Back to GetFilings.com
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, 1998
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 TRANSPORTATION HOLDING
COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3524 Airport Road
Maiden, North Carolina 28650
(Address of principal (Zip Code)
executive offices)
(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 May 1, 1998, computed by reference to the
average of the closing bid and asked prices for such stock on such
date, was $10,417,000. As of the same date, 2,711,653 shares of
Common Stock were outstanding.
PART I
Item 1. Business.
Air Transportation Holding Company, 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, 1998 the Company's air cargo services through MAC and CSA
accounted for approximately 65.9% of the Company's consolidated
revenues, aviation related parts brokerage and overhaul services
through MAS accounted for 9.1% of consolidated revenues and
aircraft deice equipment products through Global accounted for
25.0% of consolidated revenues. The Company's air cargo services
are provided to one customer -- Federal Express Corporation
("Federal Express"). Revenues from contracts with Federal
Express accounted for approximately 64.0% of the Company's
consolidated revenues for the year ended March 31, 1998. Certain
financial data with respect to the Company's overnight air cargo,
aviation services deice 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, MAC and MAS
is Maiden, North Carolina, the principal place of business of CSA
is Iron Mountain, Michigan and the principal place of business
for Global is Olathe, Kansas.
Recent 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
deicers sold to domestic and international passenger and cargo
airlines, as well as to airports. 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 93.8% of MAC and CSA's revenues
(61.8% of the Company's consolidated revenues).
For the fiscal year ended March 31, 1998, MAC and CSA
provided air delivery service exclusively to Federal Express. As
of March 31, 1998, 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. As of March 31, 1998, MAC and
CSA were flying approximately 102 routes pursuant to their
agreements with Federal Express.
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
affect on MAC, CSA and the Company.
MAC and CSA operate under separate aviation certifications.
MAC is certified to operate under Part 121 and Part 135 of the
regulations of the Federal Aviation Administration (the "FAA").
This certification permits MAC to operate aircraft that can carry
up to 18,000 pounds of cargo. CSA is certified 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, 1998:
Form of Number of
Type of Aircraft Model Year Ownership Aircraft
Cessna Caravan, 208A and 208B
(single turbo prop) 1985-1996 dry lease 71
Fokker F-27 (twin turbo prop) 1968-1981 dry lease 22
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
6,500 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 5,700 hours.
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.
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 are located in Maiden, North Carolina and its primary
maintenance facilities are located at the Global TransPark in
Kinston, North Carolina, Maiden, 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 5% of the amount sold in the fiscal year ended
March 31, 1998 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
$1,321,000 at March 31, 1998 and included parts for use in
primarily six 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 generally does
not provide parts or services under contracts directly with the
U.S. government. For the fiscal year ended March 31, 1998, MAS
provided services or parts to over 120 customers, with no single
customer accounting for more than 5% of the Company's revenues
for the year.
MAS's operations are not materially seasonal.
Aircraft Deice 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.
Global's primary customers are passenger and cargo airlines, 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 deicing 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 four basic models of deicing equipment:
a 3200 gallon capacity model, a 2100 gallon capacity model, a
1200 gallon capacity model and a 700 gallon capacity model. Each
model can be customized as requested by the customer, including
the addition of fire suppressant equipment, modifications for
open or enclosed cab design, and color and style of the exterior
finish.
Global competes primarily on the basis of reliability of its
products, prompt delivery and price. The market for deicing
equipment is highly competitive. Although the Company believes
that Global is the second largest supplier of deicing equipment
in the United States, the Company believes that FMC Corp. is the
dominant competitor in the industry and is several times larger
and has more financial resources than Global.
Global's 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.
Accordingly, 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 plans to reduce Global's seasonal fluctuation in
revenues by broadening its product line to increase revenues in
the first and fourth fiscal quarters.
Backlog.
The Company's backlog consists of "firm" orders supported by
customer purchase orders with fixed delivery dates for deicing
equipment sold by Global and for parts and equipment sold by MAS.
At March 31, 1998, the Company's backlog of orders was $5.8
million, of which $4.8 million was attributable to Global and
approximately $1.0 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 is currently conducting a periodic routine review 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 May 1, 1998, the Company had 444 full-time and full-time-
equivalent employees, of which 301 are employed by MAC, 58 are
employed by CSA, 24 are employed by MAS and 61 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. The
facility consists of approximately 65 acres with one 3,000 foot
paved runway, approximately 20,000 square feet of hangar space
and approximately 9,700 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,
and is currently scheduled to expire on May 31, 2001, and may be
renewed for an additional five-year period. In connection with
the renewal, the monthly rental payment for this facility
increased to $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 under an annually renewable agreement with a monthly
rental payment, as of March 31, 1998, of approximately $1,500.
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 approximately 4,700 square feet of shop
space. The lease expires in April 2000, and the monthly rental
payment is $2,750.
Global leases a 34,000 square foot production facility in
Olathe, Kansas. The facility is leased under a lease agreement
which expires in August 1999, but can be terminated by the
landlord on six-months' notice. The monthly rental payment, as
of March 31, 1998, was $17,030.
As of March 31, 1998, the Company leased hangar space at 33
other locations for aircraft storage. Such hangar space is
leased 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 not aware of any pending or threatened
lawsuits that if adversely decided would have a material adverse
effect on the Company.
The Company's fiscal year 1997, 1996 and 1995 tax returns
are currently being examined by the Internal Revenue Service
("IRS"). Although the IRS has given the Company a preliminary
indication that it may challenge the utilization of certain net
operating carryforwards, no assessments against the Company for
additional income taxes have been proposed. Company management
believes that the ultimate outcome of the IRS audit will not have
a material impact on future results of operations.
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 1, 1998, the number of holders of record of the
Company's Common Stock was approximately 380. 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
1996 through March 1998 is as follows:
Common Stock
Quarter Ended High Low
June 30, 1996 $4 3/8 $4
September 30, 1996 5 7/8 4 1/8
December 31, 1996 5 1/4 4
March 31, 1997 4 1/4 3 1/4
June 30, 1997 5 1/2 3 1/8
September 30, 1997 5 1/8 4 1/8
December 31, 1997 5 1/2 4
March 31, 1998 15 4 3/8
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 current year's $.14 per share cash
dividend will be paid on June 12, 1998 to stockholders of record
on May 19, 1998.
Item 6. Selected Financial Data
(In thousands except per share data)
Year Ended March 31,
1998 1997 1996 1995 1994
Operating Revenues $51,026 $35,103 $35,432 $32,813 $30,674
Earnings before change in
accounting principle 1,706 1,323 1,612 1,598 1,579
Change in accounting principle - - - - 715
Net earnings $1,706 $1,323 $1,612 $1,598 $2,294
Earnings per share-Basic:
Before change in
accounting principle $0.64 $0.51 $0.58 $0.56 $0.54
Change in accounting
principle - - - - 0.25
Earnings per share-Basic $ 0.64 $0.51 $0.58 $0.56 $0.79
Earnings per share-Diluted:
Before change in
accounting principle $0.61 $0.47 $0.53 $0.48 $0.47
Change in accounting principle - - - - $0.22
Earnings per share-Diluted $0.61 $0.47 $0.53 $0.48 $0.69
Total assets $18,289 $11,118 $10,220 $10,161 $ 8,550
Long-term obligations, including
current portion $ 885 $ - $ 10 $ 14 $ 20
Stockholders' equity $ 9,712 $ 8,254 $ 7,414 $ 7,130 $ 6,642
Average common shares
outstanding 2,660 2,619 2,771 2,868 2,912
Dividend declared per
common share (1)(2) $ 0.10 $ - $ 0.15 $ 0.06 $ 0.05
Dividend paid per
common share (1)(2) $ 0.10 $ 0.08 $ 0.07 $ 0.06 $ 0.05
(1) On February 1, 1996, the Company declared a cash dividend of $.08 per
common share that was paid on April 22, 1996.
(2) On May 14, 1998, the Company declared a cash dividend of $.14 per
common share payable on June 12, 1998 to stockholders of record on
May 19, 1998.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company's most significant component of revenue is
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.
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, 1998) are owned by and dry-
leased from a major air express company (Customer), and Short
Brothers SD3-30 aircraft (two aircraft at March 31, 1998) 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.
In Fiscal 1994, to expand its revenue base, the Company
organized Mountain Aircraft Services, LLC (MAS)to sell aircraft
parts and offer engine overhaul management and engine component
repair services to the commercial and military aviation industry.
Revenue from this operation contributed approximately $4,626,000
(9.1%) and $3,449,000 (9.8%) to the Company's revenues in fiscal
1998 and 1997, respectively.
In August 1997 the Company acquired certain assets and order
backlog and assumed certain liabilities of Simon Deicer Company,
a division of Terex Aviation Ground Equipment, Inc. located in
Olathe, Kansas. The acquisition, renamed Global Ground Support,
LLC (Global), manufactures, services and supports aircraft
deicers on a worldwide basis. Global is operated as a subsidiary
of MAS. Global's revenue contributed approximately $12,763,000
(25.0%) to Company revenue in fiscal 1998.
The following table summarizes the changes and trends in the
Company's expenses as a percentage of revenue:
Fiscal Year Ended March 31
1998 1997 1996
Operating revenue (in thousands) $51,026 $35,103 $35,432
Expense as a percentage of revenue:
Flight operations 27.28% 36.75% 35.71%
Maintenance and brokerage 32.64 44.46 46.39
Ground equipment 20.88 - -
General and administrative 11.70 12.06 10.77
Depreciation and amortization 1.11 1.06 1.37
Facility start-up/merger expense 0.37 0.99 -
Total costs and expenses 93.98% 95.32% 94.24%
Seasonality
Global's business has historically been highly seasonal. In
general, the bulk of Global's revenues have occurred earned
during the second and third fiscal quarters, and comparatively
little revenue has occurred during the first and fourth fiscal
quarters due to the nature of its product line. The Company
plans to reduce Global's seasonal fluctuation in revenues by
broadening its product line to increase revenue in the first and
fourth fiscal quarters. The remainder of the Company's business
is not materially seasonal.
Fiscal 1998 vs. 1997
Consolidated revenue increased $15,922,000 (45.4%) to $51,026,
000 for the fiscal year ended March 31, 1998 compared to the prior
fiscal year. The increase in 1998 revenue primarily resulted from
the $12,763,000 increase in revenue associated with the August
1997 acquisition of Global as well as increases in maintenance
service, engine overhaul and parts revenue.
Operating expenses increased $14,492,000 (43.3%) to
$47,955,000 for fiscal 1998 compared to fiscal 1997. The increase
in operating expenses consisted of the following changes: cost of
flight operations increased $1,018,000 (7.9%) as a result of
additional costs associated with flight crews, fuel and airport
fees; maintenance expense increased $1,048,000 (6.7%) primarily as
a result of increases in parts purchases and mechanic staffing;
ground equipment increased $10,652,000, as a result of the August
1997 Global acquisition; depreciation and amortization increased
$198,000 (53.2%) as a result of additional depreciable assets
purchased in the acquisition of Global, offset by depreciation
related to the sale of aircraft in fiscal 1997; the general and
administrative expense increase of $1,736,000 (41.0%) is a result
of $950,000 in G&A costs associated with the Company's operation
of Global and increased insurance, employee benefits, staffing,
salary and wage rates.
Non-operating expense increased a net $697,000 (134.6%) due to
a fiscal 1998 $418,000 provision to fulfill contractual benefits
related to the death of the Company's Chairman and CEO, a fiscal
1997 $182,000 gain on sale of aircraft and increased current year
interest related to the use of the Company's line of credit for
the operation of Global.
Pretax earnings increased $733,000 (33.9%) to $2,892,000 for
fiscal 1998. The pretax earnings increase was primarily related to
the profitable results of Global, which added $1,052,000 to the
Company's pretax earnings and a $571,000 increase in pre-tax
earnings for MAC partly offset by the increased non-operating
expense discussed above.
Provision for income taxes increased $350,000 (41.8%) due to
the increased earnings generated by Global and MAC and also due
to a higher effective rate in fiscal 1998 which resulted, in
part, from the complete utilization of Company NOL's in the
second quarter of fiscal 1997. The provision for income taxes for
the fiscal years ended March 31, 1998 and 1997 were different
from the Federal statutory rates due to state tax provisions and
changes to the deferred tax valuation allowance.
The Company's fiscal year 1997, 1996 and 1995 tax returns
are currently being examined by the Internal Revenue Service
(IRS). Although the IRS has given the Company a preliminary
indication that it may challenge the utilization of certain net
operating carryforwards, no assessments against the Company for
additional income taxes have been proposed. Company management
believes that the ultimate outcome of the IRS audit will not have
a material impact on future results of operations.
Fiscal 1997 vs. 1996
Consolidated revenue decreased $329,000 (0.9%) to
$35,103,000 for the fiscal year ended March 31, 1997 compared to
the prior fiscal year. The decrease in 1997 revenue primarily
resulted from a $1,054,000 decrease in cargo revenue generated by
Company-owned aircraft (one of which was sold in fiscal 1997),
partially offset by a $308,000 increase in dry lease revenue and
a $418,000 increase in revenue related to the expansion of MAS.
Operating expenses increased $72,000 (0.2%) to $33,462,000
for fiscal 1997 compared to fiscal 1996. The increase in
operating expenses consisted of the following changes: cost of
flight operations increased $249,000 (2.0%) as a result of
increases in pilot and flight personnel and costs associated with
pilot travel; maintenance expense decreased $830,000 (5.1%)
primarily as a result of decreases in parts purchases and
contract service and outside maintenance costs; depreciation and
amortization decreased $113,000 (23.3%) due to the sale of a
Company-owned aircraft and the complete amortization of goodwill
in the first quarter of fiscal 1997; the general and
administrative expense increase of $418,000 (11.0%) resulted from
increases in insurance, employee benefits and wage rates, and
increases in operational and clerical staffing related to
expansion of MAS; facility start-up/merger expense reflect
$223,000 and $125,000 of cost, respectively associated with the
start-up and relocation of maintenance operations to Kinston,
North Carolina and professional fees related to the Company's
letter of intent to acquire another entity. These merger
discussions were terminated subsequent to fiscal year-end.
Non-operating income increased a net $40,000 (8.4%) due to
increased investment income offsetting decreased proceeds from
the disposal of assets.
Pretax earnings decreased $361,000 to $2,159,000 for fiscal
1997. The pretax earnings decrease was primarily related to the
decreased level of earnings generated by Company-owned aircraft
and costs associated with the above facility start-up and merger
expense.
Provision for income taxes decreased $72,000 (7.9%) to
$836,000 in 1997. The decrease was due to decreased earnings
offset by the complete utilization of net operating loss
carryforwards in the second quarter of fiscal 1997.
Liquidity and Capital Resources
As of March 31, 1998 the Company's working capital amounted to
$7,566,000, an increase of $782,000 compared to March 31, 1997.
The net increase primarily resulted from profitable operations,
offset by cash required for the acquisition and operation of
Global.
The Company's unsecured line of credit provides credit in the
aggregate of up to $5,000,000 and matures in August 1998. Amounts
advanced under the line of credit bear interest at the 30 day
"LIBOR" rate plus 137 basis points. The Company anticipates that
it will renew the line of credit before its scheduled expiration.
Under the terms of the line of credit the Company may not
encumber certain real or personal property. As of March 31, 1998,
the Company was in a net borrowing position against its credit
line of $916,000. Management believes that funds anticipated from
operations and existing credit facilities will provide adequate
cash flow to meet the Company's future financial needs.
The respective years ended March 31, 1998, 1997 and 1996
resulted in the following changes in cash flow: operating
activities used $759,000 in 1998, and provided $1,262,000 and
$1,510,000 in 1997 and 1996. Investing activities used
$2,093,000, $397,000 and $1,567,000 and financing activities
provided $668,000 in 1998, and used $701,000 and $1,110,000,
respectively, in 1997 and 1996. Net cash decreased $2,184,000,
and $1,167,000 for 1998 and 1996, respectively, and increased
$164,000 for 1997.
Cash used in operating activities was $2,021,000 more for the
year ended March 31, 1998 compared to 1997 principally due to the
change in net assets resulting from the operations of Global,
partially offset by the deferred retirement obligations booked.
Cash used in investing activities for the year ended March 31,
1998 was approximately $1,696,000 more than 1997, principally due
to expenditures related to the acquisition of Global, and an
increase in capital expenditures. Cash provided by financing
activities was $1,369,000 more in 1998 compared to 1997
principally due to an increase in borrowings under the line of
credit, as well as decreased stock repurchases.
During the fiscal year ended March 31, 1998 the Company
repurchased 15,780 shares of its common stock at a total cost of
$67,000. Pursuant to its previously announced stock repurchase
program, $204,000 remains available for repurchase of common
stock.
Cost associated with the Company's start-up and
certification of an FAA approved 145 component repair facility,
which opened at Kinston, N. C. in May 1997, professional fees
related to terminated first quarter merger discussions and start-
up cost associated with Global amounted to $189,000 for fiscal
1998. There are currently no commitments for significant capital
expenditures. The Company paid a $.10 per share cash dividend in
June 1997. The Company's Board of Directors on August 7, 1997
adopted the policy to pay a regularly scheduled annual cash
dividend in the first quarter of each fiscal year, in an amount
to be determined by the board. The Company's Board of Directors
on May 14, 1998 approved a $.14 per share cash dividend payable
June 12, 1998 to stockholders of record May 19, 1998.
Deferred Retirement Obligation
The Company's former Chairman and Chief Executive Officer,
David Clark, passed away on April 18, 1997. In addition to
amounts previously expensed, under the terms of Mr. Clark's
supplemental retirement agreement, death benefits with a present
value of $418,000 were expensed in the first quarter of fiscal
1998. The death benefits are payable in the amount of $75,000
per year for 10 years.
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 since it is experiencing
low inflation, 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.
Year 2000 Issue
The Company has initiated a comprehensive review of its
computer systems to identify the systems that could be affected
by the "year 2000 issue", which is the result of computer
programs written using two digits rather than four to define the
applicable year. Like most owners of computer software, the
Company will be required to modify significant portions of its
software so that it will function properly in the Year 2000. The
Company presently believes that, with modifications to existing
software and conversions to new software, the Year 2000 problem
will not pose significant operational problems for the Company's
computer systems. Management does not believe the conversion
will have a significant impact on the Company's financial
position or results of operations.
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Air Transportation Holding Company, Inc.
Denver, North Carolina
We have audited the accompanying consolidated balance sheets of
Air Transportation Holding Company, Inc. and subsidiaries (the
"Company") as of March 31, 1998 and 1997, and the related
consolidated statements of earnings, stockholders' equity, and
cash flows for each of the three years in the period ended March
31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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
Transportation Holding Company, Inc. and subsidiaries as of March
31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended March
31, 1998 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
June 12, 1998
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 193,918 $ 2,377,898
Marketable securities (Note 3) 2,556,257 2,229,708
Accounts receivable, less allowance for
doubtful accounts of $104,000 in 1998
and $57,000 in 1997 6,673,101 3,310,810
Inventories (Note 4) 5,325,613 1,069,206
Deferred tax asset (Note 10) 272,980 319,651
Prepaid expenses 33,922 119,828
Total Current Assets 15,055,791 9,427,101
PROPERTY AND EQUIPMENT (Note 1):
Furniture, fixtures and improvements 3,765,745 2,555,994
Flight equipment and rotables inventory 927,523 842,642
4,693,268 3,398,636
Accumulated depreciation and amortization (2,429,031) (1,943,020)
Property and equipment, net 2,264,237 1,455,616
DEFERRED TAX ASSET (Note 10) 152,000 25,329
INTANGIBLE PENSION ASSET (Note 11) 389,495 -
OTHER ASSETS 427,880 210,365
Total Assets $18,289,403 $11,118,411
See notes to consolidated financial statements.
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
1998 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank (Note 6) $ 916,079 $ -
Accounts payable 3,975,633 809,245
Accrued expenses (Note 5) 1,778,664 1,443,513
Income taxes payable (Note 10) 762,961 389,916
Current portion of long-term obligation 56,241 -
Total Current Liabilities 7,489,578 2,642,674
CAPITAL LEASE OBLIGATION (less
current portion) 30,904 -
DEFERRED RETIREMENT OBLIGATIONS (less
current portion) (Note 11) 1,056,795 221,533
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; issued 2,711,653 shares
in 1998 and 2,651,433 shares
in 1997 677,241 662,858
Additional paid in capital 7,128,907 7,126,294
Retained earnings 1,905,978 465,052
Total Stockholders' Equity 9,712,126 8,254,204
Total Liabilities and
Stockholders' Equity $18,289,403 $11,118,411
See notes to consolidated financial statements.
AIR TRANSPORTATION HOLDING COMPANY, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended March 31,
1998 1997 1996
Operating Revenues (Note 9):
Cargo $18,999,331 $18,521,298 $19,129,860
Maintenance 14,226,260 12,966,027 13,104,829
Ground equipment 12,763,091 - -
Aircraft services and other 5,036,958 3,615,947 3,197,607
51,025,640 35,103,272 35,432,296
Operating Expenses:
Flight operations 13,920,520 12,902,342 12,653,601
Maintenance and brokerage 16,654,164 15,606,161 16,435,729
Ground equipment 10,652,102 - -
General and administrative 5,970,003 4,234,113 3,815,987
Depreciation and amortization 569,329 371,615 484,711
Start-up/merger expense (Note 2) 188,520 347,960 -
47,954,638 33,462,191 33,390,028
Operating Income 3,071,002 1,641,081 2,042,268
Non-operating Expense (Income):
Interest 22,382 566 986
Deferred retirement expense
(Note 11) 438,833 - -
Investment income (281,857) (336,222) (215,252)
Gain on asset sale - (182,359) (263,508)
179,358 (518,015) (477,774)
Earnings Before Income Taxes 2,891,644 2,159,096 2,520,042
Income Taxes (Note 10) 1,185,574 835,892 907,995
Net Earnings $ 1,706,070 $ 1,323,204 $ 1,612,047
Net Earnings Per Share (Note 12):
Basic $ 0.64 $ 0.51 $ 0.58
Diluted $ 0.61 $ 0.47 $ 0.53
Average Shares Outstanding:
Basic 2,659,765 2,618,599 2,771,025
Diluted 2,787,875 2,793,891 3,021,334
See notes to consolidated financial statements.
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common
Stock Additional Retained
(Note 8) Paid-In Earnings
Shares Amount Capital (Deficit)
Balance, March 31, 1995 2,865,933 $ 716,483 $7,891,108 $(1,477,577)
Repurchase and retirement
of common stock (238,500) (59,625) (669,563) (281,855)
Exercise of stock options 98,000 24,500 77,500 -
Cash dividend ($.07 per share) - - - (200,615)
Cash dividend ($.08 per share) - - - (218,435)
Net earnings - - - 1,612,047
Balance, March 31, 1996 2,725,433 681,358 7,299,045 (566,435)
Repurchase and retirement of
common stock (135,000) (33,750) (224,001) (291,717)
Exercise of stock options 61,000 15,250 51,250 -
Net earnings - - - 1,323,204
Balance, March 31, 1997 2,651,433 662,858 7,126,294 465,052
Repurchase and retirement of
common stock (15,780) (4,617) (62,637) -
Exercise of stock options 76,000 19,000 65,250 -
Cash dividend ($.10 per share) - - - (265,144)
Net earnings - - - 1,706,070
Balance, March 31, 1998 2,711,653 $ 677,241 $7,128,907 $ 1,905,978
See notes to consolidated financial statements .
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31,
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $1,706,070 $1,323,204 $1,612,047
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 569,329 371,615 484,711
Change in deferred tax asset (80,000) 122,858 107,782
Change in retirement obligation 445,767 221,533 -
Gain on sale of assets - (182,359) (263,508)
Charge in lieu of income taxes credited
to goodwill - 15,837 323,346
Changes in assets and liabilities which
provided (used) cash:
Accounts receivable (3,359,098) (177,140) 232,616
Inventories (2,733,378) (343,703) (455,850)
Prepaid expense and other (131,608) (144,483) (88,180)
Accounts payable 3,163,849 14,974 (794,443)
Accrued expenses (712,731) (111,771) 154,009
Income taxes payable 373,045 151,803 197,059
Total adjustments (2,464,825) (60,836) (102,458)
Net cash provided by (used
in) operating activities (758,755) 1,262,368 1,509,589
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (1,042,995) (674,194) (1,889,819)
Sale of marketable securities 716,446 334,305 -
Business acquisition (715,981) - -
Capital expenditures (1,050,626) (472,019) (127,156)
Proceeds from sale of equipment - 415,000 450,000
Net cash used in investing activities (2,093,156) (396,908) (1,566,975)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 916,079 - -
Payment of cash dividend (265,144) (218,435) (200,615)
Repurchase of common stock (67,254) (549,468) (1,011,043)
Proceeds from exercise of stock options 84,250 66,500 102,000
Net cash provided by (used
in) financing activities 667,931 (701,403) (1,109,658)
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,183,980) 164,057 (1,167,044)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,377,898 2,213,841 3,380,885
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 193,918 $2,377,898 $2,213,841
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 20,108 $ 572 $ 981
Income/Franchise taxes 842,477 613,396 346,873
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998, 1997, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principal Business Activity - 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
deice 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.
Cash Equivalents - Cash equivalents consist of liquid
investments with maturities of three months or less when
purchased.
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 in current assets aircraft
parts and supplies, although a certain portion of these
inventories are not expected to 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 and are,
therefore, 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 6 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 goods are completed
for shipment to customers.
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 - SFAS No. 123 "Accounting for
Stock-Based Compensation," requires companies to measure
employee stock compensation plans based on the fair value
method of accounting. However, the Statement allows the
alternative of continued use of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," 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. The
Company adopted the new standard in fiscal 1997 and elected
the continued use of APB Opinion No. 25. Pro- forma
disclosure has not been provided since no employee stock
options have been granted since 1992.
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.
Recent Accounting Pronouncements - In June 1997, Statement
of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130) was issued. SFAS 130 will
require disclosure of comprehensive income (which is defined
as "the change in equity during a period excluding changes
resulting from investments by shareholders and distributions
to shareholders") and its components. SFAS 130 is effective
for fiscal years beginning after December 15, 1997, with
reclassification of comparative years. The Company will
adopt SFAS 130 in the year ending March 31, 1999. Had the
new standard been applied in the March 31, 1998 financial
statements, there would have been no material difference
between comprehensive and reported income.
Statement of Financial Accounting Standard No. 131,
"Disclosure about Segments of an Enterprise and Related
Information" (SFAS 131) was also issued in June 1997. SFAS
131 is effective for the Company in the fiscal year ending
March 31, 1999. SFAS 131 redefines how operating segments
are determined and requires disclosure of certain financial
information about a company's operating segments.
Management has not yet determined the impact of the adoption
of SFAS 131 on its current disclosures of its business
segments.
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.
Reclassifications - Certain prior year reclassifications
have been made to 1997 and 1996 amounts to conform to
current year presentation.
2. BUSINESS ACQUISITION, FACILITY START-UP AND MERGER EXPENSES
On August 29, 1997, the Company acquired certain assets and
assumed certain liabilities of the Simon Deicer Division of
Terex, Inc. for $716,000 cash. The acquired entity, renamed
Global Ground Support, LLC (Global), manufactures, sells and
services aircraft deice equipment on a worldwide basis. The
acquisition was accounted for using the purchase method;
accordingly, the assets and liabilities (which included
$1,523,000 inventory, $288,000 fixed assets and $3,000
accounts receivable, net of $1,049,000 in customer deposits
and $49,000 warranty obligation) of the acquired entity have
been recorded at their estimated fair value at the date of
acquisition. Global's results of operations have been
included in the Consolidated Statements of Earnings since
the date of acquisition.
The following table presents unaudited pro-forma results of
operations as if the acquisition had occurred on April 1,
1997 and 1996. These pro-forma results have been prepared
for comparative purposes only and do not purport to be
indicative of what would have occurred had the acquisition
been made at the beginning of fiscal 1997 or of results,
which may occur in the future. Furthermore, no effect has
been given in the pro-forma information for operating
benefits that are expected to be realized through the
combination of the entities because precise estimates of
such benefits cannot be quantified.
Year Ended March 31,
1998 1997
Operating revenues $ 52,761,000 $ 43,461,000
Net earnings 1,718,000 549,000
Net earnings per share -diluted .65 .21
During fiscal year 1998 the Company incurred $189,000 in
costs related to the start-up of a newly certificated FAA
145 component repair facility and professional fees
associated with fiscal 1997 merger discussions, terminated
in April 1997. These costs have been expensed in the
accompanying Consolidated Statement of Earnings.
During fiscal year 1997 the Company incurred $348,000 in
start-up and merger expenses related to the relocation of
certain of its aircraft maintenance facilities and the above
mentioned proposed merger terminated in April 1997.
3. MARKETABLE SECURITIES
Marketable securities consists primarily of individual
stocks and bonds and mutual funds. The Company has
classified marketable securities as available-for-sale and
they are carried at fair value. If significant, unrealized
gains and losses on such securities are excluded from
earnings and reported as a separate component of
stockholders' equity, net of the related income taxes, until
realized. At March 31, 1998 and 1997, such unrealized
amounts were immaterial. Realized gains and losses on
marketable securities are determined by calculating the
difference between the basis of each specifically identified
marketable security sold and its sales price. During 1998
and 1997, the Company recorded realized gains of
approximately $19,000 and $67,000, respectively, in the
accompanying consolidated statements of earnings.
At March 31, 1998 and 1997, marketable securities consist of
the following investment types:
1998 1997
Mutual funds $ 1,398,719 $ 961,048
Equity securities 611,366 237,876
Government bonds 433,700 690,541
Corporate bonds 112,472 340,243
Total $ 2,556,257 $ 2,229,708
4. INVENTORIES
Inventories consist of the following:
March 31,
1998 1997
Aircraft parts and supplies $ 1,559,225 $ 1,069,206
Aircraft equipment manufacturing:
Raw materials 3,197,008 -
Work in process 5,871 -
Finished goods 563,509 -
Total $ 5,325,613 $ 1,069,206
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
March 31,
1998 1997
Salaries, wages and related items $ 1,027,028 $ 741,835
Profit sharing 466,425 352,000
Other 285,211 349,678
$ 1,778,664 $ 1,443,513
6. FINANCING ARRANGEMENTS
During fiscal 1998 the Company increased its bank financing
line to $5,000,000 under an unsecured revolving line of
credit which expires on August 31, 1998. The Company
anticipates it will renew the line of credit prior to its
scheduled expiration. Amounts advanced bear interest at the
30-day "LIBOR" rate plus 137 basis points. The LIBOR rate
at March 31, 1998 was 5.69%. As of March 31, 1998, $916,079
was outstanding against the line; there were no advances
outstanding as of March 31, 1997.
7. LEASE COMMITMENTS
The Company has operating lease commitments for office
equipment and its office and maintenance facilities. 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 expires in
May 2001.
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 over the
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 four 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. The two-year operating lease expires in
September 1999.
At March 31, 1998, future minimum annual rental payments
under non-cancelable operating leases with initial or
remaining terms of more than one year are as follows:
1999 $ 466,218
2000 336,042
2001 136,883
2002 16,147
Total minimum lease payments$ 955,290
Rent expense for operating leases amounted to approximately
$369,000, $236,000, and $177,000 for 1998, 1997 and 1996,
respectively. Rent expense to related parties was $96,900,
$94,700 and $84,000 for 1998, 1997 and 1996, 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, 1998.
The Company has granted options to purchase shares of common
stock to certain Company employees at prices ranging from
$1.00 to $1.25 per share. All options were granted at
exercise prices which approximated the fair value of the
common stock on the date of grant. Options vest over a five
year period, and must be exercised within five years of the
vesting date. Options outstanding at March 31, 1998 have a
weighted average contractual life of 1.65 years. No options
have been granted or have expired during fiscal year 1998,
1997 or 1996. The Company has reserved an aggregate of
110,000 common shares for issuance upon exercise of these
stock options. Of the outstanding options at March 31, 1998
the exercise prices per share range from $1.00 to $1.25, and
are all currently exercisable.
Option information is summarized as follows:
Weighted Average
Executive Stock Option Plan Shares Exercise Price Per Share
Outstanding March 31, 1995 345,000 $ 1.09
Exercised 98,000 $ 1.04
Outstanding March 31, 1996 247,000 $ 1.11
Exercised 61,000 $ 1.09
Outstanding March 31, 1997 186,000 $ 1.12
Exercised 76,000 $ 1.11
Outstanding March 31, 1998 110,000 $ 1.12
The Company has announced its intention to repurchase the
Company's common stock under a share repurchase program. At
March 31, 1998 the Company had repurchased a total of
667,780 shares at a total cost of $2,795,362 and may expend
up to an additional $204,638 under this program.
9. REVENUES FROM MAJOR CUSTOMER
Approximately 64.0%, 89.5% and 89.1% of the Company's
revenues were derived from services performed for a major
air express company in 1998, 1997 and 1996, respectively.
10. INCOME TAXES
The provision for income taxes consists of:
YEAR ENDED MARCH 31,
1998 1997 1996
Current:
Federal $ 1,080,000 $ 519,000 $ 188,000
State 186,000 178,000 182,000
Total current 1,266,000 697,000 370,000
Deferred (80,000) 123,000 108,000
Charge in lieu of Federal taxes - 16,000 430,000
Total $ 1,186,000 $ 836,000 $ 908,000
Pre-acquisition net operating loss carryforwards have been
utilized for federal income tax purposes for fiscal years
1997 and 1996. The income tax benefit ($16,000 in 1997,
$323,000 in 1996) derived from these pre-acquisition net
operating loss carryforwards was accounted for as a
reduction of goodwill until goodwill was fully amortized in
fiscal year 1997.
The consolidated income tax provision was different from the
amount computed using the statutory Federal income tax rate
for the following reasons:
1998 1997 1996
Income tax provision at U.S. Statutory rate $ 983,000 $ 734,000 $ 857,000
State income taxes 159,000 118,000 120,000
Reduction in valuation allowance (133,200) (37,000) (115,000)
Meal and entertainment disallowance 85,000 90,000 67,000
Other net 92,200 (69,000) (21,000)
Income tax provision $ 1,186,000 $ 836,000 $ 908,000
The tax effect of temporary differences that gave rise to
the Company's deferred tax asset at March 31, 1998 and 1997
are as follows:
1998 1997
Book accruals over tax, net $ 272,980 $ 452,851
Fixed assets 152,000 25,329
424,980 478,180
Less: Valuation allowance - (133,200)
Deferred tax asset $ 424,980 $ 344,980
The deferred tax asset is classified in the accompanying
1998 and 1997 consolidated balance sheets according to the
classification of the related asset and liability. The
Company has recorded a valuation allowance in order to
reduce its deferred tax asset to an amount which is more
likely than not to be realized. At March 31, 1997, the
Company had recorded a valuation allowance to reduce its
deferred tax asset to an amount which management believed
would more likely that not be realized. At March 31, 1998,
Company management does not believe that a valuation
allowance is necessary.
The Company's fiscal year 1997, 1996 and 1995 tax returns
are currently being examined by the Internal Revenue Service
(IRS). Although the IRS has given the Company a preliminary
indication that it may challenge the utilization of certain
net operating carryforwards, no assessments against the
Company for additional income taxes have been proposed.
Company management believes that the ultimate outcome of the
IRS audit will not have a material impact on future results
of operations.
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, 1998, 1997 and 1996 was $203,000, $203,000, and
$210,000, 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, 1998,
1997, and 1996 expense was $466,000, $352,000, and $409,000,
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, 1998 and 1997.
March 31,
1998 1997
Vested benefit obligation $ 648,796 $ 1,007,084
Accumulated benefit obligation 648,796 1,007,084
Projected benefit obligation 648,796 1,007,084
Plan assets at fair value - -
Projected benefit obligation greater than plan assets 648,796 1,007,084
Unrecognized prior service cost (389,495) (785,551)
Adjustment required to recognize minimum liability 389,495 -
Accrued pension cost recognized in the consolidated
balance sheet $ 648,796 $ 221,533
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 at March 31, 1998, 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 previously recognized prior service
costs.
The projected benefit obligation was determined using an
assumed discount rate of 7%. The liability relating to
these benefits has been included in accrued expenses in the
accompanying financial statements.
Net periodic pension expense for fiscal 1998 and 1997
included the following:
1998 1997
Future service cost $ 31,317 $ 29,267
Interest cost 61,229 63,969
Amortization 89,667 86,187
Net periodic pension cost $ 182,213 $ 179,423
The Company's 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, 1998
accruals related to the unpaid present value of the benefit
amounted to approximately $458,000.
12. NET EARNINGS PER COMMON SHARE
In February 1997, Statement of Financial Accounting
Standards No. 128 "Earnings per Share" (SFAS 128) was
issued. SFAS 128 became effective for the Company's fiscal
year ended March 31, 1998 and as required by SFAS No. 128,
per share data for all periods presented has been
retroactively restated to conform to the new standard.
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:
For year ended March 31,
1998 1997 1996
Net earnings $ 1,706,070 $ 1,323,204 $ 1,612,047
Weighted average common shares:
Shares outstanding - basic 2,659,765 2,618,599 2,771,025
Dilutive stock options 128,110 175,292 250,309
Shares outstanding - diluted 2,787,875 2,793,891 3,021,334
Net earnings per common share:
Basic $ 0.64 $ 0.51 $ 0.58
Diluted $ 0.61 $ 0.47 $ 0.53
13. QUARTERLY FINANCIALINFORMATION (UNAUDITED)
(in thousands except per share data)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1998
Operating Revenues $ 8,159 $10,752 $16,463 $15,652
Operating Income 465 615 1,373 618
Earnings Before Income Taxes 124 687 1,412 669
Net Earnings 94 419 893 300
Net Earnings Per Share-Basic $ 0.03 $ 0.15 0.34 0.12
Net Earnings Per Share-Diluted 0.03 0.15 0.32 0.11
1997
Operating Revenues $ 8,059 $ 8,280 $ 8,911 $ 9,853
Operating Income 544 92 404 601
Earnings Before Income Taxes 611 327 446 775
Net Earnings 405 128 305 485
Net Earnings Per Share-Basic $ 0.15 $ 0.05 $ 0.12 $ 0.19
Net Earnings Per Share-Diluted 0.14 0.05 0.11 0.17
The fiscal 1998 quarterly financial information presented above reflects the
following unusual or infrequently occurring events, as described by quarter:
First Quarter Fiscal 1998 - $251,000 net provision for a deferred retire-
ment obligation related to the April 1997 death of the Company's Chairman
& CEO.
Third Quarter Fiscal 1998 - First full quarter operations of Global, an
AirT subsidiary which was acquired in August 1997. Revenue for the quarter
amounted to $6,368,000,net earnings was $599,000.
Fourth Quarter Fiscal 1998 - Global revenue decreased to $4,842,000 due to
the highly seasonal nature of its operations. In addition, Global recorded
an inventory revaluation charge which reduced fourth quarter net earnings
by $255,000.
14. SEGMENT INFORMATION The Company operates in three different business
segments, overnight air cargo, aviation parts, overhaul and repair
service, and manufacture of aircraft deice equipment. The aircraft
deice equipment segment represents operations since the August 1997,
date of its' acquisition. Segment data is summarized as follows:
Year Ended March 31,
1998 1997 1996
Operating Revenues
Overnight Air Cargo $33,609,527 $31,530,661 $32,224,146
Ground Equipment 12,763,091 - -
Aviation Services 4,626,089 3,448,622 3,175,768
Corporate 26,933 123,989 32,382
Total $51,025,640 $35,103,272 $35,432,296
Operating Income
Overnight Air Cargo $ 3,140,747 $ 2,456,249 $ 2,163,468
Ground Equipment 1,070,636 - -
Aviation Services (138,663) 52,979 85,139
Corporate (1) (1,001,718) (868,147) (206,339)
Total $ 3,071,002 $ 1,641,081 $ 2,042,268
Identifiable Assets
Overnight Air Cargo $ 9,325,095 $ 7,385,257 $ 6,537,141
Ground Equipment 3,018,627 - -
Aviation Services 449,972 1,766,081 1,353,021
Corporate 5,495,709 1,967,073 2,329,909
Total $18,289,403 $11,118,411 $10,220,071
Capital Expenditures, net
Overnight Air Cargo $ 373,560 $ 228,998 $ 114,141
Ground Equipment 463,556 - -
Aviation Services 213,510 243,021 13,015
Corporate - - -
Total $ 1,050,626 $ 472,019 $ 127,156
Depreciation and Amortization
Overnight Air Cargo $ 248,810 $ 178,302 $ 222,047
Ground Equipment 63,611 - -
Aviation Services 176,546 72,756 67,709
Corporate 80,362 120,557 194,955
Total $ 569,329 $ 371,615 $ 484,711
(1) Includes income from inter-segment transactions.
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 52, 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 41, 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 54, 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 61, 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
has 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.
H. Wayne Ross, age 53, has served as President of CSA since
October 1988.
William H. Simpson, age 50, 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 46, has served as Vice President of MAC
since 1984, and in various other capacities at MAC since 1979.
Claude S. Abernethy, Jr., age 71, 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 Interstate/Johnson Lane
Incorporated, a securities brokerage and investment banking firm.
Mr. Abernethy is also a director of Interstate/Johnson Lane
Incorporated, Carolina Mills, Inc. and Ridgeview Incorporated.
Sam Chesnutt, age 64, 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 42, has served as a director of the
Company since May 1997. Mr. Clark is self-employed in the real
estate development business since 1987.
Herman A. Moore, age 68, 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 75, 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.
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, 1997 all executive officers,
directors and greater than ten-percent beneficial owners have
complied with all applicable Section 16(a) filing requirements,
except that Mr. Allison Clark was late in filing his initial
report on Form 3, Mr. Walter Clark was late in filing a Form 5 to
report the receipt of a gift of 2,222 shares and Ms. Street was
late in filing a report on Form 4 with respect to her exercise of
options in September 1997 and a report on Form 4 with respect to
two sale transactions in March 1998.
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, to the four other executive
officers on March 31, 1998 with total compensation of $100,000 or
more and to David Clark. Mr. David Clark passed away on
April 18, 1997. Prior to his death, David Clark served as the
Company's Chief Executive Officer.
SUMMARY COMPENSATION TABLE
Annual Compensation
Other Annual
Name and Principal Year Salary Bonus Compensation
Position ($) ($) ($)
Walter Clark (1) 1998 76,236 10,000 -
Chief Executive Officer 1997 - - -
1996 - - -
David Clark (2) 1998 28,429 - 43,750(2)
Former Chief Executive 1997 171,391 50,222 -
Officer 1996 155,749 59,583 -
J. Hugh Bingham 1998 184,445 70,721 -
Senior Vice President 1997 148,289 50,222 -
1996 126,441 67,583 -
John J. Gioffre 1998 127,142 52,641 -
Vice President 1997 121,208 37,667 -
1996 101,250 49,937 -
J. Leonard Martin (3) 1998 117,751 15,953 -
Vice President 1997 - - -
1996 - - -
William H. Simpson 1998 195,809 70,721 -
Executive Vice President 1997 186,299 50,222 -
1996 155,364 73,583 -
__________________________________________
(1) Mr. Walter Clark commenced his employment in April 1997.
(2) Represents annual benefit paid by the Company to Mr. David
Clark's estate upon his death. Mr. David Clark served as
the Company's Chief Executive Officer until he passed away
on April 18, 1997.
(3) Mr. Martin commenced his employment in April 1997.
The following table sets forth the number of shares of
Common Stock underlying unexercised options at March 31, 1998
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, 1998 based upon the closing bid price of the
Company's Common Stock in the over-the-counter market on that
date ($13.50 per share) and the exercise price of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options
On Realized Options at FY-End (#) at FY-End ($)
Name Exercise# ($) Exercis- Unexercis- Exercis- Unexercis-
able able able able
Walter Clark - - - - - -
David Clark - - - - - -
J. Hugh Bingham 20,000 71,000 38,000 - 470,500 -
John J. Gioffre 13,000 46,125 20,000 - 247,000 -
J. Leonard Martin - - - - - -
William H.Simpson 28,000 99,500 52,000 - 644,000 -
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 expires
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 $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.
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 May 1, 1998 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
Amount of
Beneficial
Title of Name and Address of Ownership
Class Beneficial Owner as of May 1, Percent
1998 of Class
Common Walter Clark and Caroline 1,283,716(1) 47.3%
Stock, par Clark, Executors(1)
value $.25 P.O. Box 488
per share Denver, North Carolina 28650
William H. Simpson 261,980(2) 9.5%
P.O. Box 488
Denver, North Carolina 28650
Kennedy Capital Management, 145,864 5.4%
Inc.(3)
425 North Ballas Road
St. Louis, Missouri 63141
_____________________________
(1) Includes 1,279,272 shares controlled by such individuals as
the executors of the estate of David Clark who passed away
on April 18, 1997, 2,222 shares owned by Walter Clark and
2,222 shares owned by Caroline Clark.
(2) Includes 1,200 shares held jointly with J. Hugh Bingham and
52,000 shares under options granted by the Company.
(3) Information regarding Kennedy Capital Management, Inc. is
based upon information provided by Kennedy Capital
Management Inc. to the Company on June 16, 1998.
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 officers of
the Company as a group as of May 1, 1998. 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 May 1, 1998
Name Position with Company No. of Shares Percent
J. Hugh Bingham President, Chief 116,080(1)(2) 4.2%
Operating Officer,
Director
Walter Clark Chairman of the Board 1,281,494(3) 47.3%
of Directors and Chief
Executive Officer
John J. Gioffre Vice President-Finance, 57,980(4) 2.1%
Secretary and
Treasurer, Director
J. Leonard Martin Vice President, 100(5) *
Director
William H. Simpson Executive Vice 261,580(1)(6) 9.5%
President, Director
Claude S. Abernethy, Jr. Director 22,611 *
Sam Chesnutt Director 3,600 *
Allison T. Clark Director 2,222 *
Herman A. Moore Director - *
George C. Prill Director 45,966 1.7%
All directors and executive N/A 1,804,833(7) 64.0%
officers as a group (12 persons)
__________________________________________
* Less than one percent.
(1) Includes 1,200 shares jointly held by Messrs. Simpson and
Bingham.
(2) Includes 38,000 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.
(4) Includes 20,000 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.
(6) Includes 52,000 shares under options granted by the Company
to Mr. Simpson.
(7) Includes an aggregate of 110,000 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. On May 30, 1996, 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. The lease may be extended
for an additional five-year term, with rental payments to be
adjusted to reflect changes in the consumer price index. Upon
the renewal, the monthly rental payment was increased from $7,000
to $8,073. The Company paid aggregate rental payments of $96,876
to Airport Associates pursuant to such lease during the fiscal
year ended March 31, 1998. 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, 1998 and 1997.
(iii) Consolidated Statements of Earnings for each of the
three years in the period ended March 31, 1998.
(iv) Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended March 31, 1998.
(v) Consolidated Statements of Cash Flows for each of the
three years in the period ended March 31, 1998.
(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, incorporated
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 NationsBank of North
Carolina, N.A., the Company and its subsidiaries,
dated January 17, 1995, incorporated by reference
to Exhibit 10.7 to the Company's Quarterly Report
on Form 10-Q for the period ended December 31,
1994
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 Form of option to purchase the following
amounts of Common Stock issued by the Company to
the following executive officers during the
following fiscal years ended March 31: *
Number of Shares
Executive Officer 1993 1992 1991
J. Hugh Bingham 150,000 150,000 200,000
John J. Gioffre 100,000 100,000 125,000
William H. Simpson 200,000 200,000 300,000
incorporated by reference to Exhibit 10.8 to
the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1993
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 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
21.1 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 period ended September 30, 1997.
27.1 Financial Data Schedules
__________________
* 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, 1998.
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 TRANSPORTATION HOLDING COMPANY, INC.
By: /s/ Walter Clark
Walter Clark, Chief Executive Officer
(Principal Executive Officer)
Date: June 24, 1998
By: /s/ John J. Gioffre
John J. Gioffre, Vice President - Finance
(Principal Financial and Accounting Officer)
Date: June 24, 1998
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 24, 1998
By: /s/ J. Hugh Bingham
J. Hugh Bingham, Director
Date: June 24, 1998
By: /s/ Allison T. Clark
Allison T. Clark, Director
Date: June 24, 1998
By: /s/ Walter Clark
Walter Clark, Director
Date: June 24, 1998
By: /s/ Sam Chesnutt
Sam Chesnutt, Director
Date: June 24, 1998
By: /s/ John J. Gioffre
John J. Gioffre, Director
Date: June 24, 1998
By: /s/ J. Leonard Martin
J. Leonard Martin, Director
Date: June 24, 1998
By: /s/ George C. Prill
George C. Prill, Director
Date: June 24, 1998
By: /s/ William Simpson
William Simpson, Director
Date: June 24, 1998
EXHIBIT INDEX
Exhibit Number Document
27.1 Financial Data Schedules