FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended December 31, 2002
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 (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 488, Denver, North Carolina 28037
(Address of principal executive offices)
(704) 377-2109
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
2,726,320 Common Shares, par value of $.25 per share were outstanding
as of February 10, 2003
This filing contains 29 pages.
AIR T, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
for the three and nine-month periods ended
December 31, 2002 and 2001 (Unaudited) 3
Consolidated Balance Sheets at
December 31, 2002 (Unaudited)
and March 31, 2002 4
Consolidated Statements of Cash
Flows for the nine-month periods
ended December 31, 2002 and 2001 (Unaudited) 5
Consolidated Statement of Stockholders'
Equity at December 31, 2002 (Unaudited) 6
Notes to Consolidated Financial
Statements (Unaudited) 7-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13-22
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 22
Item 4. Controls and procedures 22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
Signatures and Certifications 24-26
Exhibit Index 27
Exhibits 99.1 and 99.2 Officers' Certifications 28-29
2
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine monthsEnded
December 31, December 31,
2002 2001 2002 2001
Operating Revenues:
Cargo 4,936,248 4,887,585 14,448,177 14,732,919
Maintenance 2,582,316 2,368,391 7,132,070 7,173,960
Ground equipment 3,992,789 6,758,345 9,026,966 26,479,654
Aircraft services and other 1,920,495 1,754,582 4,946,843 10,228,826
13,431,848 15,768,903 35,554,056 58,615,359
Operating Expenses:
Flight operations 3,611,089 3,477,843 10,455,807 10,597,732
Maintenance and services 4,386,515 4,271,437 11,642,191 17,171,098
Ground equipment 3,090,356 5,198,062 7,341,304 21,078,142
General and administrative 2,031,072 2,263,049 5,990,502 6,825,249
Depreciation and amortization 166,020 176,056 520,351 528,955
13,285,052 15,386,447 35,950,155 56,201,176
Operating Income (Loss) 146,796 382,456 (396,099) 2,414,183
Non-operating Expense
(Income):
Interest 94,246 121,377 301,882 374,299
marketable securities - - 161,197 -
Deferred retirement expense 5,250 6,249 15,750 18,747
Investment income (18,063) (22,879) (61,947) (57,707)
Other (6,000) - (34,671) -
75,433 104,747 382,211 335,339
Earnings (Loss) Before
Income Taxes 71,363 277,709 (778,310) 2,078,844
Provision (Benefit) For
Income Taxes 34,000 121,477 (291,000) 833,721
Net Earnings (Loss) 37,363 156,232 (487,310) 1,245,123
Net Earnings (Loss) Per
Share:
Basic 0.01 0.06 (0.18) 0.46
Diluted 0.01 0.06 (0.18) 0.45
Weighted Average Shares
Outstanding:
Basic 2,726,320 2,716,764 2,726,320 2,714,323
Diluted 2,726,320 2,776,076 2,726,320 2,769,960
See Notes to Consolidated Financial Statements.
3
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31, 2002
2002
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents 82,336 31,770
Marketable securities 1,019,762 982,028
Accounts receivable, net 6,960,737 5,875,754
Costs and estimated earningsin excess
of billings on uncompleted contracts - 14,320
Inventories, net 9,334,786 9,907,430
Deferred tax asset 743,513 727,665
Prepaid expenses and other 236,251 188,245
Total Current Assets 18,377,385 17,727,212
Property and Equipment, net 2,819,761 3,519,048
Deferred Tax Asset 582,849 568,186
Intangible Pension Asset 290,862 290,862
Other Assets 825,282 797,454
Total Assets 22,896,139 22,902,762
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable 3,621,313 3,543,568
Accrued expenses 2,222,908 1,915,605
Income taxes (receivable) payable (166,355) 355,195
Current portion of long-term obligations 91,812 691,812
Total Current Liabilities 5,769,678 6,506,180
Capital Lease Obligations (less current
portion) 56,760 87,718
Long-term Debt (less current
portion) 4,685,117 3,378,934
Deferred Retirement Obligations
(less current portion) 1,909,702 1,830,205
Stockholders' Equity:
Preferred stock, $1 par value,
authorized
50,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,726,320 and
2,724,320 shares issued and
outstanding 681,580 681,080
Additional paid in capital 6,863,898 6,858,898
Retained earnings 3,266,457 4,079,621
Accumulated other comprehensive loss (337,053) (519,874)
10,474,882 11,099,725
Total Liabilities and
Stockholders' Equity 22,896,139 22,902,762
See notes to consolidated financial statements.
4
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
December 31,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) earnings (487,310) 1,245,123
Items not involving cash:
Increase in accounts receivable
and inventory reserves 137,921 -
Loss on impairment of investments
and disposal of assets 130,716 -
Increase in deferred tax asset (30,511) (147,558)
Depreciation and amortization 520,351 528,955
Net periodic pension cost 68,997 199,494
Changes in assets and liabilities:
Accounts receivable (1,029,915) 3,026,514
Inventories 718,228 355,921
Prepaid expenses and other (61,515) (11,549)
Accounts payable 77,745 (3,637,646)
Accrued expenses 317,803 396,294
Income taxes (receivable) payable (521,550) 182,040
Total adjustments 328,270 892,465
Net cash (used in) provided by
operating activities (159,040) 2,137,588
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (242,731) (397,172)
Proceeds from sale of equipment 140,000 -
Net cash used in investing activities (102,731) (397,172)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in line of credit, net 632,691 (1,259,563)
Payment of cash dividend (325,854) (405,520)
Repurchase of common stock - (42,785)
Proceeds from exercise of stock options 5,500 72,334
Net cash provided by (used in)
financing activities 312,337 (1,635,534)
NET INCREASE IN CASH & CASH EQUIVALENTS 50,566 104,882
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 31,770 97,799
CASH AND CASH EQUIVALENTS AT END OF PERIOD 82,336 202,681
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest 309,640 379,601
Income/Franchise taxes 262,019 791,902
SUMMARY OF SIGNIFICANT NON-CASH
INFORMATION:
Decrease in fair value of derivatives 20,998 190,000
Increase in fair value of marketable
securities 42,622 120,509
See notes to consolidated financial statements.
5
AIR T, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Accumulated
Other
Comprehens-
Additional ive Total
Common Stock Paid-In Retained Income Stockholder's
Shares Amount Capital Earnings (Loss) Equity
Balance, March
31, 2002 2,724,320 681,080 6,858,898 4,079,621 (519,874) 11,099,725
Comprehensive
Income (Loss):
Net loss (487,310)
Other Comprehensive Income (Loss):
Fair value adjustment on
marketable securities 42,622
Other than temporary
impairment of
marketable securities 161,197
Change in fair value of
derivatives (20,998)
Total comprehensive
loss (487,310) 182,821 (304,489)
Exercise of stock
options 2,000 500 5,000 5,500
Cash dividend
($.12 per share) (325,854) (325,854)
Balance, Decem-
ber 31, 2002 2,726,320 681,580 6,863,898 3,266,457 (337,053) 10,474,882
6
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
A. Financial Statements
The Consolidated Balance Sheet as of December 31, 2002, the
Consolidated Statements of Operations for the three and nine-month periods
ended December 31, 2002 and 2001, the Consolidated Statements of Cash Flows
for the nine-month periods ended December 31, 2002 and 2001 and the
Consolidated Statement of Stockholders' Equity for the nine-month period
ended December 31, 2002 have been prepared by Air T, Inc. (the Company)
without audit. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to
present fairly the financial position, results of operations, cash flows
and equity position as of December 31, 2002, and for prior periods
presented, have been made.
It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended March 31, 2002. The results
of operations for the periods ended December 31 are not necessarily
indicative of the operating results for the full year.
B. Income Taxes
The tax effect of temporary differences, primarily asset reserves and
accrued liabilities, gave rise to the Company's deferred tax asset in the
accompanying December 31, 2002 and March 31, 2002 consolidated balance
sheets. Management has assessed the need for a valuation allowance to
reduce its deferred tax asset to an amount which, more likely than not,
will be realized.
The income tax provisions for the nine-months ended December 31, 2002
and 2001 differ from the federal statutory rate primarily as a result of
state income taxes and permanent timing differences.
C. Net Earnings (Loss) Per Share
Basic earnings (loss) per share has been calculated by dividing net
earnings (loss) by the weighted average number of common shares outstanding
during each period. For purposes of calculating diluted earnings (loss)
per share, shares issuable under employee stock options were considered
potential common shares and were included in the weighted average common
shares unless they were anti-dilutive.
7
The computation of basic and diluted earnings (loss) per common share is as
follows:
Three Months Ended Nine months Ended
December 31, December 31,
2002 2001 2002 2001
Net earnings (loss) 37,363 156,232 (487,310) 1,245,123
Weighted average common shares:
shares outstanding basic 2,726,320 2,716,764 2,726,320 2,714,323
Dilutive stock options - 59,312 - 55,637
Shares outstanding diluted 2,726,320 2,776,076 2,726,320 2,769,960
Net earnings (loss) per common share:
Basic 0.01 0.06 (0.18) 0.46
Diluted 0.01 0.06 (0.18) 0.45
See notes to consolidated financial statements.
D. Inventories
December 31, March 31,
2002 2002
Aircraft parts and
supplies 5,271,846 5,373,398
Aircraft equipmentmanufacturing:
Raw materials 3,217,231 2,777,175
Work in process 362,471 914,730
Finished goods 1,173,544 1,432,332
Total Inventory 10,025,092 10,497,635
Reserves (690,306) (590,205)
Total, net of reserves 9,334,786 9,907,430
8
E. Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-lived Assets". SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. It
requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the long-
lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. Upon adoption the Company does not expect it to have a
material effect on the Company's financial position and results of
operations. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" and amends Accounting Principles Bulletin (APB) No. 30 "Reporting the
Results of Operations-Discontinued Events and Extraordinary Items". Along
with establishing a single accounting model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by
sale, this standard retains the basic provisions of APB No. 30 for the
presentation of discontinued operations in the income statement but
broadens that presentation to include a component of an entity. SFAS No.
144 is effective for the current fiscal year. The adoption of SFAS No. 144
did not have a material effect on the Company's financial position and
results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections". This statement requires gains and losses from the
extinguishment of debt to be classified as extraordinary only if they meet
the criteria for extraordinary treatment set forth in APB Opinion No. 30.
The statement also amends SFAS No. 13, Accounting for Leases, to require
that certain lease modifications that have economic effects similar to sale-
leaseback transactions be accounted for in the same manner as such
transactions. Finally, the statement makes certain technical corrections,
which the FASB deemed to be nonsubstantive, to a number of existing
accounting pronouncements. The rescission of SFAS No. 4, 44, and 64 is
effective for the Company in fiscal 2004. The amendments of SFAS No. 13 is
effective for transactions occurring after May 15, 2002, and all other
provisions of the statement are effective for financial statements issued
on or after May 15, 2002. The Company does not believe this statement will
have a material effect on the Company's financial position and results of
operations.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement is effective
for exit or disposal activities initiated after December 31, 2002.
Liabilities for costs associated with an exit activity should be initially
measured at fair value, when incurred. This statement applies to costs
associated with an exit activity that does not involve an entity newly
acquired in a business combination, or a disposal activity covered by SFAS
No. 144. The Company is evaluating the effect of this statement.
9
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". This Interpretation elaborates on
the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees that it
has issued. It also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The Company's ground
equipment subsidiary warranties its products for a one-year period from
date of sale. Product warranty reserves are booked at time of sale based
on the historical average warranty cost and are adjusted for actual
warranty cost on a quarterly basis. As of December 31, 2002 the
Company's warranty reserve amounted to $108,000. The initial
recognition and initial measurement provisions of this Interpretation
are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The Company does not believe the initial
recognition and initial measurement provisions of this Interpretation
will materially affect its financial position and results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". This Statement amends FASB
Statement No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
Company is currently evaluating the effect of this statement.
F. Derivative Financial Instruments
As required by SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", the Company recognizes all derivatives as either
assets or liabilities in the statement of financial position and measures
those instruments at fair value.
The Company is exposed to market risk, such as changes in interest
rates. To manage the volatility relating to interest rate risk, the
Company may enter into interest rate hedging arrangements from time to
time. The Company does not utilize derivative financial instruments for
trading or speculative purposes.
During the first quarter of fiscal 2003, the Company had outstanding
two interest rate swaps with a notional amount of $2.4 million, and $2
million respectively. These agreements were originally entered into at
respective interest rates of 6.97% and 6.5% respectively. On July 31, 2002
the Company elected to undo its $2,000,000 (6.5%) revolving credit line
swap in consideration of $58,750, the fair-market-value termination fee as
of that date. The fair value of the remaining swap decreased by $21,000 to
a liability of $140,000 as of December 31, 2002. The Company assessed the
effectiveness of the swap using the hypothetical derivative method.
10
G. Financing Arrangements
On August 31, 2002 the Company amended its bank financing line to a
$7,000,000 credit facility. Under the terms of the agreement, the
$7,000,000 secured long-term revolving credit line expires on August 31,
2004.
The revolving credit line contains customary events of default and
restrictive covenants that, among other matters, require the Company to
maintain certain financial ratios. As of December 31, 2002, 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 December 31, 2002
was 1.38%. At December 31, 2002 and 2001, the amounts outstanding against
the line were $4,545,000 and $4,504,000, respectively. At December 31,
2002, $2,455,000 was available under the entire credit facility.
H. Segment Information
The Company's four subsidiaries operate in three business segments. Each b
usiness 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.
11
Segment data is summarized as follows:
Three months ended Nine months ended
December 31, December 31,
2002 2001 2002 2001
Operating Revenues
Overnight Air Cargo 7,241,762 7,255,976 21,580,247 21,906,879
Ground Equipment 3,992,789 6,758,345 9,026,966 26,479,654
Aviation Services 2,197,297 1,736,582 4,946,843 10,210,826
Corporate - 18,000 - 18,000
Total 13,431,848 15,768,903 35,554,056 58,615,359
Operating Income (Loss)
Overnight Air Cargo 498,707 623,127 1,808,217 1,809,239
Ground Equipment 262,932 810,697 (306,325) 3,126,906
Aviation Services (13,161) (448,983) (207,126) (524,545)
Corporate (1) (601,682) (602,385) (1,690,865) (1,997,417)
Total 146,796 382,456 (396,099) 2,414,183
Depreciation and Amortization
Overnight Air Cargo 56,183 68,239 185,926 205,154
Ground Equipment 43,757 49,711 137,941 148,371
Aviation Services 29,559 36,928 89,869 114,265
Corporate 36,521 21,178 106,615 61,165
Total 166,020 176,056 520,351 528,955
Capital Expenditures, net
Overnight Air Cargo 4,996 2,993 22,748 180,947
Ground Equipment 11,779 (13,248) 106,663 48,634
Aviation Services 477 16,303 4,043 35,297
Corporate 32,989 55,410 109,277 103,890
Total 50,241 61,458 242,731 368,768
December 31, 2002 March 31, 2002
Identifiable Assets
Overnight Air Cargo 3,189,273 3,852,042
Ground Equipment 9,987,661 10,051,691
Aviation Services 5,818,620 6,142,237
Corporate 3,900,585 2,856,792
Total 22,896,139 22,902,762
(1) Excludes income from inter-segment transactions,
included as non-operating income.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Air T's management's discussion and analysis, which describes the
principal factors affecting the results of operations of the Company,
should be read in conjunction with the accompanying financial statements
and our Annual Report on Form 10-K for the year ended March 31, 2002, which
include additional information about our significant accounting policies.
Overview
The Company's most significant component of revenue for the nine-month
period ended December 31, 2002, which accounted for 60.7% of revenue, was
generated by its air cargo subsidiaries, Mountain Air Cargo, Inc.(MAC) and
CSA Air, Inc.(CSA).
MAC and CSA are short-haul express air freight carriers. MAC and
CSA's revenue contributed approximately $21,580,000 and $21,907,000 to the
Company's revenues for the nine-month periods ended December 31, 2002 and
2001, respectively. Under the terms of the dry-lease service agreements,
which currently cover approximately 98% of the revenue generating 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.
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 December 31,
2002) are owned by and dry-leased from a major air express company
(Customer), and Short Brothers SD3-30 aircraft (two aircraft at December
31, 2002) 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.
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.
Global Ground Support, LLC (Global), another subsidiary of the
Company, manufactures, services and supports aircraft deicers and other
ground support equipment on a worldwide basis. Global's revenue contributed
approximately $9,027,000 and $26,480,000 to the Company's revenues for the
nine-month periods ended December 31, 2002 and 2001, respectively. The
significant decrease in revenues in 2002 was primarily related to
reductions in commercial ground support equipment and military aircraft
deicer orders and the April 2002 completion of a large scale airport
contract, which commenced in February 2001.
13
Mountain Aircraft Services, LLC's (MAS) aircraft brokerage and repair
services contributed approximately $4,947,000 and $10,211,000 to the
Company's revenues for the nine-month periods ended December 31, 2002 and
2001, respectively, and are included in Aircraft Services and Other in the
accompanying consolidated statements of operations. The 2002 decrease was
due to a $4,700,000 engine sale in 2001 and lower levels of brokering and
repair activity in 2002.
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 in the accompanying
footnotes to the consolidated financial statements.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements, in conformity
with accounting principles generally accepted in the U.S., requires the use
of estimates and assumptions to determine certain assets, liabilities,
revenues and expenses. Management bases these estimates and assumptions
upon the best information available at the time of the estimates or
assumptions. The Company's estimates and assumptions could change
materially as conditions within and beyond our control change.
Accordingly, actual results could differ materially from estimates. The
most significant estimates made by management include allowances for
doubtful accounts receivables, reserves for excess and obsolete
inventories, valuation allowances for deferred tax assets, assumptions used
in the calculation of retirement benefit obligations, revenue recognized
under the percentage of completion method and valuation of long-lived
assets. Following is a discussion of critical accounting policies and
related management estimates and assumptions necessary in determining the
value of related assets or liabilities.
Allowance for Doubtful Accounts Receivable. An allowance for doubtful
accounts receivable is established based on management's estimates of the
collectability of accounts receivables. The required allowance is
determined using information such as the age of the account receivable,
customer credit history, industry information, credit reports and customer
financial condition. The estimates can be affected by changes in the age
of the receivable, aviation industry, customer credit issues or general
economic conditions.
Inventories. The Company's parts inventories are valued at the lower
of cost or market. Provisions for excess and obsolete inventories are
based on assessment of slow-moving and obsolete inventories. Historical
part usage and estimated future demand provide the basis for estimates.
Estimates are subject to volatility and can be affected by reduced
equipment utilization, the retirement of aircraft or ground equipment and
changes in the aviation industry.
Deferred Tax Assets. Deferred tax assets, net of valuation allowance,
reflect the likelihood of the recoverability of these assets. Company
judgement of the recoverability of these assets is based primarily on
estimates of current and expected future earnings and tax planning.
14
Retirement Benefits Obligation. The Company determines the value of
retirement benefits assets and liabilities on an actuarial basis. Values
are affected by management's estimates, based upon the Company's
independent actuary's calculation of the expected return on plan assets,
insurance policies and the discount rates used.
Actual changes in the fair market value of plan assets, differences
between the actual return and the expected return on plan assets and
changes in the current discount rate could affect the amount of pension
gain or loss recognized in other comprehensive income.
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. Revenues for contracts under percentage of completion are measured
by the percentage of cost incurred to date, to estimated total cost for
each contract or workorder. Unanticipated changes in job performance, job
conditions and estimated profitability may result in revisions to costs and
income, and are recognized prospectively beginning in the period in which
the revisions are determined.
Valuation of Long-Lived Assets. The Company adopted Financial
Accounting Standards Board Statement of Financial Accounting Standards
(SFAS) No. 144, "Accounting for Impairment or Disposal of Long-Lived
Assets" on April 1, 2002. The Company assesses long-lived assets used
in operations for impairment when events and circumstances indicate the
assets may be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than their carrying amount. In the
event it is determined that the carrying values of long-lived assets are in
excess of the fair value of those assets, the Company
then will write-down the value of the assets to fair value.
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 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. In June 1999, Global was awarded a four-year
contract to supply deicing equipment to the United States Air Force, and in
January 2001 Global received a $7.1 million pedestal-mounted deicer
contract with the Philadelphia International Airport, which was completed
in the first quarter of fiscal 2003. The Company believes that revenue from
these contracts contributed to management's plan to reduce Global's
seasonal fluctuation in revenues during fiscal 2002 and 2001, however, as
these contracts are completed, seasonal trends for Global's business may
resume. The remainder of the Company's business is not materially seasonal.
15
Results of Operations
Consolidated revenue decreased $23,061,000 (39.3%) to $35,554,000 and
$2,337,000 (14.8%) to $13,432,000, respectively, for the nine and three-
month periods ended December 31, 2002 compared to their equivalent 2001
periods. The nine and three-month current period net decrease in revenue
primarily resulted from decreased revenue at Global and MAS, as described
in the Overview section of Item 2.
The business of Global and MAS has been significantly adversely
affected by reduced orders from commercial airlines and aviation related
companies, due principally to the severe downturn in the commercial
aviation industry. Although both of these businesses also derive a
significant portion of their revenue from sale of products for military
applications, the military programs that use the Company's products have
not been fully funded to date and the Company is uncertain as to the timing
of such funding.
Operating expenses decreased $20,251,000 (36.0%) to $35,950,000 for
the nine-month period ended December 31, 2002 and $2,101,000 (13.7%) to
$13,285,000 for the three-month period ended December 31, 2002 compared to
their equivalent 2001 periods. The change in operating expenses for the
nine-month period consisted of the following: cost of flight operations
decreased $142,000 (1.3%), primarily as a result of schedule changes which
decreased costs associated with pilot salaries and travel partially offset
by increased fuel costs; maintenance and services expense decreased
$5,529,000 (32.2%), primarily as a result of decreases associated with cost
of parts, outside maintenance and maintenance salaries, partially offset by
increases in contract services related to the operations of MAC; ground
equipment decreased $13,737,000 (65.2%), as a result of lower cost of parts
and labor associated with decreased Global sales; and general and
administrative expense decreased $835,000 (12.2%) primarily as a result of
decreased profit sharing expense, staffing, contract labor, rent and
related facilities cost, partially offset by increases in professional
fees.
The change in operating expenses for the three-month period consisted
of the following: cost of flight operations increased $133,000 (3.8%),
primarily as a result of increased costs associated with airport fees,
travel and benefits partially offset by decreased pilot salaries;
maintenance and services expense increased $115,000 (2.7%), primarily as a
result of increases associated with cost of parts, contract services and
benefits, partially offset by decreases in outside maintenance and
maintenance salaries; ground equipment decreased $2,108,000 (40.6%), as a
result of lower cost of parts and labor associated with decreased Global
sales; and general and administrative expense decreased $232,000 (10.3%)
primarily as a result of decreased profit sharing expense, staffing, rent
and related facilities cost, and contract labor, partially offset by
increases in professional fees and benefits.
16
Results of Operations (Cont'd)
The current nine month period's decreased revenue and the related
operating loss resulted primarily from decreased production related to the
above mentioned commercial orders and Air Force and Philadelphia airport
contracts at Global and decreased maintenance and services parts revenue
and operating income in the aviation services sector. Compared to the nine
months ended December 31, 2001 Global's revenue and operating income
decreased $17,453,000 (65.9%) and $3,433,000 (109.8%), respectively, to
$9,027,000 and an operating loss of $306,000. MAS's revenue and operating
loss, respectively, decreased by $5,264,000 (51.6%) and $318,000 (60.6%)
for the similar periods.
Non-operating expense increased $47,000 and decreased $30,000,
respectively, for the nine and three-month periods ended December 31, 2002
and December 31, 2001. The nine-month increase in non-operating expense
was principally due to a $161,000 other-than-temporary loss on impairment
of marketable securities, partially offset by a decrease in credit line
interest related to lower levels of borrowing. The three-month decrease
was principally due to a decrease in interest expense during the 2002
period.
Pretax earnings decreased $2,857,000 and $206,000, respectively, for
the nine and three-month periods ended December 31, 2002, compared to their
respective December 31, 2001 periods. The nine and three-month decrease
was principally due to the above stated decrease in Global earnings and
loss on securities, partially offset by an increase in current period
earnings for the air cargo segment.
The provision for income taxes decreased $1,125,000 and $87,000 for
the nine and three-month periods ended December 31, 2002, respectively
compared to their respective 2001 periods, primarily due to the net loss
for the nine month period and lower pre-tax net income for the three-month
period ended December 31, 2002. The effective tax rate for the nine and
three-month periods ended December 31, 2002 and 2001 were approximately
38.5% and 46.0%, respectively.
Liquidity and Capital Resources
As of December 31, 2002 the Company's working capital amounted to
$12,607,000, an increase of $1,387,000 compared to March 31, 2002. The net
increase primarily resulted from increased accounts receivables, and
decreases in income taxes payable and current portion of long-term debt,
partially offset by decreased inventory.
On August 31, 2002 the Company amended its bank financing line to a
$7,000,000 credit facility. Under the terms of the agreement, the
$7,000,000 secured long-term revolving credit line expires on August 31,
2004.
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 December 31, 2002, the Company
was in compliance with all of the restrictive covenants.
17
Liquidity and Capital Resources (Cont'd)
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 December 31, 2002
was 1.38. At December 31, 2002 and 2001, the amounts outstanding against
the line were $4,545,000 and $4,504,000, respectively. At December 31,
2002, an additional $2,455,000 was available under the entire credit
facility.
The Company has not currently, nor in the past, engaged in the use of
structured finance arrangements, known as off-balance sheet financing
transactions, with unconsolidated entities or other persons.
The respective nine-month periods ended December 31, 2002 and 2001
resulted in the following changes in cash flow: operating activities used
$159,000 and provided $2,138,000, investing activities used $103,000 and
$397,000 and financing activities provided $312,000 and used $1,636,000.
Net cash increased $51,000 and $105,000 for the respective nine-month
periods ended December 31, 2002 and 2001.
Cash used in operating activities was $2,297,000 more for the nine-
months ended December 31, 2002 compared to the similar 2001 period,
principally due to decreased earnings, and an increase in accounts
receivable for the nine months ended December 31, 2002 as compared to a
decrease in accounts receivable in the similar 2001 period, and decreased
income tax payable.
Cash used in investing activities for the nine-months ended December
31, 2002 was approximately $294,000 less than the comparable period in
2001, principally due to decreased capital expenditures and $140,000
proceeds on an asset sale in the period ended December 31, 2002.
Cash provided by financing activities for the nine-months ended
December 31, 2002 was approximately $1,948,000 more than the comparable
2001 period, principally due to an increase in net borrowings under the
line of credit in 2002 partially offset by a decrease in cash dividend.
There are currently no commitments for significant capital
expenditures. The Company's Board of Directors, on August 7, 1998, 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 $0.12 per share cash dividend in June 2002.
Deferred Retirement Obligation
The Company's former Chairman and Chief Executive Officer passed away
on April 18, 1997. The death benefits are payable in the amount of $75,000
per year for 10 years.
18
Impact of Inflation
The Company believes the impact of inflation and changing prices on
its revenues and net earnings will not have a material effect on its
manufacturing operations because increased costs due to the currently low
level of inflation could be passed on to its customers, or on to 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.
Outlook
The Company believes its ground support equipment and aircraft
services order declines were largely the result of the economic downturn
and effects of the September 11, 2001 terrorist attacks which particularly
impacted the aviation sector of the economy. The Company's current
forecast for the remainder of fiscal 2003 and first half of fiscal 2004
suggests that the commercial aviation market for Company related products
and services will grow at a rate that is substantially less than that of
the U.S. gross domestic product. Due to increased military and Homeland
Security budgets, this area, pending funding approvals, may help offset the
expected lower than normal order levels from commercial customers.
Given the uncertainties associated with the above factors, the Company
continues to operate in a highly unpredictable environment. Based on the
current general economic and industry outlook and cost cutting measures
implemented over the past twelve months, the Company believes its existing
cash and cash equivalents, cash flow from operations, and funds available
from current and renewed credit facilities will be adequate to meet its
current and anticipated working capital requirements through 2003. If these
sources are inadequate or become unavailable, then the Company may pursue
additional funds through the financing of unencumbered assets, although
there is no assurance these additional funds will be sufficient to replace
the sources that are inadequate or become unavailable.
Actual results for fiscal 2003 will depend upon a number of factors
beyond the Company's control, including, in part, the timing, speed and
magnitude of the economic recovery, military funding and commercial
aviation capital spending.
FORWARD LOOKING STATEMENTS
Certain statements in this Report, including those contained in
"Outlook," are "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995 with respect to the
Company's financial condition, results of operations, plans, objectives,
future performance and business. Forward-looking statements include those
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "estimates," or similar expressions. These forward-looking
statements involve risks and uncertainties. Actual results may differ
materially from those contemplated by such forward-looking statements,
because of, among other things, potential risks and uncertainties, such as:
19
Economic conditions in the Company's markets;
The continuing impact of the events of September 11, 2001, or any
subsequent terrorist activities;
The Company's ability to manage its cost structure for capital
expenditures and operating expenses and match them to shifting
customer volume levels;
Market acceptance of the Company's new commercial and military
equipment and services. Competition from other providers of
similar equipment, parts brokerage and overhaul services;
Changes in government regulation, weather and technology
A forward-looking statement is neither a prediction nor a guarantee of
future events or circumstances, and those future events or circumstances
may not occur. We are under no obligation, and we expressly disclaim any
obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-lived Assets". SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. It
requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the long-
lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. Upon adoption the Company does not expect it to have a
material effect on the Company's financial position and results of
operations. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" and amends Accounting Principles Bulletin (APB) No. 30 "Reporting the
Results of Operations-Discontinued Events and Extraordinary Items". Along
with establishing a single accounting model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by
sale, this standard retains the basic provisions of APB No. 30 for the
presentation of discontinued operations in the income statement but
broadens that presentation to include a component of an entity. SFAS No.
144 is effective for the current fiscal year. The adoption of SFAS No. 144
did not have a material effect on the Company's financial position and
results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections". This statement requires gains and losses from the
extinguishment of debt to be classified as extraordinary only if they meet
the criteria for extraordinary treatment set forth in APB Opinion No. 30.
The statement also amends SFAS No. 13, Accounting for Leases, to require
that certain lease modifications that have economic effects similar to sale-
leaseback transactions be accounted for in the same manner as such
transactions. Finally, the statement makes certain technical corrections,
20
which the FASB deemed to be nonsubstantive, to a number of existing
accounting pronouncements. The rescission of SFAS No. 4, 44, and 64 is
effective for the Company in fiscal 2004. The amendments of SFAS No. 13 is
effective for transactions occurring after May 15, 2002, and all other
provisions of the statement are effective for financial statements issued
on or after May 15, 2002. The Company does not believe this statement will
have a material effect on the Company's financial position and results of
operations.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement is effective
for exit or disposal activities initiated after December 31, 2002.
Liabilities for costs associated with an exit activity should be initially
measured at fair value, when incurred. This statement applies to costs
associated with an exit activity that does not involve an entity newly
acquired in a business combination, or a disposal activity covered by SFAS
No. 144. The Company is evaluating the effect of this statement.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". This Interpretation elaborates on
the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees that it
has issued. It also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The disclosure
requirements of this Interpretation are currently effective for the
Company. The initial recognition and initial measurement provisions of
this Interpretation are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002. The Company does not believe
the initial recognition and initial measurement provisions of this
Interpretation will materially affect its financial position and results of
operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". This Statement amends FASB
Statement No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
Company is currently evaluating the effect of this statement.
Derivative Financial Instruments
As required by SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", the Company recognizes all derivatives as either
assets or liabilities in the statement of financial position and measures
those instruments at fair value.
21
The Company is exposed to market risk, such as changes in interest
rates. To manage the volatility relating to interest rate risk, the
Company may enter into interest rate hedging arrangements from time to
time. The Company does not utilize derivative financial instruments for
trading or speculative purposes.
During the first quarter of fiscal 2003, the Company had outstanding
two interest rate swaps with a notional amount of $2.4 million, and $2
million respectively. These agreements were originally entered into at
respective interest rates of 6.97% and 6.5% respectively. On July 31, 2002
the Company elected to undo its $2,000,000 (6.5%) revolving credit line
swap in consideration of $58,750, the fair-market-value termination fee as
of that date. The fair value of the remaining swap decreased by $21,000 to
a liability of $140,000 as of December 31, 2002. The Company assessed the
effectiveness of the swap using the hypothetical derivative method.
Item 3. 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 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 balance of the line of
credit at December 31, 2002, annual interest expense would have increased
by approximately $45,000.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
The Company's Chief Executive Officer and Chief Financial Officer have
evaluated the Company's disclosure controls and procedures within 90 days
of the filing date of this report, and they concluded that these controls
and procedures are effective in providing material information relating to
the Company and its subsidiaries.
(b) Changes in Internal Controls.
There are no significant changes in internal controls or in other
factors that could significantly affect these controls subsequent to the
date of their evaluation.
22
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
3.1 Restated Certificate of Incorporation, incorporated by reference to
Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the
period ended December 31, 2002
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
10.15 Amendment No 1. to Loan Agreement among Bank of America N.A. the
Company and its subsidiaries, dated August 31, 2002 incorporated
by reference to Exhibit 10.15 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1997.
21.2 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 to the Company's Quarterly Report on Form 10-Q for the
ended September 30, 1997
99.1 Certification of Walter Clark
99.2 Certification of John J. Gioffre
_______________________
b. Reports on Form 8-K
No Current Reports on Form 8-K were filed in the three months ended
December 31, 2002.
23
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: February 12, 2003 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: February 12, 2003 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
24
CERTIFICATION
I, Walter Clark, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Air T, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: February 12, 2003 /s/ Walter Clark
Walter Clark, Chief Executive Officer
25
CERTIFICATION
I, John Gioffre, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Air T, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: February 12, 2003 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
26
AIR T, INC
EXHIBIT INDEX
PAGE
99.1 Certification of Walter Clark 28
99.2 Certification of John J. Gioffre 29
27
CERTIFICATION
The undersigned hereby certifies in his capacity as an officer of Air T,
Inc. (the "Company") that the Quarterly Report of the Company on Form 10-Q
for the period ended December 31, 2002 fully complies with the requirements
of Section 13(a) of the Securities Exchange Act of 1934 and that the
information contained in such report fairly presents, in all material
respects, the financial condition of the Company at the end of such period
and the results of operations of the Company for such period.
Date: February 12, 2003 /s/ Walter Clark
Walter Clark, Chief Executive Officer
28
CERTIFICATION
The undersigned hereby certifies in his capacity as an officer of Air T,
Inc. (the "Company") that the Quarterly Report of the Company on Form 10-Q
for the period ended December 31, 2002 fully complies with the requirements
of Section 13(a) of the Securities Exchange Act of 1934 and that the
information contained in such report fairly presents, in all material
respects, the financial condition of the Company at the end of such period
and the results of operations of the Company for such period.
/s/ John Gioffre
Date: February 12, 2003
John J. Gioffre, Chief Financial Officer
29