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 June 30, 2001
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.
2,711,953 Common Shares, par value of $.25 per share were outstanding as of
August 10, 2001
This filing contains 38 pages.
AIR T, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings
for the three-month periods ended
June 30, 2001 and 2000 (Unaudited) 3
Consolidated Balance Sheets at
June 30, 2001 (Unaudited)
and March 31, 2001 4
Consolidated Statements of Cash
Flows for the three-month periods
ended June 30, 2001 and 2000 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-13
Item 3. Quantitative and Qualitative Disclosure
About Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
Exhibits 18-38
2
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended
June 30,
2001 2000
Operating Revenues:
Cargo $ 4,736,789 $ 4,254,410
Maintenance 2,240,761 2,579,679
Ground equipment 9,037,732 5,723,587
Aircraft services and other 1,558,113 1,854,696
17,573,395 14,412,372
Operating Expenses:
Flight operations 3,451,649 3,001,972
Maintenance and brokering 3,750,548 3,882,556
Ground equipment 7,394,771 4,903,427
General and administrative 2,100,307 1,998,932
Depreciation and amortization 175,416 219,623
16,872,691 14,006,510
Operating Income 700,704 405,862
Non-operating Expense (Income):
Interest 141,612 159,981
Deferred retirement expense 6,249 6,249
Investment income and other (18,520) (40,472)
129,341 125,758
Earnings Before Income Taxes 571,363 280,104
Income Taxes 228,596 114,648
Net Earnings $ 342,767 $ 165,456
Net Earnings Per Share:
Basic $ 0.13 $ 0.06
Diluted $ 0.12 $ 0.06
Weighted Average Shares Outstanding:
Basic 2,712,353 2,748,586
Diluted 2,772,926 2,799,604
See notes to consolidated financial statements.
3
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2001 March 31,2001
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 649,512 $ 97,799
Marketable securities 975,257 875,836
Accounts receivable, net 10,445,371 11,089,528
Costs and estimated earnings in excess
of billings on uncompleted contracts 213,022 194,067
Inventories 11,538,500 10,783,686
Deferred tax asset, net 444,764 444,764
Prepaid expenses and other 598,397 203,765
Total Current Assets 24,864,823 23,689,445
Property and Equipment 7,826,296 7,625,404
Less accumulated depreciation (4,534,004) (4,371,232)
Property and Equipment, net 3,292,292 3,254,172
Deferred Tax Asset 567,282 567,282
Intangible Pension Asset 361,631 361,631
Other Assets 677,463 660,682
Total Assets $ 29,763,492 $ 28,533,212
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,785,844 $ 8,879,628
Accrued expenses 1,645,410 1,573,468
Income taxes payable 422,422 287,846
Current portion of long-term obligations 678,703 699,719
Total Current Liabilities 10,532,379 11,440,661
Capital Lease Obligation (less current
portion) 117,286 105,007
Long-term Debt (less current
portion) 7,180,865 5,163,829
Deferred Retirement Obligations (less
current portion) 1,719,898 1,653,400
Stockholders' Equity:
Preferred stock, $1 par value, authorized
10,000,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,711,953 and
2,705,153 shares issued 677,988 676,288
Additional paid in capital 6,833,021 6,828,640
Retained Earnings 3,143,889 3,206,642
Accumulated other comprehensive loss (441,834) (541,255)
Total Stockholders' Equity 10,213,064 10,170,315
Total Liabilities & Stockholders' Equity $ 29,763,492 $ 28,533,212
See notes to consolidated financial statements.
4
AIR T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
June 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 342,767 $ 165,456
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 175,416 219,623
Change in retirement obligation 66,498 66,498
Loss on sale of assets - 2,149
Change in assets and liabilities:
Accounts receivable, net 644,157 2,048,831
Inventories (754,814) (1,587,510)
Prepaid expenses and other (430,368) 39,664
Accounts payable (1,093,784) (1,548,344)
Accrued expenses 63,204 133,940
Income taxes payable 134,576 (60,710)
Total adjustments (1,195,115) (685,859)
Net cash used in operating activities (852,348) (520,403)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (213,537) (218,672)
Net cash used in
investing activities (213,537) (218,672)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit, net 2,017,036 1,323,225
Payment of cash dividend (405,519) (274,858)
Repurchase of common stock (3,919) (39,451)
Proceeds from exercise of stock options 10,000 22,500
Net cash provided by financing activities 1,617,598 1,031,416
NET INCREASE IN CASH & CASH EQUIVALENTS 551,713 292,341
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 97,799 144,513
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 649,512 $ 436,854
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Equipment capital lease $ - $ 19,894
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 145,779 $ 194,979
Income taxes 86,692 17,596
See notes to consolidated financial statements.
5
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Financial Statements
The Consolidated Balance Sheet as of June 30, 2001, the Consolidated
Statements of Earnings for the three-month periods ended June 30, 2001 and 2000
and the Consolidated Statements of Cash Flows for the three-month periods ended
June 30, 2001 and 2000 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 and cash flows as of June 30, 2001, 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, 2001. The results of
operations for the period ended June 30 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 June 30, 2001 and March 31, 2001 consolidated balance sheets.
The income tax provisions for the three-months ended June 30, 2001 and 2000
differ from the federal statutory rate primarily as a result of state income
taxes and permanent tax timing differences.
C. Net Earnings Per Share
Basic earnings per share has been calculated by dividing net earnings by
the weighted average number of common shares outstanding during each period.
For purposes of calculating diluted earnings per share, shares issuable under
employee stock options were considered common share equivalents and were
included in the weighted average common shares.
D. Inventories
Inventories consist of the following:
June 30, 2001 March 31, 2001
Aircraft parts and supplies $ 5,340,852 $ 5,458,684
Aircraft equipment manufacturing:
Raw materials 4,471,068 2,666,270
Work in process 1,152,574 1,131,565
Finished goods 574,006 1,527,170
Total $11,538,500 $10,783,686
6
E. Recent Accounting Pronouncements
On June 29, 2001, the Financial Accounting Standards Board approved
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and No.142, "Goodwill and Other Intangible Assets". SFAS No. 141
will require that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 and that the use of the pooling-of-
interest method is no longer allowed. SFAS No.142 requires that upon adoption,
amortization of goodwill will cease and instead the carrying value of goodwill
will be evaluated for impairment on an annual basis. Identifiable intangible
assets will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS No.142 is
effective for fiscal years beginning after December 15, 2001. The Company has
determined that neither of these recently accounting standards will impact the
Company's financial position and results of operations.
F. Derivative Financial Instruments
On April 1, 2001, we adopted Statement of Financial Accounting Standard No.
133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, FAS 133 established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
implementation of FAS 133 at April 1, 2001 had no material effect on the
Company's financial position or results of operations.
We are exposed to market risk, such as changes in interest rates. To
manage the volatility relating to interest rate risk, we may enter into
interest rate hedging arrangements from time to time. We do not utilize
derivative financial instruments for trading or speculative purposes.
During the first quarter, we entered into two interest rate swaps with
a notional amount of $3 million, and $2 million respectively. These
agreements were entered into as fair value hedges to fix the interest rates
on the $3 million term portion and $2 million of the revolving portion of
the credit facility at respective interest rates of 6.97% and 6.5%
respectively. The fair value of these swaps at June 30, 2001 was
insignificant.
G. Financing Arrangements
In May 2001 the Company expanded its bank financing line to a $10,000,000
credit facility. Under the terms of the agreement, a $7,000,000 secured long-
term revolving credit line which expires on August 31, 2003 replaced the
Company's existing $8,500,000 unsecured short-term revolving credit line which
was due to expire in August 2001. The remaining $3,000,000 of the credit
facility was set up as a five-year term loan which expires on May 31, 2006 and
is scheduled to be repaid in quarterly principal payments of $150,000, plus
accrued interest, beginning August 31, 2001.
7
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 June 30, 2001, the Company was in compliance with all
of the restrictive covenants. The amount of credit available to the Company
under the agreement at any given time is determined by an availability
calculation, based on the eligible borrowing base, as defined in the credit
agreement, which includes the Company's outstanding receivables, inventories and
equipment, with certain exclusions. The credit facility is secured by
substantially all of the Company's assets.
Amounts advanced under the credit facility bear interest at the 30-day
"LIBOR" rate plus 137 basis points. The LIBOR rate at June 30, 2001 was 4.06%.
At June 30, 2001 and 2000, the amounts outstanding against the line were
$7,781,000 and $5,764,000, respectively. At June 30, 2001, $2,219,000 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.
Segment data is summarized as follows:
Three months ended June 30,
2001 2000
Operating Revenues
Overnight Air Cargo $ 6,990,131 $ 6,862,554
Ground Equipment 9,037,732 5,723,588
Aviation Services 1,539,532 1,820,230
Corporate 6,000 6,000
Total $ 17,573,395 $ 14,412,372
Operating Income
Overnight Air Cargo $ 476,690 $ 604,285
Ground Equipment 963,321 203,914
Aviation Services (112,882) 127,554
Corporate (1) (626,425) (529,891)
Total $ 700,704 $ 405,862
Depreciation and Amortization
Overnight Air Cargo $ 70,005 $ 78,164
Ground Equipment 46,517 69,378
Aviation Services 38,892 30,071
Corporate 20,002 42,010
Total $ 175,416 $ 219,623
Capital expenditures, net
Overnight Air Cargo $ 102,909 $ 15,580
Ground Equipment 72,092 59,405
Aviation Services 14,260 142,702
Corporate 24,276 985
Total $ 213,537 $ 218,672
8
As of
June 30, 2001 March 31, 2001
Identifiable Assets
Overnight Air Cargo $ 10,813,931 $ 11,635,258
Ground Equipment 6,812,562 5,902,969
Aviation Services 415,171 1,760,016
Corporate 11,721,828 9,234,969
Total $ 29,763,492 $ 28,533,212
(1) Includes income from inter-segment transactions.
The computation of basic and diluted earnings per common share is as follows:
Three months ended June 30,
2001 2000
Net earnings $ 342,767 $ 165,456
Weighted average common shares:
Shares outstanding-basic 2,712,353 2,748,586
Dilutive stock options 60,573 51,018
Shares outstanding-diluted 2,772,926 2,799,604
Net earnings per common share:
Basic $ 0.13 $ 0.06
Diluted $ 0.12 $ 0.06
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
The Company's two most significant components of revenue, which accounted
for 51.4% and 39.7% of revenue, respectively, were generated through its ground
support equipment subsidiary, Global Ground Support, LLC (Global), and its air
cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA).
Global, manufactures, services and supports aircraft deicers and other
ground support equipment on a worldwide basis. Global's revenue contributed
approximately $9,037,000 and $5,724,000 to the Company's revenues for the three-
month periods ended June 30, 2001 and 2000, respectively. The significant
increase in revenues in 2001 was primarily related to a four-year, $25,000,000
contract to supply deicing equipment to the United States Air Force and a large
scale airport deicer contract, which commenced in February 2001.
MAC and CSA are short-haul express air freight carriers. MAC and CSA's
revenue contributed approximately $6,990,000 and $6,863,000 to the Company's
revenues for the three-month periods ended June 30, 2001 and 2000, respectively.
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.
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 June 30, 2001) are owned by and
dry-leased from a major air express company (Customer), and Short Brothers SD3-
30 aircraft (two aircraft at June 30, 2001) are owned by the Company and
operated under wet-lease arrangements with the Customer. Pursuant to such
agreements, the Customer determines the type of aircraft and schedule of routes
to be flown by MAC and CSA, with all other operational decisions made by the
Company.
Agreements are renewable annually and may be terminated by the Customer at
any time upon 15 to 30 days' notice. The Company believes that the short term
and other provisions of its agreements with the Customer are standard within the
air freight contract delivery service industry. The Company is not
contractually precluded from providing such services to other firms, and has
done so in the past. Loss of its contracts with the Customer would have a
material adverse effect on the Company.
Mountain Aircraft Services, LLC's (MAS) aircraft component repair services
contributed approximately $1,540,000 and $1,820,000 to the Company's revenues
for the three-month periods ended June 30, 2001 and 2000, respectively, and are
included in Aircraft Services and Other in the accompanying consolidated
statement of earnings.
10
The Company's four subsidiaries operate in three business segments. Each
business segment has separate management teams and infrastructures that offer
different products and services. The subsidiaries have been combined into the
following reportable segments: air cargo, aviation services and aviation ground
equipment in the accompanying financial statements.
Seasonality
Global's business has historically been highly seasonal. Due to the nature
of its product line, the bulk of Global's revenues and earnings have typically
occurred during the second and third fiscal quarters in anticipation of the
winter season, and comparatively little has occurred during the first and fourth
fiscal quarters. The Company has continued its efforts, started in fiscal 1999,
to reduce Global's seasonal fluctuation in revenues and earnings by broadening
its product line to increase revenues and earnings in the first and fourth
fiscal quarters. The Company expended exceptional effort in fiscal 1999 and
2000 to design and produce prototype equipment to expand its product line to
include additional deicer models and three models of scissor-lift equipment for
catering, cabin service and maintenance service of aircraft. These costs were
expensed as incurred. As indicated above, in June 1999, Global was awarded a
four-year contract to supply deicing equipment to the United States Air Force
for a total amount of approximately $25 million, and in January 2001 Global
received a $7.1 million pedestal-mounted deicer contract with the Philadelphia
International Airport, expected to be completed in the third quarter of fiscal
2002. The Company anticipates that revenue from these contracts will contribute
to management's plan to reduce Global's seasonal fluctuation in revenues. The
remainder of the Company's business is not materially seasonal.
Results of Operations
Consolidated revenue increased $3,161,000 (21.9%) to $17,573,000 for the
three-month period ended June 30, 2001 compared to its equivalent 2000 period.
The increase in revenue primarily resulted from an increase in operations of
Global, partially offset by decreases in component repair services.
Operating expenses increased $2,866,000 (20.5%) to $16,873,000 for the
three-month period ended June 30, 2001 compared to its equivalent 2000 period.
The increase in operating expenses consisted of the following: cost of flight
operations increased $450,000 (15.0%) primarily as a result of increases in
costs associated with pilot salaries and travel; maintenance expense decreased
$132,000 (3.4%) primarily as a result of decreases associated with cost of
parts, contract labor and outside maintenance related to the overhaul and repair
operations of MAC and MAS; ground equipment increased $2,491,000 (50.8%), as a
result of cost of parts and labor associated with increased Global sales;
depreciation decreased $44,000 (20.1%), primarily related to the completion of
certain assets' depreciable lives; and general and administrative expense
increased $101,000 (5.1%) primarily as a result of increased wages, benefits and
staff expense, particularly related to the expansion of Global.
11
Results of Operations (cont'd)
The current period's increased revenue and operating income resulted
primarily from increased production related to the above mentioned Air Force and
airport contracts at Global, offset, in part, by decreased maintenance and
brokerage parts revenue and operating income in the air cargo and aviation
services sectors. During the quarter ended June 30, 2001 Global's revenue and
operating income increased $3,314,000 (57.9%) and $785,000, respectively, to
$9,038,000 and $769,000 compared to the quarter ended June 30, 2000.
The $3,000 increase in non-operating expense was principally due to a
decrease in investment income partially offset by a decrease in credit line
interest related to lower levels of borrowing in the first quarter of 2001
compared to 2000.
Pretax earnings increased $291,000 for the three-month period ended June 30,
2001 compared to 2000, principally due to the above stated increase in Global
earnings, partially offset by a decrease in current period earnings for the air
cargo and aircraft services sectors.
The provision for income taxes for the three-month period ended June 30,
2001 increased $114,000 compared to the 2000 period, primarily due to increased
taxable income, partially offset by a lower effective tax rate. The effective
tax rate for the three-month period ended June 30, 2001 compared to the 2000
period was 40.0% and 40.9%, respectively.
Liquidity and Capital Resources
As of June 30, 2001 the Company's working capital amounted to $14,332,000,
an increase of $2,084,000 compared to March 31, 2001. The net increase primarily
resulted from increased cash from operations, decreased accounts payable and
accrued expenses and increased inventories, partly offset by decreased accounts
receivable.
In May 2001 the Company expanded its bank financing line to a $10,000,000
credit facility. Under the terms of the agreement, a $7,000,000 secured long-
term revolving credit line which expires on August 31, 2003 replaced the
Company's existing $8,500,000 unsecured short-term revolving credit line which
was due to expire in August 2001. The remaining $3,000,000 of the credit
facility was set up as a five-year term loan which expires on May 31, 2006 and
is scheduled to be repaid in quarterly principal payments of $150,000, plus
accrued interest, beginning August 31, 2001.
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 June 30, 2001, the Company was in compliance with all
of the restrictive covenants. The amount of credit available to the Company
under the agreement at any given time is determined by an availability
calculation, based on the eligible borrowing base, as defined in the credit
agreement, which includes the Company's outstanding receivables, inventories and
equipment, with certain exclusions. The credit facility is secured by
substantially all of the Company's assets.
12
Amounts advanced under the credit facility bear interest at the 30-day
"LIBOR" rate plus 137 basis points. The LIBOR rate at June 30, 2001 was 4.06%.
At June 30, 2001 and 2000, the amounts outstanding against the line were
$7,781,000 and $5,764,000, respectively. At June 30, 2001, $2,219,000 was
available under the entire credit facility.
The respective three-month periods ended June 30, 2001 and 2000 resulted in
the following changes in cash flow: operating activities used $852,000 in 2001
and $520,000 in 2000, investing activities used $214,000 in 2001 and $219,000 in
2000 and financing activities provided $1,618,000 in 2001 and $1,031,000 in
2000. Net cash increased $552,000 and $292,000 during the three months ended
June 30, 2001 and 2000, respectively.
Cash used in operating activities was $332,000 higher for the three-months
ended June 30, 2001 compared to the similar 2000 period, principally due to
increased accounts receivable, partly offset by increased income, accounts
payable and accrued expenses.
Cash used in investing activities for the three-months ended June 30, 2001
was approximately $5,000 less than the comparable period in 2000 due to
decreased capital expenditures.
Cash provided by financing activities was $586,000 more in the 2001 three-
month period than in the corresponding 2000 period due to an increase in
borrowings under the line of credit in 2001, partially offset by an increase in
cash dividends.
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 $.15 per share cash dividend in
June 2001.
Deferred Retirement Obligation
The Company's former Chairman and Chief Executive Officer passed away on
April 18, 1997. In addition to amounts previously expensed, under the terms of
his supplemental retirement agreement, death benefits with a present value of
approximately $420,000 were expensed in the first quarter 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 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.
13
Recent Accounting Pronouncements
On June 29, 2001, the Financial Accounting Standards Board approved
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141
will require that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 and that the use of the pooling-of-
interest method is no longer allowed. SFAS No. 142 requires that upon adoption,
amortization of goodwill will cease and instead the carrying value of goodwill
will be evaluated for impairment on an annual basis. Identifiable intangible
assets will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. The Company has
determined that neither of these recently accounting standards will impact the
Company's financial position and results of operations.
Derivative Financial Instruments
On April 1, 2001, we adopted Statement of Financial Accounting Standard No.
133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, FAS 133 established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
implementation of FAS 133 at April 1, 2001 had no material effect on the
Company's financial position or results of operations.
We are exposed to market risk, such as changes in interest rates. To
manage the volatility relating to interest rate risk, we may enter into
interest rate hedging arrangements from time to time. We do not utilize
derivative financial instruments for trading or speculative purposes.
During the first quarter, we entered into two interest rate swaps with
a notional amount of $3 million, and $2 million respectively. These
agreements were entered into as fair value hedges to fix the interest rates
on the $3 million term portion and $2 million of the revolving portion of
the credit facility at respective interest rates of 6.97% and 6.5%
respectively. The fair value of these swaps at June 30, 2001 was
insignificant.
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
fix the interest rates on the $3 million term portion and $2 million of the
revolving portion of its credit facility at respective interest rates of 6.97%
and 6.50% to reduce its exposure to the fluctuations of LIBOR-based variable
interest rates. The Company is exposed to changes in interest rates on certain
portions of its line of credit, which bears interest based on the 30-day LIBOR
rate plus 137 basis points. If the LIBOR interest rate had been increased by
one percentage point, based on the year-end balance of the line of credit,
annual interest expense would have increased by approximately $58,000.
14
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) 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, 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 Loan agreement between Bank of America, N.A. and Air t, Inc., dated
May 23, 2001
10.2 ISDA Schedule to the Master Agreement between Bank of America,
N.A. and Air t, Inc, dated May 23, 2001.
21.1 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 of the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1997
27.1 Financial Data Schedule (For SEC use only)
_______________________
b. Reports on Form 8-K
No Current Reports on Form 8-K were filed in the first quarter of fiscal
2002.
15
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: August 10, 2001 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: August 10, 2001 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
16
AIR T, INC
EXHIBIT INDEX
PAGE
10.2 Loan agreement between Bank of America,
N.A. and Air t, Inc., dated May 23, 2001 18-28
10.3 ISDA Schedule to the Master Agreement between
Bank of America,N.A. and Air t, Inc, dated
May 23, 2001. 29-38
17