 (154,745) 9,635,898
Comprehensive Income:
Net earnings 361,857
Other Comprehensive Loss:
Unrealized loss on
available-for-sale securities (315,438)
Excess of additional pension
liability over unrecognized
prior service cost (127,721)
Total Comprehensive Loss: (81,302)
Repurchase and
retirement of
common stock (24,300) (6,075) (72,362) - - (78,437)
Cash dividend ($.08 per share) - - (220,278) - (220,278)
Balance, March
31, 2000 2,740,353 684,416 6,976,795 2,192,574 (597,904) 9,255,881
Comprehensive Income:
Net earnings 1,288,925
Other Comprehensive Income:
Unrealized loss on
available-for-sale securities 74,980
Excess of additional pension
liability over unrecognized
prior service cost (18,331)
Total Comprehensive Income 1,345,574
Repurchase and
retirement of
common stock (61,200) (14,628) (172,155) - - (186,783)
Exercise of
stock options 26,000 6,500 24,000 - - 30,500
Cash dividend
($.15 per share) - - - (274,858) - (274,858)
Balance, March
31, 2001 2,705,153 $ 676,288 $6,828,640 3,206,642 $(541,255)$10,170,315
See notes to consolidated financial statements.
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principal Business Activities - The Company, through its operating
subsidiaries, is an air cargo carrier specializing in the overnight
delivery of small package air freight, a provider of aircraft parts, engine
overhaul management and component repair services and a manufacturer of
aircraft ground service equipment.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries, Mountain Air
Cargo, Inc., CSA Air, Inc., Mountain Aircraft Services, LLC and Global
Ground Support, LLC. All significant intercompany transactions and
balances have been eliminated.
Concentration of Credit Risk - The Company's potential exposure to
concentrations of credit risk consists of trade accounts receivable.
Accounts receivable are normally due within 30 days and the Company
performs periodic credit evaluations of its customers' financial condition.
Substantially all of the Company's customers are concentrated in the
aviation industry and revenue can be materially affected by current
economic conditions and the price of certain supplies such as fuel, the
cost of which is passed through to the customer. The Company has customer
concentrations in two areas of operations, air cargo which provides
service to one major customer and aviation parts and repair service which
provides service to approximately 75 customers, five of which are
considered major customers. The loss of a major customer would have a
material impact on the Company's results of operations.
Cash Equivalents - Cash equivalents consist of liquid investments with
maturities of three months or less when purchased.
Marketable Securities - Marketable securities consists primarily of
individual stocks, bonds, mutual funds and certificates of deposit.
The Company has classified marketable securities as available-for-sale
and they are carried at fair value. Unrealized gains and losses on such
securities are excluded from earnings and reported as a separate
component of stockholders' equity until realized. Realized gains and
losses on marketable securities are determined by calculating the
difference between the basis of each specifically identified market-
able security sold and its sales price.
Inventories - Inventories of the manufacturing subsidiary are carried at
the lower of cost (first in, first out) or market. Parts and supplies
inventory are carried at the lower of average cost or market. Consistent
with industry practice, the Company includes aircraft parts and supplies in
current assets, although a certain portion of these inventories may not be
used within one year.
Property and Equipment - Property and equipment is stated at cost or, in
the case of equipment under capital leases, the present value of future
lease payments. Rotables inventory represents aircraft parts which are
repairable, capitalized and depreciated over their estimated useful lives.
Depreciation and amortization are provided on a straight-line basis over
the asset's service life or related lease term, as follows:
Flight equipment and intellectual property 7 years
Other equipment and furniture 3 to 7 years
Revenue Recognition - Cargo revenue is recognized upon completion of
contract terms and maintenance revenue is recognized when the service has
been performed. Revenue from product sales is recognized when contract
terms are completed and title has passed to customers. Revenues from
overhaul contracts on customer owned parts and long term fixed price
manufacturing projects are recognized on the percentage-of-completion
method, in accordance with AICPA Statement of Position 81-1, "Accounting
for Performance of Construction Type and Certain Production Type
Contracts", as a result of a significant increase in overhaul contracts in
fiscal 2000. Prior to 2000 such contracts were immaterial. Revenues for
contracts under percentage of completion are measured by the percentage of
cost incurred to date, if necessary adjusted for specific profit margins,
to estimated total cost for each contract or workorder. Contract costs
include all direct material and labor costs and overhead costs related to
contract performance. Unanticipated changes in job performance, job
conditions and estimated profitability may result in revisions to costs and
income, and are recognized in the period in which the revisions are
determined. Such contracts generally have no customer retainage
provisions. Except for a manufacturing contract at Global, which is billed
on a progress billing basis, the Company generally bills its customer at
the time of completion of the contract or workorder.
Operating Expenses Reimbursed by Customer - The Company, under the terms of
its air cargo dry-lease service contracts, passes through to its major
customer certain cost components of its operations without markup. The
cost of flight crews, fuel, landing fees, outside maintenance and certain
other direct operating costs are included in operating expenses and billed
to the customer, at cost, as cargo and maintenance revenue.
Stock Based Compensation - The Company measures employee stock
compensation plans based on the intrinsic method of accounting, with pro-
forma disclosure of net earnings and earnings per share determined as if
the fair value based method had been applied in measuring compensation
cost.
Income Taxes - Income taxes are provided for temporary differences between
the tax and financial accounting bases of assets and liabilities using the
asset and liability method. Deferred income taxes are recognized for the
tax consequence of such temporary differences at the enacted tax rate
expected to be in effect when the differences reverse.
Accounting Estimates - The preparation of consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported. Actual results could differ from those estimates. Significant
estimates include the allowance for doubtful accounts, inventory
reserve, intangible pension asset, deferred retirement obligations and
revenue recognized under the percentage of completion method.
Recent Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standard
No. 133, ("SFAS 133") "Accounting for Derivative Instruments and Hedging
Activities", which requires all derivative instruments to be recognized on
the balance sheet at their fair value. Changes in the fair value of
derivatives are to be recorded each period either in other comprehensive
income or in current earnings depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS No. 133 was effective for
the Company beginning on April 1, 2001. The adoption of SFAS No. 133 did
not significantly impact the Company's financial statements.
Reclassifications - Certain reclassifications have been made to 2000 and
1999 amounts to conform to current year presentation.
2. MARKETABLE SECURITIES
At March 31, 2001 and 2000, marketable securities consist of the following
investment types:
2001 2000
Real estate trust $ 98,000 $ 140,000
Mutual funds 764,336 970,010
Equity securities - 68,814
Certificate of deposit 13,500 116,854
Total $ 875,836 $ 1,295,678
The Company recorded a realized gain of approximately $40,000 in 2001
and a realized loss of approximately $26,000 in 2000 in the accompanying
consolidated statements of earnings.
3. INVENTORIES
Inventories consist of the following:
March 31,
2001 2000
Aircraft parts and supplies $ 5,458,684 $ 3,626,641
Aircraft equipment manufacturing:
Raw materials 2,666,270 3,198,978
Work in process 1,131,565 1,486,847
Finished goods 1,527,170 1,233,413
Total $10,783,686 $ 9,545,879
4. UNCOMPLETED CONTRACTS
Overhaul contracts in process accounted for under the percentage of
completion method at March 31, 2001 and 2000 are summarized as follows:
2001 2000
Costs incurred on uncompleted contracts $ 53,953 $ 126,731
Estimated earnings 140,114 83,447
Subtotal 194,067 210,178
Less billings to date - -
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 194,067 $ 210,178
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
March 31,
2001 2000
Salaries, wages and related items $ 661,600 $ 677,345
Profit sharing 403,466 129,189
Other 508,402 284,304
TOTAL $ 1,573,468 $ 1,090,838
6. FINANCING ARRANGEMENTS
On May 31, 2001 the Company expanded its bank financing line to a
$10,000,000 credit facility. Under the terms of the agreement, a
$7,000,000 secured long-term revolving credit line, which expires on August
31, 2002, replaced the Company's existing $8,500,000 unsecured short-term
revolving credit line, which was due to expire in August 2001. The
remaining $3,000,000 of the credit facility was set up as a five-year term
loan which expires on May 31, 2006 and is scheduled to be repaid in
quarterly principal payments of $150,000 plus accrued interest.
Long-term debt maturities are as follows (adjusted to reflect the
subsequent refinancing in May 2001):
2002 $ 450,000
2003 600,000
2004 3,364,000
2005 600,000
2006 600,000
Thereafter 150,000
Total $ 5,764,000
Both the credit facility in effect at March 31, 2001 and the new credit
facility contain customary events of default and restrictive covenants
that, among other matters, require the Company to maintain
certain financial ratios. As of March 2001, the Company was in compliance
with all of the restrictive covenants. The amount of credit available to
the Company under the agreement at any given time is determined by an
availability calculation, based on the eligible borrowing base, as defined
in the credit agreement which includes the Company's outstanding
receivables, inventories and equipment, with certain exclusions. The
credit facility is secured by substantially all of the Company's assets.
Amounts advanced under the credit facility bear interest at the 30-day
"LIBOR" rate plus 137 basis points. The LIBOR rate at March 31, 2001 was
5.28%. At March 31, 2001 and 2000, the amounts outstanding against the line
were $5,764,000 and $3,988,000, respectively. At March 31, 2001,
$2,736,000 was available under the entire credit facility.
The Company has classified $5,162,000 of its outstanding bank debt as
long-term as of March 31, 2001 to reflect the terms included under the
agreement signed on May 31, 2001. The Company also entered into a
swap agreement on May 31, 2001 to fix the interest rate on the $3,000,000
term portion and $2,000,000 of the revolving portion of the credit facility
at respective interest rates of 6.97% and 6.50%.
7. LEASE COMMITMENTS
The Company has operating lease commitments for office equipment and its
office and maintenance facilities as well as capital leases for certain
office and other equipment. The Company leases its corporate office
and certain maintenance facilities from a company controlled by Company
officers for $8,073 per month under a five year lease which expired in May
2001. In May 2001, the lease was renewed through May 2006, at $9,147 per
month.
In August 1996, the Company relocated certain portions of its maintenance
operations to a new maintenance facility located at the Global TransPark in
Kinston, N. C. Under the terms of the long-term facility lease, after an
18 month grace period (from date of occupancy), rent will escalate from
$2.25 per square foot to $5.90 per square foot, per year, over the 21.5
year life of the lease. However, based on the occurrence of certain events
the lease may be canceled by the Company. The Company currently considers
the lease to be non-cancelable for seven years and has calculated rent
expense on a straight-line basis over this portion of the lease term.
In August 1997 Global, located in Olathe, Kansas, leased approximately
57,000 square feet of manufacturing space for $17,030 per month, under a
two-year operating lease originally set to expire in September 1999. In
September 1998, the lease was expanded to 112,500 square feet of
manufacturing and office space for $35,903 per month expiring August 2001.
In April 2001, the lease was renewed through August 2006, monthly rental
will increase from $28,967 to $30,847 over the life of the lease.
At March 31, 2001, future minimum annual lease payments under capital and
non-cancellable operating leases with initial or remaining terms of more
than one year are as follows:
Capital Operating
Leases Leases
2002 $ 59,091 $ 802,389
2003 44,964 490,699
2004 38,036 421,076
2005 35,223 364,476
2006 13,115 370,104
Total minimum lease payments $ 190,429 $ 2,448,744
Less amount representing interest 35,703
Present value of lease payments 154,726
Less current maturities 49,719
Long-term maturities $ 105,007
Rent expense for operating leases amounted to approximately $819,000,
$728,000, and $623,000 for 2001, 2000 and 1999, respectively. Rent expense
to related parties was $96,900 for 2001, 2000 and 1999, respectively.
8. STOCKHOLDERS' EQUITY
The Company may issue up to 10,000,000 shares of preferred stock, in one or
more series, on such terms and with such rights, preferences and
limitations as determined by the Board of Directors. No preferred shares
have been issued as of March 31, 2001.
The Company has granted options to purchase shares of common stock to
certain Company employees and outside directors at prices ranging from
$1.00 to $6.375 per share. All options were granted at exercise prices
which approximated the fair market value of the common stock on the date of
grant. Options granted in fiscal 1991 and 1992 vested over a five year
period and must be exercised within five years of the vesting date while
options granted in fiscal 1999 and 2000 vest over one to three year periods
and must be exercised within one to ten years of the vesting date.
The following table summarizes information about stock options at
March 31, 2001:
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Options Contractual Exercise Options Exercise
Price Outstanding Life (Years) Price Exercisable Price
1.25 8,000 .1 1.25 8,000 1.25
2.75 157,200 2.0 2.75 104,800 2.75
3.19 89,000 3.6 3.19 89,000 3.19
6.38 5,000 7.4 6.38 5,000 6.38
$1.25 to 6.38 259,200 2.6 $ 2.93 206,800 $ 2.97
Option information is summarized as follows:
Weighted Average
Shares Exercise Price Per Share
Outstanding March 31, 1998 110,000 1.12
Granted 162,200 2.86
Exercised (76,000) 1.09
Outstanding March 31, 1999 196,200 2.57
Granted 89,000 3.19
Outstanding March 31, 2000 285,200 2.77
Exercised (26,000) 1.17
Outstanding March 31, 2001 259,200 2.93
The fair value of options granted in 2000 and 1999, is estimated on the
date of grant using the Black-Scholes option-pricing model with the
assumptions listed below. No options were granted in 2001.
2000 1999
Weighted average fair value per option $ 1.62 $ 1.15
Assumptions used:
Weighted average expected volatility 65.1% 61.0%
Weighted average expected dividend yield 2.4% 2.2%
Weighted average risk-free interest rate 6.59% 5.70%
Weighted average expected life, in years 4.6 3.0
The Company measures stock-based compensation using the intrinsic value
method in accordance with APB Opinion No. 25 and FASB Interpretation No.
28. Had compensation cost for the Company's stock-based compensation
awards been determined at the grant dates based on the fair market value
method described in FASB Statement No. 123, "Accounting for Stock-Based
Compensation" the Company's pro forma net income would have been
$1,240,350, or $0.45 per diluted share, and $279,927, or $0.10 per
diluted share, respectively, for 2001 and 2000. The effect on 1999 was
immaterial.
The Company has announced its intention to repurchase up to $3,400,000 of
the Company's common stock under a share repurchase program. At March 31,
2001 the Company had repurchased a total of 776,280 shares at a total cost
of $3,210,082 and may expend up to an additional $189,919 under this
program.
9. REVENUES FROM MAJOR CUSTOMER
Approximately 43.1%, 55.5% and 63.1% of the Company's revenues were derived
from services performed for a major air express company in 2001, 2000 and
1999, respectively. Approximately 13.9% of the Company's revenue for 2001
was generated from Global's U.S. Air Force contract.
10. INCOME TAXES
The provision for income taxes consists of:
Year Ended March 31,
2001 2000 1999
Current:
Federal $ 730,000 $ 300,000 $ 583,000
State 178,000 67,000 35,000
Total current 908,000 367,000 618,000
Deferred:
Federal (207,000) (83,000) (192,000)
State (45,000) (18,000) (42,000)
Total deferred (252,000) (101,000) (234,000)
Total $ 656,000 $ 266,000 $ 384,000
Due to a favorable IRS ruling regarding possible tax assessments,
the Company reduced its tax valuation allowance in fiscal 2001.
The consolidated income tax provision was different from the amount
computed using the statutory Federal income tax rate for the following
reasons:
2001 2000 1999
Income tax provision at U.S.
Statutory rate $ 661,000 $ 213,000 $ 308,000
State income taxes 94,000 32,000 52,000
Reduction in valuation
allowance (137,000) - -
Meal and entertainment disallowance 21,000 17,000 21,000
Other net 17,000 4,000 3,000
Income tax provision $ 656,000 $ 266,000 $ 384,000
The tax effect of temporary differences that gave rise to the Company's
deferred tax assets at March 31, 2001 and 2000 are as follows:
2001 2000
Book accruals over tax, net:
Warranty reserve $ 80,123 $ 57,903
Accounts receivable reserve 66,210 61,428
Accrued insurance 25,561 21,378
Accrued vacation 79,467 72,093
Deferred compensation 519,111 387,698
Other 198,884 89,035
Fixed assets 42,690 70,166
Total $ 1,012,046 $ 759,651
The deferred tax asset is classified in the accompanying 2001 and 2000
consolidated balance sheets according to the classification of the related
asset and liability.
11. EMPLOYEE BENEFITS
The Company has a 401K defined contribution plan (AirT 401(K) Retirement
Plan). All employees of the Company are eligible to participate in the
plan. The Company's contribution to the 401(K) plan for the years ended
March 31, 2001, 2000 and 1999 was $229,000, $229,000, and $191,000,
respectively.
The Company, in each of the past three years, has paid a discretionary
profit sharing bonus in which all employees have participated. The
Company's March 31, 2001, 2000, and 1999 expense was $400,000, $126,000 and
$147,000, respectively.
Effective January 1, 1996 the Company entered into supplemental retirement
agreements with certain key executives of the Company, to provide for a
monthly benefit upon retirement. The following table sets forth the funded
status of the plan at March 31, 2001 and 2000.
March 31,
2001 2000
Vested benefit obligation and
accumulated benefit obligation $ 1,392,100 $ 1,204,109
Projected benefit obligation 1,395,178 1,206,770
Plan assets at fair value - -
Projected benefit obligation
greater than plan assets 1,395,178 1,206,770
Unrecognized prior service cost (361,631) (432,356)
Unrecognized actuarial gain/(loss) (147,552) (128,804)
Adjustment required to recognize
minimum liability 506,105 558,499
Accrued pension cost recognized in
the consolidated
balance sheet $ 1,392,100 $ 1,204,109
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," the Company has
recorded an additional minimum liability representing the excess of the
accumulated benefit obligation over the fair value of plan assets and
accrued pension liability for its pension plan. The additional liability
has been offset by an intangible asset to the extent of prior service cost.
The portion of the additional liability which exceeds the unrecognized
prior service cost in fiscal 2001 totaled $18,331 and is reported as a
component of accumulated other comprehensive loss.
The projected benefit obligation was determined using an assumed discount
rate of 7% and an assumed rate of return on assets of 6%. The liability
relating to these benefits has been included in deferred retirement
obligation in the accompanying financial statements.
Net periodic pension expense for fiscal 2001 and 2000 included the
following:
2001 2000
Future service cost $ 58,826 $ 53,106
Interest cost 87,425 77,987
Amortization 94,134 88,363
Net periodic pension cost $ 240,385 $ 219,456
The Company's former Chairman and CEO passed away on April 18, 1997. Under
the terms of his supplemental retirement agreement, approximately $498,000
in present value of death benefits is required to be paid to fulfill death
benefit payments over the next 10 years. As of March 31, 2001 accruals
related to the unpaid present value of the benefit amounted to
approximately $308,000(of which approximately $260,000 is included under
deferred retirement obligations in the accompanying balance sheet). The
net periodic pension costs are included in general and administrative
expenses in the accompanying consolidated statements of earnings.
12. NET EARNINGS PER COMMON SHARE
Basic earnings per share has been calculated by dividing net earnings by
the weighted average number of common shares outstanding during each
period. For purposes of calculating diluted earnings per share, shares
issuable under employee stock options were considered common share
equivalents and were included in the weighted average common shares.
The computation of basic and diluted earnings per common share is as
follows:
Year Ended March 31,
2001 2000 1999
Net earnings $ 1,288,925 $ 361,857 $ 522,704
Weighted average common shares:
Shares outstanding - basic 2,733,428 2,757,549 2,697,509
Dilutive stock options 47,304 79,849 96,445
Shares outstanding - diluted 2,780,732 2,837,398 2,793,954
Net earnings per common share:
Basic $ 0.47 $ 0.13 $ 0.19
Diluted $ 0.46 $ 0.13 $ 0.19
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(in thousands except per share data)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2001
Operating Revenues $ 14,412 $ 15,110 $ 20,583 $ 20,141
Operating Income 406 458 1,051 602
Earnings Before Income Taxes 280 282 822 561
Net Earnings 165 167 498 459
Net Earnings Per Share -Basic $ 0.06 $ 0.06 $ 0.18 $ 0.17
Net Earnings Per Share -Diluted 0.06 0.06 0.18 0.16
2000
Operating Revenues $ 10,790 $ 13,906 $ 15,579 $ 18,571
Operating Income (Loss) 109 (618) 761 721
Earnings (Loss) Before Income Taxes 19 (751) 602 758
Net Earnings (Loss) 11 (465) 374 442
Net Earnings (Loss) Per Share
-Basic $ 0.00 $ (0.17) $ 0.14 $ 0.16
Net Earnings (Loss) Per Share
-Diluted 0.00 (0.17) 0.14 0.16
14. SEGMENT INFORMATION
The Company's four subsidiaries operate in three business segments. Each
business segment has separate management teams and infrastructures that
offer different products and services. The subsidiaries have been combined
into the following reportable segments: overnight air cargo, aviation
services, and aviation ground equipment.
The accounting policies for all reportable segments are the same as those
described in Footnote 1 of Notes to Consolidated Financial Statements.
The Company evaluates the performance of its operating segments based
on operating income.
Segment data is summarized as follows:
Year Ended March 31,
2001 2000 1999
Operating Revenues
Overnight Air Cargo $ 30,262,362 $ 32,667,694 $ 33,433,473
Ground Equipment 31,405,711 17,009,311 13,395,761
Aviation Services 8,577,800 9,169,133 5,290,783
Corporate - - -
Total $ 70,245,873 $ 58,846,138 $ 52,120,017
Operating Income (Loss)
Overnight Air Cargo $ 2,475,522 $ 2,679,793 $ 2,665,801
Ground Equipment 2,048,843 (591,440) (497,629)
Aviation Services 274,337 650,033 (79,329)
Corporate (1) (2,281,603) (1,764,026) (1,142,277)
Total $ 2,517,099 $ 974,360 $ 946,566
Identifiable Assets
Overnight Air Cargo $ 11,635,258 $ 10,690,024 $ 10,231,038
Ground Equipment 5,902,969 3,366,272 2,056,020
Aviation Services 1,760,016 948,855 210,882
Corporate 9,234,969 8,931,296 8,353,704
Total $ 28,533,212 $ 23,936,447 $ 20,851,644
Capital Expenditures, net
Overnight Air Cargo $ 371,505 $ 353,409 $ 258,621
Ground Equipment 77,288 58,483 623,545
Aviation Services 229,650 132,238 195,930
Corporate 42,102 108,497 173,050
Total $ 720,545 $ 652,627 $ 1,251,146
Depreciation and
Amortization
Overnight Air Cargo $ 261,122 $ 322,479 $ 203,954
Ground Equipment 271,496 283,664 174,415
Aviation Services 146,683 161,781 156,856
Corporate 146,717 153,867 113,704
Total $ 826,018 $ 921,791 $ 648,929
(1) Includes income from inter-segment transactions.
15. COMMITMENTS AND CONTINGENCIES
The Company is currently aware of certain employee, product liability and
environmental matters, some of which involve pending or threatened lawsuits. If
adversely decided, management believes the results of these pending or
threatened lawsuits would not have a material adverse effect on the Company.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Company had no disagreements on accounting or financial disclosure
matters with its independent certified public accountants to report under this
Item 9.
PART III
Item 10. Directors and Executive Officers of the Registrant.
J. Hugh Bingham, age 55, has served as President and Chief Operating
Officer of the Company since April 1997, as Senior Vice President of the Company
from June 1990 until April 1997, as Executive Vice President from June 1983 to
June 1990, and as a director since March 1987. Mr. Bingham also serves as Chief
Executive Officer and a director of MAC, as Chief Executive Officer of MAS and
as an Executive Vice President and director of CSA.
Walter Clark, age 44, has served as Chairman of the Board of Directors of
the Company and Chief Executive Officer since April 1997. Mr. Clark also serves
as a director of MAC and CSA. Mr. Clark was elected a director of the Company
in April 1996. Mr. Clark was self-employed in the real estate development
business from 1985 until April 1997.
John J. Gioffre, age 57, has served as Vice President-Finance and Chief
Financial Officer of the Company since April 1984 and as Secretary/Treasurer of
the Company since June 1983. He has served as a director of the Company since
March 1987. Mr. Gioffre also serves as Vice-President, Secretary/Treasurer and
a director of MAC and CSA and as Vice President-Finance, Treasurer and Secretary
of MAS.
J. Leonard Martin, age 64, was elected a director in August 1994 and joined
the Company as a Vice President in April 1997. From June 1995 until April 1997,
Mr. Martin was an independent aviation consultant. From April 1994 to June
1995, Mr. Martin served as Chief Operating Officer of Musgrave Machine & Tool,
Inc., a machining company. From January 1989 to April 1994, Mr. Martin served
as a consultant to the North Carolina Air Cargo Authority in connection with the
establishment of the Global TransPark air cargo facility in Kinston, North
Carolina. From 1955 through 1988 Mr. Martin was employed by Piedmont Airlines,
a commercial passenger airline, in various capacities, ultimately serving as
Senior Vice President-Passenger Services.
William H. Simpson, age 53, has served as Executive Vice President of the
Company since June 1990, as Vice President from June 1983 to June 1990, and as a
director of the Company since June 20, 1985. Mr. Simpson is also the President
and a director of MAC, the Chief Executive Officer and a director of CSA and
Executive Vice President of MAS.
Menda J. Street, age 49, has served as Vice President of MAC since 1984,
and in various other capacities at MAC since 1979.
Claude S. Abernethy, Jr., age 74, was elected as director of the Company in
June 1990. For the past five years, Mr. Abernethy has served as a Senior Vice
President of IJL Wachovia Securities, a securities brokerage and investment
banking firm, and its predecessor. Mr. Abernethy is also a director of Carolina
Mills, Inc. and Ridgeview Incorporated.
Sam Chesnutt, age 67, was elected a director of the Company in August 1994.
Mr. Chesnutt serves as President of Sam Chesnutt and Associates, an agribusiness
consulting firm. From November 1988 to December 1994, Mr. Chesnutt served as
Executive Vice President of AgriGeneral Company, L.P., an agribusiness firm.
Allison T. Clark, age 45, has served as a director of the Company since May
1997. Mr. Clark has been self-employed in the real estate development business
since 1987.
Herman A. Moore, age 71, was elected a director of the Company on June 22,
1998. Mr. Moore is the president of Herman A. Moore & Assoc., Inc., a real
estate development company.
George C. Prill, age 78, has served as a director of the Company since June
1982, as Chief Executive Officer and Chairman of the Board of Directors from
August 1982 until June 1983, and as President from August 1982 until spring
1984. Mr. Prill has served as an Editorial Director for General Publications,
Inc., a publisher of magazines devoted to the air transportation industry, since
November 1992 and was retired from 1990 until that time. From 1979 to 1990,
Mr. Prill served as President of George C. Prill & Associates, Inc., of
Charlottesville, Virginia, which performed consulting services for the aerospace
and airline industry. Mr. Prill has served as President of Lockheed
International Company, as Assistant Administrator of the FAA, as a Senior Vice
President of the National Aeronautic Association and Chairman of the Aerospace
Industry Trade Advisory Committee.
The officers of the Company and its subsidiaries each serve at the pleasure
of the Board of Directors. Allison Clark and Walter Clark are brothers.
Each director receives a director's fee of $500 per month and an attendance
fee of $500 is paid to outside directors for each meeting of the board of
directors or a committee thereof. Pursuant to the Company's 1998 Omnibus
Securities Award Plan (the "Plan") each director who is not an employee of the
Company received an option to purchase 1,000 shares of Common Stock at an
exercise price of $6.375 per share (the closing bid price per share on the date
of stockholder approval of the Plan.) The Plan provides for a similar option
award to any director first elected to the board after the date the stockholders
approved the Plan. Such options expire ten years after the date they were
granted.
To the Company's knowledge, based solely on review of the copies of reports
under Section 16(a) of the Securities Exchange Act of 1934 that have been
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended March 31, 2001 all executive officers,
directors and greater than ten-percent beneficial owners have complied with all
applicable Section 16(a) filing requirements, except that Mr. Simpson was late
in filing a Form 4 report with respect to his exercise of options.
Item 11. Executive Compensation.
The following table sets forth a summary of the compensation paid during
each of the three most recent fiscal years to the Company's Chief Executive
Officer and to the four other executive officers on March 31, 2001 with total
compensation of $100,000 or more.
SUMMARY COMPENSATION TABLE
Long-term
Annual Compensation Compensation Awards
Name and Principal Securities Underlying
Position Year Salary ($)(1) Bonus ($) Options (#)
Walter Clark 2001 125,732 46,900 -
Chief Executive Officer 2000 126,035 15,080 50,000
1999 132,527 20,900 -
J. Hugh Bingham 2001 193,004 46,900 -
President 2000 196,032 15,080 -
1999 203,774 20,900 9,000
John J. Gioffre 2001 121,788 35,175 -
Vice President 2000 121,948 11,311 -
1999 128,297 15,675 9,000
J. Leonard Martin 2001 122,673 24,880 -
Vice President 2000 122,205 6,880 -
1999 129,955 4,000 9,000
William H. Simpson 2001 194,803 46,900 -
Executive Vice President 2000 195,169 15,080 9,000
1999 204,008 20,900 -
__________________________________________
(1) Includes perquisites in aggregate amount no greater than 10% of the
officer's base salary plus bonus.
The following table sets forth, for each of the executive officers listed
in the Summary Compensation Table who exercised options to purchase shares of
Common Stock during the most recent fiscal year, the number of shares purchased
and the value realized upon exercise, which is determined based on the aggregate
fair market value of the shares at the time of the exercise minus the aggregate
exercise price. The table also sets forth the number of shares of Common Stock
underlying unexercised options at March 31, 2001 held by each of the executive
officers listed in the Summary Compensation Table. The table also includes the
value of such options at March 31, 2001 based upon the closing bid price of the
Company's Common Stock in the over-the-counter market on that date ($4.00 per
share) and the exercise price of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Value of
Securities Unexercised
Shares Underlying In-the-Money
Acquired Value Unexercised Options
On Realized Options at FY-End (#) at FY-End ($)
Name Exercise # ($) Exercisable Unexer- Unexer-
cisable Exercisable cisable
Walter Clark - - 50,000 - 40,500 -
J. Hugh Bingham 6,000 11,630 6,000 3,000 7,500 3,750
John J. Gioffre 4,000 7,750 6,000 3,000 7,500 3,750
J. Leonard Martin - - 6,000 3,000 7,500 3,750
William H. Simpson 16,000 35,500 17,000 - 13,770 -
EMPLOYMENT AGREEMENTS
Effective January 1, 1996, the Company and each of its subsidiaries entered into
employment agreements with J. Hugh Bingham, John J. Gioffre and William H.
Simpson, each of substantially similar form. Each of such employment agreements
provides for an annual base salary ($130,000, $103,443 and $165,537 for Messrs.
Bingham, Gioffre and Simpson, respectively) which may be increased upon annual
review by the Compensation Committee of the Company's Board of Directors. In
addition, each such agreement provides for the payment of annual incentive bonus
compensation equal to a percentage (2.0%, 1.5% and 2.0% for Messrs. Bingham,
Gioffre and Simpson, respectively) of the Company's consolidated earnings before
income taxes and extraordinary items as reported by the Company in its Annual
Report on Form 10-K. Payment of such bonus is to be made within 15 days after
the Company files its Annual Report on Form 10-K with the Securities and
Exchange Commission.
The initial term of each such employment agreement expired on March 31, 1999,
and the term is automatically extended for additional one-year terms unless
either such executive officer or the Company's Board of Directors gives notice
to terminate automatic extensions which must be given by December 1 of each year
(commencing with December 1, 1996).
Each such agreement provides that upon the executive officer's retirement, he
shall be entitled to receive an annual benefit equal to $75,000 ($60,000 for Mr.
Gioffre), reduced by three percent for each full year that the termination of
his employment precedes the date he reaches age 65. The retirement benefits
under such agreements may be paid at the executive officer's election in the
form of a single life annuity or a joint and survivor annuity or a life annuity
with a ten-year period certain. In addition, such executive officer may elect
to receive the entire retirement benefit in a lump sum payment equal to the
present value of the benefit based on standard insurance annuity mortality
tables and an interest rate equal to the 90-day average of the yield on ten-year
U.S. Treasury Notes.
Retirement benefits shall be paid commencing on such executive officer's 65th
birthday, provided that such executive officer may elect to receive benefits on
the later of his 62nd birthday, in which case benefits will be reduced as
described above, or the date on which his employment terminates, provided that
notice of his termination of employment is given at least one year prior to the
termination of employment. Any retirement benefits due under the employment
agreement shall be offset by any other retirement benefits that such executive
officer receives under any plan maintained by the Company. In the event such
executive officer becomes totally disabled prior to retirement, he will be
entitled to receive retirement benefits calculated as described above.
In the event of such executive officer's death before retirement, the agreement
provides that the Company shall be required to pay an annual death benefit to
such officer's estate equal to the single life annuity benefit such executive
officer would have received if he had terminated employment on the later of his
65th birthday or the date of his death, payable over ten years; provided that
such amount would be reduced by five percent for each year such executive
officer's death occurs prior to age 65, but in no event more than 50 percent.
Each of the employment agreements provides that if the Company terminates such
executive officer's employment other than for "cause" (as defined in the
agreement), such executive officer be entitled to receive a lump sum cash
payment equal to the amount of base salary payable for the remaining term of the
agreement (at the then current rate) plus one-half of the maximum incentive
bonus compensation that would be payable if such executive officer continued
employment through the date of the expiration of the agreement(assuming for such
purposes that the amount of incentive bonus compensation would be the same in
each of the years remaining under the agreement as was paid for the most recent
year prior to termination of employment). Each of the agreements further
provides that if any payment on termination of employment would not be
deductible by the Company under Section 280G(b)(2) of the Internal Revenue Code,
the amount of such payment would be reduced to the largest amount that would be
fully deductible by the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock (determined in accordance with Rule 13d-3 of
the Securities and Exchange Commission) of the Company as of June 1, 2001 by
each person that beneficially owns five percent or more of the shares of Common
Stock. Each person named in the table has sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned, except as
otherwise set forth in the notes to the table.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Title of Amount of
Class Name and Address of Beneficial Ownership Percent
Beneficial Owner as of June 1, 2001 Of Class
Common Stock, Walter Clark and Caroline 1,342,416(1) 48.7%
par value $.25 per Clark, Executors (1)
share P.O. Box 488
Denver, North Carolina 28650
William H. Simpson 270,580(2) 10.0%
P.O. Box 488
Denver, North Carolina
28650
_____________________________
(1) Includes 1,279,272 shares controlled by such individuals as the executors
of the estate of David Clark, 10,922 shares owned by Walter Clark, 50,000
shares purchasable by Walter Clark under options awarded by the Company and
2,222 shares owned by Caroline Clark.
(2) Includes 1,200 shares held jointly with J. Hugh Bingham and 20,500 shares
under options granted by the Company.
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock of the Company by each director of the
Company and by all directors and executive officers of the Company as a group as
of June 1, 2001. Each person named in the table has sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned,
except as otherwise set forth in the notes to the table.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Shares and Percent of Common Stock
Beneficially Owned as of June 1, 2001
Name Position with
Company No. of Shares Percent
J. Hugh Bingham President, Chief Operating 125,680(1)(2) 4.6%
Officer, Director
Walter Clark Chairman of the Board of 1,340,194(3) 48.6%
Directors and Chief
Executive Officer
John J. Gioffre Vice President-Finance, 63,580(4) 2.3%
Chief Financial Officer,
Secretary and Treasurer,
Director
J. Leonard Martin Vice President, 6,100(5) *
Director
William H. Simpson Executive Vice President, 270,580(1)(6) 10.0%
Director
Claude S. Abernethy, Jr. Director 44,011(7)(8) 1.6%
Sam Chesnutt Director 12,100(7) *
Allison T. Clark Director 3,222(7) *
Herman A. Moore Director 31,000(7) 1.1%
George C. Prill Director 46,966(7) 1.7%
All directors and N/A 1,963,233(9) 70.3%
executive officers as
a group (11 persons)
__________________________________________
* Less than one percent.
(1) Includes 1,200 shares jointly held by Messrs. Simpson and Bingham.
(2) Includes 6,000 shares under options granted by the Company to Mr. Bingham.
(3) Includes 1,279,272 shares held by the estate of David Clark, of which Mr.
Walter Clark is a co-executor and 50,000 shares under options granted by
the Company to Mr. Walter Clark.
(4) Includes 6,000 shares under options granted by the Company to Mr. Gioffre.
(5) Such 100 shares are held by Mr. Martin's spouse of which shares Mr. Martin
disclaims beneficial ownership and 6,000 shares under options granted by
the Company to Mr. Martin.
(6) Includes 9,000 shares under options granted by the Company to Mr. Simpson.
(7) Includes 1,000 shares under options granted by the Company.
(8) Includes 20,400 shares held by the Estate of Raenelle B. Abernethy, of
which Mr. Abernethy is the executor.
(9) Includes an aggregate of 88,000 shares of Common Stock members of such
group have the right to acquire within 60 days.
Item 13. Certain Relationships and Related Transactions.
The Company leases its corporate and operating facilities at the Little
Mountain, North Carolina airport from Little Mountain Airport Associates, Inc.
("Airport Associates"), a corporation whose stock is owned by J. Hugh Bingham,
William H. Simpson, John J. Gioffre, the estate of David Clark and three
unaffiliated third parties. Walter Clark and Allison Clark are beneficiaries of
the estate of David Clark, and Walter Clark is also a co-executor of the estate.
On May 31, 2001, the Company renewed its lease for this facility, scheduled to
expire on that date, for an additional five-year term, and adjusted the rent to
account for increases in the consumer price index. Upon the renewal, the
monthly rental payment was increased from $8,073 to $9,147. The Company paid
aggregate rental payments of $96,876 to Airport Associates pursuant to such
lease during the fiscal year ended March 31, 2001. The Company believes that
the terms of such lease are no less favorable to the Company than would be
available from an independent third party.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following documents are filed as part of this report:
1. Financial Statements
The following financial statements are incorporated herein by reference in Item
8 of Part II of this report:
(i) Independent Auditors' Report.
(ii) Consolidated Balance Sheets as of March 31, 2001 and 2000.
(iii)Consolidated Statements of Earnings for each of the three years in the
period ended March 31, 2001.
(iv) Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended March 31, 2001.
(v) Consolidated Statements of Cash Flows for each of the three years in the
period ended March 31, 2001.
(vi) Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
No schedules are required to be submitted.
3. Exhibits
No. Description
3.1 Certificate of Incorporation, as amended, incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994
3.2 By-laws of the Company, as amended, incorporated by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996
4.1 Specimen Common Stock Certificate, incorporated by reference to
Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31,1994
10.1 Aircraft Dry Lease and Service Agreement dated February 2, 1994
between Mountain Air Cargo, Inc. and Federal Express Corporation, in-
corporated by reference to Exhibit 10.13 to Amendment No. 1 on Form
10-Q/A to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1993
10.2 Loan Agreement among Bank of America, the Company and its subsidiaries
dated August 31, 2000, incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2000.
10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between Mountain Air
Cargo, Inc. and Federal Express Corporation, incorporated by reference
to Exhibit 10.4 of Amendment No. 1 on Form 10-Q/Q to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1994
10.4 Adoption Agreement regarding the Company's Master 401(k) Plan and
Trust, incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1993*
10.5 Amendment No. 1 to Omnibus Securities Award Plan incorporated by
reference to Exhibit 10.14 of the Company's Annual Report on Form
10-K for the year ended March 31, 2000*.
10.6 Premises and Facilities Lease dated November 16, 1995 between Global
TransPark Foundation, Inc. and Mountain Air Cargo, Inc., incorporated
by reference to Exhibit 10.5 to Amendment No. 1 on Form 10-Q/A to the
the Company's Quarterly Report on Form 10-Q for the period ended
December 31, 1995
10.7 Employment Agreement dated January 1, 1996 between the Company,
Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and
William H. Simpson, incorporated by reference to Exhibit 10.8 to the
Company's Annual Report Form 10-K for the fiscal year ended
March 31, 1996*
10.8 Employment Agreement dated January 1, 1996 between the Company,
Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and
John J. Gioffre, incorporated by reference to Exhibit 10.9 to the
Company's Annual Report Form 10-K for the fiscal year ended
March 31, 1996*
10.9 Employment Agreement dated January 1, 1996 between Company, Mountain
Air Cargo Inc. and Mountain Aircraft Services, LLC and J. Hugh
Bingham, incorporated by reference to Exhibit 10.10 to the Company's
Annual Report Form 10k for the fiscal year end March 31, 1996.*
10.10 Employment Agreement dated September 30, 1997 between Mountain
Aircraft Services, LLC and J. Leonard Martin, incorporated by
reference to Exhibit 10.10 to the Company's Quarterly Report Form
10-Q for the quarter ended December 31, 1997.*
10.11 Omnibus Securities Award Plan, incorporated by reference to Exhibit
10.11 to the Company's Quarterly Report Form 10-Q for the quarter
ended June 30, 1998.*
10.12 Commercial and Industrial Lease Agreement dated August 25, 1998
between William F. Bieber and Global Ground Support, LLC, incorporated
by reference to Exhibit 10.12 of the Company's Quarterly Report on 10Q
for the period ended September 30, 1998.
10.13 Amendment, dated February 1, 1999, to Aircraft Dry Lease and Service
Agreement dated February 2, 1994 between Mountain Air Cargo, Inc. and
Federal Express Corporation, incorporated by reference to Exhibit
10.13 of the Company's Quarterly Report on 10Q for the period ended
December 31, 1998.
21.1 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1998
__________________
* Management compensatory plan or arrangement required to be filed as an
exhibit to this report.
b. Reports on Form 8-K.
No Current Reports on Form 8-K were filed in the last quarter of the fiscal
year ended March 31, 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AIR T, INC.
By: /s/ Walter Clark
Walter Clark, Chief Executive Officer
(Principal Executive Officer)
Date: June 14, 2001
By: /s/ John J. Gioffre
John J. Gioffre, Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: June 14, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Claude S. Abernethy
Claude S. Abernethy, Jr., Director
Date: June 14, 2001
By: /s/ J. Hugh Bingham
J. Hugh Bingham, Director
Date: June 14, 2001
By: /s/ Allison T. Clark
Allison T. Clark, Director
Date: June 14, 2001
By: /s/ Walter Clark
Walter Clark, Director
Date: June 14, 2001
By: /s/ Sam Chesnutt
Sam Chesnutt, Director
Date: June 14, 2001
By: /s/ John J. Gioffre
John J. Gioffre, Director
Date: June 14, 2001
By: /s/ J. Leonard Martin
J. Leonard Martin, Director
Date: June 14, 2001
By: /s/ Herman A. Moore
Herman A. Moore, Director
Date: June 14, 2001
By: /s/ George C. Prill
George C. Prill, Director
Date: June 14, 2001
By: /s/ William Simpson
William Simpson, Director
Date: June 14, 2001