<page>
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 September 30, 2003
Commission File Number 0-11720
Air T, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
Post Office Box 488, Denver, North Carolina
28037
(Address of principal executive offices)
(704) 377-2109
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
2,726,320 Common Shares, par value of $.25 per share were
outstanding as of October 25, 2003.
This filing contains 25 pages.
</page>
<page>
AIR T, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the three and six-month periods ended
September 30, 2003 and 2002 (Unaudited)
3
Condensed Consolidated Balance Sheets at
September 30, 2003 (Unaudited)
and March 31, 2003
4
Condensed Consolidated Statements of Cash
Flows for the six-month periods
ended September 30, 2003 and 2002 (Unaudited)
5
Condensed Consolidated Statement of Stockholders'
Equity and Other Comprehensive Loss
at September 30, 2003 (Unaudited)
6
Notes to Condensed Consolidated Financial
Statements (Unaudited)
7-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
13-18
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
18
Item 4. Controls and Procedures
18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
19
Signatures
20
Exhibit Index
21
Officers' Certifications
22-25
</page>
<page>
<table>
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<caption>
Three Months Ended Six months Ended
September 30, September 30,
2003 2002 2003 2002
<s> <c> <c> <c> <c>
Operating Revenues:
Overnight air cargo $
$8,514,30 7,715,802 $15,799,77 $14,338,48
6 4 5
Ground equipment
5,108,772 1,458,718 8,879,365 5,034,177
13,623,07 9,174,520 24,679,139 19,372,662
8
Operating Expenses:
Flight-air cargo
3,702,484 3,634,906 6,854,869 6,844,315
Maintenance-air cargo
3,134,575 2,711,471 5,535,086 4,854,147
Ground equipment
3,782,400 1,365,975 6,650,201 4,250,948
General and administrative
1,926,660 1,705,290 3,749,521 3,478,161
Depreciation and amortization
137,820 146,598 275,377 294,021
12,683,93 9,564,240 23,065,054 19,721,592
9
Operating Income (Loss)
939,139 (389,720) 1,614,085 (348,930)
Non-operating (Income) Expense:
Interest
(48,434) 25,822 (90,158) 10,587
Cash surrender value of life
insurance (6,000) (6,000) (14,500) (12,000)
Deferred retirement expense
5,250 5,250 10,500 10,500
(Gain) loss on impairment of - -
marketable securities (13,810) 161,197
Investment income and other
(30,219) (49,957) (66,303) (97,405)
(79,403) (38,695) (160,461) 72,879
Earnings (Loss) From Continuing
Operations Before Income Taxes
1,018,542 (351,025) 1,774,546 (421,809)
Income Tax Expense (Benefit)
406,178 (127,985) 718,482 (158,133)
Earnings (Loss) From Continuing
Operations $ $ $ $
612,364 (223,040) 1,056,064 (263,676)
Loss From Discontinued Operations,
Net of Income taxes
(253,945) (140,485) (348,857) (260,997)
Net Earnings (Loss) $ $ $ $
358,419 (363,525) 707,207 (524,673)
Basic and Diluted Earnings (Loss) Per Share:
Continuing Operations $ $ $ $
0.22 (0.08) 0.39 (0.10)
Discontinued Operations
(0.09) (0.05) (0.13) (0.09)
Total Basic and Diluted Net
Earnings (Loss) Per Share $ $ $ $
0.13 (0.13) 0.26 (0.19)
Weighted Average Shares
Outstanding:
Basic
2,726,320 2,726,320 2,726,320 2,726,320
Diluted
2,733,614 2,726,320 2,726,320 2,726,320
<fn>
See notes to condensed financial statements.
</fn>
</table>
</page>
<page>
<table>
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<caption>
SEPTEMBER 30, MARCH 31,
2003 2003
(Unaudited)
<s> <c> <c>
ASSETS
Current Assets:
Cash and cash equivalents $ $
412,626 79,715
Marketable securities
817,800 1,057,042
Accounts receivable, less allowance
for doubtful accounts of $464,212 at
September
30, 2003 and $449,358 at March 31, 2003
5,684,288 6,239,144
Notes receivable-current
33,452 -
Income taxes receivable
41,903 -
Inventories, net
6,818,510 6,275,288
Assets held for sale -
1,950,000
Deferred tax asset
682,897 1,036,998
Prepaid expenses and other
110,246 129,029
Total Current Assets
14,601,722 16,767,216
Property and Equipment
6,858,737 7,092,032
Less accumulated depreciation
(4,987,387) (4,788,779)
Property and Equipment, net
1,871,350 2,303,253
Deferred Tax Asset
1,130,784 1,096,883
Intangible Pension Asset
189,862 219,862
Other Assets
976,392 940,479
Notes Receivable-long-term
298,284 -
Total Assets $ $
19,068,394 21,327,693
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
3,490,565 4,436,291
Accrued expenses
2,173,120 1,691,341
Billings in excess of costs and estimated
earnings on uncompleted contracts
290,978 760,979
Income taxes payable -
180,278
Current portion of long-term debt and
obligations 110,682 113,130
Total Current Liabilities
6,065,345 7,182,019
Capital Lease Obligations (less current
portion) 32,122 50,070
Long-term Debt (less current portion)
369,193 2,345,910
Deferred Retirement Obligations (less
current portion) 2,159,754 2,138,712
Stockholders' Equity:
Preferred stock, $1 par value, authorized 50,000
shares,
none issued -
-
Common stock, par value $.25; authorized 4,000,000
shares;
2,726,320 and 2,726,320 shares issued
and outstanding 681,580 681,580
Additional paid in capital
6,863,898 6,863,898
Retained earnings
3,236,763 2,529,556
Accumulated other comprehensive loss
(340,261) (464,052)
10,441,980 9,610,982
Total Liabilities and Stockholders' $ $
Equity 19,068,394 21,327,693
SEPTEMBER 30, MARCH 31,
2003 2003
(Unaudited)
<s> <c> <c>
ASSETS
Current Assets:
Cash and cash equivalents $ $
412,626 79,715
Marketable securities
817,800 1,057,042
Accounts receivable, less allowance
for doubtful accounts of $464,212 at
September
30, 2003 and $449,358 at March 31, 2003
5,684,288 6,239,144
Notes receivable-current
33,452 -
Income taxes receivable
41,903 -
Inventories, net
6,818,510 6,275,288
Assets held for sale -
1,950,000
Deferred tax asset
682,897 1,036,998
Prepaid expenses and other
110,246 129,029
Total Current Assets
14,601,722 16,767,216
Property and Equipment
6,858,737 7,092,032
Less accumulated depreciation
(4,987,387) (4,788,779)
Property and Equipment, net
1,871,350 2,303,253
Deferred Tax Asset
1,130,784 1,096,883
Intangible Pension Asset
189,862 219,862
Other Assets
976,392 940,479
Notes Receivable-long-term
298,284 -
Total Assets $ $
19,068,394 21,327,693
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
3,490,565 4,436,291
Accrued expenses
2,173,120 1,691,341
Billings in excess of costs and estimated
earnings on uncompleted contracts
290,978 760,979
Income taxes payable -
180,278
Current portion of long-term debt and
obligations 110,682 113,130
Total Current Liabilities
6,065,345 7,182,019
Capital Lease Obligations (less current
portion) 32,122 50,070
Long-term Debt (less current portion)
369,193 2,345,910
Deferred Retirement Obligations (less
current portion) 2,159,754 2,138,712
Stockholders' Equity:
Preferred stock, $1 par value, authorized 50,000
shares,
none issued -
-
Common stock, par value $.25; authorized 4,000,000
shares;
2,726,320 and 2,726,320 shares issued
and outstanding 681,580 681,580
Additional paid in capital
6,863,898 6,863,898
Retained earnings
3,236,763 2,529,556
Accumulated other comprehensive loss
(340,261) (464,052)
10,441,980 9,610,982
Total Liabilities and Stockholders' $ $
Equity 19,068,394 21,327,693
<fn>
See notes to condensed financial statements.
</fn>
</table>
</page>
<page>
<table>
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<caption>
Six Months Ended
September 30,
2003 2002
<s <c> <c>
>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $
707,207 $(524,673
)
Adjustments to reconcile net earnings
(loss) to net
cash provided by operating activities:
Change in accounts receivable and
inventory reserves 77,323 123,314
Depreciation and amortization
275,377 354,331
Deferred tax provision (benefit)
320,200 (42,097)
Loss on disposal of assets and impairment -
of investments 130,716
Net periodic pension cost
79,998 42,498
Change in assets and liabilities which provided
(used) cash
Accounts receivable
540,002 430,229
Income taxes receivable -
(41,903)
Inventories
(363,087) 768,378
Prepaid expenses and other
31,942 8,821
Accounts payable
(945,726) (562,800)
Accrued expenses
450,375 (124,508)
Billings in excess of costs and estimated
earnings on uncompleted contracts -
(470,001)
Costs and estimated earnings in excess
of billings on uncompleted contracts - -
Income taxes payable
(180,278) (510,731)
Total adjustments
(225,778) 618,151
Net cash provided by operating activities
481,429 93,478
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets-discontinued -
operations 1,550,000
Proceeds from sale of marketable securities -
325,575
Proceeds from sale of equipment -
140,000
Capital expenditures
(71,041) (192,490)
Net cash provided by (used in) investing
activities 1,804,534 (52,490)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings on line of
credit (1,953,05 319,535
2)
Payment of cash dividend -
(325,854)
Proceeds from exercise of stock options -
5,500
Net cash used in financing activities
(1,953,05 (819)
2)
NET INCREASE IN CASH & CASH EQUIVALENTS
332,911 40,169
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 79,715 31,770
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ $
412,626 71,939
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ $
63,539 212,763
Income taxes
405,743 229,015
SUMMARY OF SIGNIFICANT NON-CASH INFORMATION:
Note receivable from sale of assets- $ $ -
discontinued operations 331,736
Change in fair value of derivatives
41,612 29,000
Increase in fair value of marketable
securities 82,179 33,256
<fn>
See notes to condensed financial statements.
</fn>
</table>
</page>
<page>
<table>
AIR T, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND
OTHER COMPREHENSIVE LOSS (UNAUDITED)
<caption>
Accumulate
d
Other
Additiona Comprehens Total
l ive
Common Stock Paid-In Retained Income Stockholde
r's
Shares Amount Capital Earnings (Loss) Equity
<s> <c> <c> <c> <c> <c> <c>
Balance, March 31, $ $
2003 2,726,32 $681,580 $6,863,89 $2,529,55 (464,052) 9,610,982
0 8 6
Comprehensive
Income:
Net earnings
707,207
Other Comprehensive Income:
Unrealized gain on
securities
82,179
Change in fair
value of
derivatives
41,612
Total comprehensive income
830,998
Balance, September $
30, 2003 2,726,32 $681,580 $6,863,89 $3,236,76 (340,261) $10,441,98
0 8 3 0
<fn>
See notes to condensed financial statements.
</fn>
</table>
</page>
<page>
AIR T, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. Financial Statements
The Condensed Consolidated Balance Sheet as of September 30,
2003, the Condensed Consolidated Statements of Operations for the
three and six-month periods ended September 30, 2003 and 2002,
the Condensed Consolidated Statements of Cash Flows for the six-
month periods ended September 30, 2003 and 2002 and the Condensed
Consolidated Statement of Stockholders' Equity and Other
Comprehensive Loss have been prepared by Air T, Inc. (the
Company) without audit. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position, results of
operations, cash flows and equity position as of September 30,
2003, 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, 2003. The results of operations for the period
ended September 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 September 30, 2003 and
March 31, 2003 consolidated balance sheets. 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.
The income tax provisions (benefit) for continuing
operations for the respective six-months ended September 30, 2003
and 2002 differ from the federal statutory rate primarily as a
result of state income taxes and permanent timing differences.
C. Net Earnings (Loss) Per Share
Basic earnings (loss) per share has been calculated by
dividing net earnings (loss) by the weighted average number of
common shares outstanding during each period. For purposes of
calculating diluted earnings (loss) per share, shares issuable
under employee stock options were considered potential common
shares and were included in the weighted average common shares
unless they were anti-dilutive. For the six month period ended
September 30, 2003 all outstanding stock options were anti-
dilutive.
The computation of basic and diluted earnings (loss) per common
share is as follows:
<table>
<caption>
Three Months Six months Ended
Ended
September 30, September 30,
2003 2002 2003 2002
<s> <c> <c> <c> <c>
Net earnings (loss) $ $
358,419 $(363,525 707,207 $(524,67
) 3)
Basic and Diluted Earnings
(Loss)
Per Share:
Continuing Operations $ $ $ $
0.22 (0.08) 0.39 (0.10)
Discontinued Operations
(0.09) (0.05) (0.13) (0.09)
Total Basic and Diluted
Net
Earnings (Loss) Per $ $ $ $
Share 0.13 (0.13) 0.26 (0.19)
Weighted Average Shares
Outstanding:
Basic
2,726,320 2,726,320 2,726,32 2,726,32
0 0
Plus: Incremental
shares from
stock options - - -
7,294
Diluted
2,733,614 2,726,320 2,726,32 2,726,32
0 0
</table>
</page>
<page>
Inventories
Inventories consist of the following:
<table>
<caption>
September 30, 2003 March 31, 2003
<s> <c> <c>
Aircraft parts and supplies $ $
1,999,983 2,088,315
Aircraft equipment
manufacturing:
Raw materials
3,722,547 2,595,448
Work in process
872,128 745,409
Finished goods
1,416,282 1,940,077
Total Inventory
8,010,940 7,369,249
Reserves
(1,192,430) (1,093,961)
Total, net of reserves $ $
6,818,510 6,275,288
</table>
Recent Accounting Pronouncements
The FASB has issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets". SFAS No. 143
addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. It requires that the fair
value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount
of the long-lived asset. SFAS No. 143 was effective for the
Company beginning April 1, 2003. Adoption of SFAS No. 143 did
not have an effect on the Company's financial position and
results of operations.
SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" and amends Accounting Principles Bulletin (APB) No.
30 "Reporting the Results of Operations-Discontinued Events and
Extraordinary Items". Along with establishing a single
accounting model, based on the framework established in SFAS No.
121, for long-lived assets to be disposed of by sale, this
standard retains the basic provisions of APB No. 30 for the
presentation of discontinued operations in the income statement
but broadens that presentation to include a component of an
entity. SFAS No. 144 was effective for the Company beginning
April 1, 2002. The effect of the adoption of SFAS No. 144 on
management's plan to discontinue the operations of MAS is
reflected in the Company's condensed consolidated statements of
financial position and results of operations and is detailed in
Note H Discontinued Operations.
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others". This Interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it
has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements, initial recognition and
initial measurement provisions of this Interpretation are
currently effective and did not affect our financial position and
results of operations for the three and six months ended
September 30, 2003.
The Company's ground equipment subsidiary warranties its products
for up to a two-year period from date of sale. Product warranty
reserves are recorded at time of sale based on the historical
average warranty cost and are adjusted as actual warranty cost
becomes known. As of September 30, 2003 the Company's warranty
reserve amounted to $150,000.
</page>
<page>
Product warranty reserve activity during the six-months ended
September 30, 2003 is as follows:
Balance at 3/31/03 $116,000
Additions to reserve 66,000
Use of reserve (32,000)
Balance at 9/30/03 $150,000
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". This
Statement amends FASB Statement No. 123, "Accounting for Stock-
Based Compensation", to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-
based employee compensation and the effect of the method used on
reported results. The Company has elected to continue to account
for its stock-based compensation under the provisions of
Accounting Principles Bulletin No. 25. The Company has applied
the fair value recognition provisions of SFAS NO. 123 to its
stock-based compensation and has determined that there is no
effect on net income and earnings per share for the three-month
and six-month periods ended September 30, 2003 and 2002
respectively.
In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities ("FIN 46"). This
Interpretation requires that variable interest entities created
after January 31, 2003, and variable interest entities in which
an interest is obtained after that date, be evaluated for
consolidation into an entity's financial statements. For
variable interest entities created or acquired prior to that
date, the provisions of FIN 46 must be applied for the first
interim or annual period ending after December 31, 2003. The
adoption of FIN 46 is not expected to have an impact on the
Company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". SFAS No. 150 is effective for the
Company beginning July 1,2003, although FASB has recently
proposed that implementation of certain provisions of SFAS NO.
150 be postponed indefinitely. The Company has determined that
the adoption of SFAS No. 150 will not have an impact on the
Company's financial position or results of operations.
Derivative Financial Instruments
As required by SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", the Company recognizes all
derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value.
The Company is exposed to market risk, such as changes in
interest rates. To manage the volatility relating to interest
rate risk, the Company may enter into interest rate hedging
arrangements from time to time. The Company does not utilize
derivative financial instruments for trading or speculative
purposes.
During the second quarter of fiscal 2003, the Company had
outstanding two interest rate swaps with a notional amount of
$2.4 million, and $2 million respectively. These agreements were
originally entered into at respective interest rates of 6.97% and
6.5% respectively. On July 31, 2002 the Company elected to
unwind its $2,000,000 (6.5%) revolving credit line swap in
consideration for $58,750, the fair-market-value termination fee
as of that date. The fair value of the remaining swap changed by
$30,000 from a liability of $129,000 at March 31, 2003, to a
liability of $99,000 as of September 30, 2003. This liability is
included in long-term debt in the condensed consolidated balance
sheets. The Company assesses the effectiveness of the swap using
the hypothetical derivative method.
On October 30, 2003, the Company terminated its remaining credit
line swap for $97,500. The amount included in accumulated other
comprehensive loss of $99,000 will be reclassified to earnings as
interest expense is recognized over the remaining term of the
thanks line.
</page>
<page>
G. Financing Arrangements
On August 31, 2003 the Company amended its $7,000,000 secured
long-term revolving credit line to extend its expiration date to
August 31, 2005.
The revolving credit line contains customary events of default, a
subjective acceleration clause and restrictive covenants that,
among other matters, require the Company to maintain certain
financial ratios. Under the provisions of the revolving credit
line, the sale of MAS as described in Note H. would be considered
an event of default. The Company has obtained a waiver for this
covenant as of September 30, 2003. As of September 30, 2003, 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
September 30, 2003 was 1.11%. At September 30, 2003 and March 31,
2003, the amounts outstanding against the line were $271,000 and
$2,217,000, respectively. At September 30, 2003, $3,479,000 was
available under the terms of the credit facility.
The Company has classified its outstanding bank debt of $271,000
as long-term as of September 30, 2003, to reflect the terms
included under the amendment signed on August 31, 2003.
H. Discontinued Operations
During the fourth quarter of fiscal 2003, Company management
agreed to a plan to sell the assets of Mountain Aircraft
Services, LLC (MAS) and to discontinue the operations of the
Company's aviation service sector business. The Company entered
into a letter of intent on June 19, 2003 to sell certain assets
and the business operations of MAS and closed on the transaction
on August 14, 2003. In conjunction with the above sale, the
Company agreed to indemnify the buyer and its affiliates with
respect to certain matters related to contractual representations
and warranties and the operation of the business prior to
closing. Although no assurances can be made, the Company does
not believe the indemnities provided will have a material effect
on its financial condition or results of operations.
Under the terms of the agreement signed on August 14, 2003, the
Company also entered into a three year consignment agreement
granting the buyer an exclusive right to sell the remaining
$1,025,000 net value of MAS inventory included in the Company's
condensed consolidated balance sheet as of September 30, 2003.
Upon termination of the consignment agreement the buyer will
return all unsold inventory to the Company. Accordingly, the
accompanying condensed consolidated financial statements reflect
the sale of certain MAS assets and reclassify the net operations
of MAS as discontinued operations, net of tax, for all periods
presented.
A summary of the assets held for sale at September 30, 2003 and
March 31, 2003 is as follows:
<table>
<caption>
September 30, 2003 March 31, 2003
<s> <c> <c>
Inventory $ - $1,900,000
Property, plant and equipment - 50,000
Assets held for sale $ - $1,950,000
</table>
</page>
<page>
A summary of the operating results of the discontinued
operations for the six-months ended September 30, 2003 and 2002
is as follows:
2003 2002
Revenue $ 2,565,931 $ 2,749,546
Operating Loss $ (373,819) $ (193,965)
Loss before income taxes $ (571,897) $ (427,864)
Income tax benefit 223,040 166,867
Net loss $ (348,857) $ (260,997)
I. Segment Information
The Company operates three subsidiaries in two continuing
business segments. Each business segment has separate management
teams and infrastructures that offer different products and
services.
During the fourth quarter of fiscal 2003, Company management
agreed to a plan to sell the assets of MAS and to discontinue the
operations of the Company's aviation service sector business. On
August 14, 2003, the Company closed on its transaction to sell
certain assets and the business operations of MAS. Therefore the
operations of MAS and the consigned inventory, as discussed in
Note H. Discontinued Operations, are not presented in the segment
information below.
The subsidiaries with continuing operations have been
combined into the following two reportable segments: overnight
air cargo and ground equipment. The overnight air cargo segment
encompasses services provided primarily to one customer, Federal
Express Corporation, and the ground equipment segment encompasses
the operations of Global Ground Support, LLC.
Segment data is summarized as follows:
<table>
<caption>
Three months ended September 30, Six months ended September 30,
200 200 2003 200
3 2 2
<s> <c> <c> <c> <c>
Operating Revenues
Overnight Air $ $ $ 15,799,774 $
Cargo 8,5 7,7 14,
14, 15, 338
306 802 ,48
5
Ground Equipment 8,879,365
5,1 1,4 5,0
08, 58, 34,
772 718 177
Total $ $ $ 24,679,139 $
13, 9,1 19,
623 74, 372
,07 520 ,66
8 2
Operating Income
(Loss)
Overnight Air $ $ $ 2,006,175
Cargo 988 694 1,3
,37 ,87 09,
8 6 510
Ground Equipment 1,013,381
694 (55 (56
,97 2,6 9,2
1 03) 57)
Corporate (1) (1,405,471)
(74 (53 (1,
4,2 1,9 089
10) 93) ,18
3)
Total $ $ $ 1,614,085 $
939 (38 (34
,13 9,7 8,9
9 20) 30)
Depreciation and Amortization
Overnight Air $ $ $ 110,476
Cargo 55, 64, 129
675 808 ,74
3
Ground Equipment 82,067
40, 46, 94,
399 123 184
Corporate 82,834
41, 35, 70,
746 667 094
Total $ $ $ 275,377 $
137 146 294
,82 ,59 ,02
0 8 1
Capital
Expenditures, net
Overnight Air $ $ $ 32,148 $
Cargo 23, 9,1 17,
534 38 752
Ground Equipment 15,548
11, 90, 94,
131 467 884
Corporate 23,345
22, 79, 79,
548 057 854
Total $ $ $ 71,041 $
57, 178 192
213 ,66 ,49
2 0
11
As of
Sep Mar
tem ch
ber 31,
30, 200
200 3
3
Identifiable
Assets
Overnight Air $ $
Cargo 4,3 4,1
81, 30,
440 676
Ground Equipment
10, 8,6
115 15,
,53 032
1
Corporate
3,1 4,6
61, 84,
239 070
Total $ $
17, 17,
658 429
,21 ,77
0 8
</table>
</page>
<page>
J. Commitments and Contingencies
Global and one of its employees are defendants in a lawsuit
filed in March 2002 in the United States District Court for the
District of Columbia, Catalyst & Chemical Services et al v.
Terex, et al. In this action, the plaintiffs allege that they
provided to Global and the employee certain trade secrets
regarding aircraft de/anti-icing systems that were then disclosed
by Global and the employee to third parties. The plaintiffs
allege misappropriation of trade secrets, breach of contract and
violation of the federal Racketeer Influenced and Corrupt
Organizations Act and seek monetary damages. The Company and its
employee have filed an answer in this action denying all
liability. Upon Global's motion, the court has dismissed the
plaintiff's claims under the Racketeer Influenced and Corrupt
Organizations Act. Recently the plaintiffs amended the complaint
to add a patent infringement claim, which appears to involve the
same materials and information that constitute the alleged trade
secrets Global has not yet responded to the newly-filed patent
claim. The Company does not believe that the action has any
merit and intends to defend the lawsuit vigorously. In November
2002, Global and the Company filed suit in North Carolina state
court against affiliates of the plaintiffs in the Catalyst &
Chemical Services et al v. Terex, et al action alleging
defamation. This action has been removed to, and is pending
before, the United States District Court for the District of
Columbia.
The Company is currently aware of certain intellectual
property and environmental matters, some of which involve pending
or threatened lawsuits. If adversely decided, management believes
the results of these pending or threatened lawsuits would not
have a material adverse effect on the Company.
</page>
<page>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Continuing Operations.
Overview
The Company's most significant component of revenues, which
accounted for 64.0% of revenues for the six months ended
September 30, 2003, was generated by its air cargo subsidiaries,
Mountain Air Cargo, Inc.(MAC) and CSA Air, Inc.(CSA).
MAC and CSA are short-haul express air freight carriers. MAC and
CSA's revenues contributed approximately $15,800,000 and
$14,338,000 to the Company's revenues for the six-month periods
ended September 30, 2003 and 2002, respectively. The increase in
revenues was primarily attributed to increased cargo and
maintenance services, related to aircraft fleet modernization and
route expansion, provided during the current period. Under the
terms of the dry-lease service agreements, which currently cover
approximately 98% of the revenue-generating aircraft operated,
the Company passes through to its customer certain cost
components of its operations without markup. The cost of fuel,
flight crews, landing fees, outside maintenance, parts and
certain other direct operating costs are included in operating
expenses and billed to the customer as cargo and maintenance
revenue, at cost.
Separate agreements cover the four types of aircraft
operated by MAC and CSA-Cessna Caravan, Fokker F-27, ATR 42 and
Short Brothers SD3-30. Cessna Caravan and Fokker F-27 and ATR 42
aircraft (a total of 99 aircraft at September 30, 2003) are owned
by and dry-leased from Federal Express Corporation (Customer),
and Short Brothers SD3-30 aircraft (two aircraft at September 30,
2003) are owned by the Company and operated under wet-lease
arrangements with the Customer. Pursuant to such agreements, the
Customer determines the type of aircraft and schedule of routes
to be flown by MAC and CSA, with all other operational decisions
made by the Company.
Agreements are renewable annually and may be terminated by
the Customer at any time upon 15 to 30 days' notice. The Company
believes that the short term and other provisions of its
agreements with the Customer are standard within the air freight
contract delivery service industry. The Company is not
contractually precluded from providing such services to other
firms, and has done so in the past. Loss of its contracts with
the Customer would have a material adverse effect on the Company.
Global Ground Support, LLC (Global), another subsidiary of
the Company, manufactures, services and supports aircraft deicers
and other specialized equipment on a worldwide basis. Global's
revenue contributed approximately $8,879,000 and $5,034,000 to
the Company's revenues for the six-month periods ended September
30, 2003 and 2002, respectively. The increase in revenues in
2003 was primarily related to a current period increase in sales
of mobile deicers and a large scale airport contract.
Until the second quarter of fiscal 2004, the business of
Global had been adversely affected by reduced orders from
commercial airlines and aviation related companies. The decrease
in orders, which started in early 2001, declined further after
September 11, 2001. Global, which also derives a significant
portion of its revenue from sale of products for military
applications, experienced temporary declines in orders for
certain military programs due to funding delays during fiscal
2003.
The Company operates three subsidiaries in two continuing
business segments. Each business segment has separate management
teams and infrastructures that offer different products and
services. The subsidiaries have been combined into the following
reportable segments: overnight air cargo and ground equipment in
the accompanying condensed consolidated financial statements.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements in
conformity with accounting principles generally accepted in the
U.S. requires the use of estimates and assumptions to determine
certain assets, liabilities, revenues and expenses. Management
bases these estimates and assumptions upon the best information
available at the time of the estimates or assumptions. The
Company's estimates and assumptions, related to both continuing
and
</page>
<page>
discontinued operations could change materially as conditions
within and beyond our control change. Accordingly, actual
results could differ materially from estimates. The most
significant estimates made by management include allowance for
doubtful accounts receivable, reserves for excess and obsolete
inventories, deferred tax asset valuation, retirement benefit
obligations and valuation of revenue recognized under the
percentage of completion method. Following is a discussion of
critical accounting policies and related management estimates and
assumptions necessary in determining the value of related assets
or liabilities.
Allowance for Doubtful Accounts. An allowance for doubtful
accounts receivable is established based on management's
estimates of the collectability of accounts receivable. The
required allowance is determined using information such as
customer credit history, industry information, credit reports and
customer financial condition. The estimates can be affected by
changes in the aviation industry, customer credit issues or
general economic conditions.
Inventories. The Company's parts inventories are valued at the
lower of cost or market. Provisions for excess and obsolete
inventories are based on assessment of slow-moving and obsolete
inventories. Historical part usage, estimated future demand and
anticipated transactions between willing buyers and sellers
provide the basis for estimates. Estimates are subject to
volatility and can be affected by reduced equipment utilization,
the retirement of aircraft or ground equipment and changes in the
aviation industry.
Deferred Taxes. Deferred tax assets and liabilities net of
valuation allowance, if any, reflect the likelihood of the
recoverability of these assets. Company judgement of the
recoverability of these assets is based primarily on estimates of
current and expected future earnings and tax planning.
Retirement Benefits Obligation. The Company currently determines
the value of retirement benefits assets and liabilities on an
actuarial basis using an appropriate discount rate. Values are
affected by the Company's outside actuary's estimates of the
expected return on insurance policies and the discount rates
used. Changes in the discount rate used will affect the amount
of pension gain or loss recognized in other comprehensive income.
Revenue Recognition. Cargo revenue is recognized upon completion
of contract terms and maintenance revenue is recognized when the
service has been performed. Revenue from product sales is
recognized when contract terms are completed and title has passed
to customers. Revenues from overhaul contracts on customer owned
parts, certain labor service contracts and long term fixed price
manufacturing projects are recognized on the percentage-of-
completion method. Revenues for contracts under percentage of
completion are measured by the percentage of cost incurred to
date, to estimated total cost for each contract or workorder;
unanticipated changes in job performance, job conditions and
estimated profitability may result in revisions to costs and
income, and are recognized in the period in which the revisions
are determined.
Seasonality
Global's business has historically been highly seasonal.
Due to the nature of its product line, the bulk of Global's
revenues and earnings have typically occurred during the second
and third fiscal quarters in anticipation of the winter season,
and comparatively little has occurred during the first and fourth
fiscal quarters. The Company has continued its efforts to reduce
Global's seasonal fluctuation in revenues and earnings by
broadening its product line to increase revenues and earnings in
the first and fourth fiscal quarters. Global is currently in the
fifth year of a multi-year 1999 contract to supply deicing
equipment to the United States Air Force, and has been awarded
two large scale contracts, each of which the Company believes
contributed to management's plan to reduce seasonal airport
deicer fluctuation in revenues. However, as these contracts are
completed, seasonal trends for Global's business may resume. The
remainder of the Company's business is not materially seasonal.
</page>
<page>
Results of Operations
The operations of MAS have been reclassified as discontinued
operations and, therefore, are not included in the Results of
Continuing Operations discussed below.
Consolidated revenue increased $5,306,000 (27.4%) to
$24,679,000 and $4,449,000 (48.5%) to $13,623,000, respectively,
for the six and three-month periods ended September 30, 2003
compared to their equivalent 2002 periods. The six and three-
month current period net increase in revenue primarily resulted
from increased revenue at both Global and MAC, as described in
the Overview section of Item 2.
Operating expenses increased $3,343,000 (17.0%) to
$23,065,000 for the six-month period ended September 30, 2003 and
$3,120,000 (32.6%) to $12,684,000 for the three-month period
ended September 30, 2003 compared to their equivalent 2002
periods. The change in operating expenses for the six-month
period consisted of the following: cost of flight operations
increased $11,000 (0.2%), primarily as a result of schedule
changes which increased costs associated with airport fees, pilot
salaries and travel partially offset by decreased fuel costs;
maintenance expense increased $681,000 (14.0%), primarily as a
result of increases in the cost of parts, outside maintenance and
maintenance salaries, related to aircraft fleet modernization and
route expansion; ground equipment increased $2,399,000 (56.4%),
as a result of higher cost of parts and labor associated with
increased Global sales; and general and administrative expense
increased $271,000 (7.8%) primarily as a result of increased
profit sharing accrual, staffing, contract labor, rent and
professional fees.
The change in operating expenses for the three-month period
consisted of the following: cost of flight operations increased
$68,000 (1.9%), primarily as a result of schedule changes which
increased costs associated with airport fees, pilot salaries and
travel partially offset by decreased fuel costs; maintenance
expense increased $423,000 (15.6%), primarily as a result of
increased cost of parts, outside maintenance and maintenance
salaries stated above; ground equipment increased $2,416,000
(176.9%), as a result of higher cost of parts and labor
associated with increased Global sales; and general and
administrative expense increased $221,000 (13.0%) primarily as a
result of increased profit sharing accrual, staffing, rent,
contract labor and professional fees.
As discussed above, the current six month period's increased
revenues and related operating income resulted primarily from
increased production related to commercial equipment orders and a
large scale airport contract at Global and increased service
revenues in the air cargo sector. During the six month period
ended September 30, 2003 Global's revenue and operating income
increased $3,845,000 (76.4%) and $1,583,000 (278.2%),
respectively, to $8,879,000 and $1,013,000, respectively,
compared to the six months ended September 30, 2002.
Net non-operating income increased $233,000 and $41,000,
respectively, for the six and three-month periods ended September
30, 2003 compared to September 30, 2002. The six-month increase
in non-operating income was principally due to no loss on
impairment of marketable securities in the current year and
decreased interest expense. The three-month increase was
principally due to decreased interest expense.
Pretax earnings increased $2,196,000 and $1,370,000,
respectively, for the six and three-month periods ended September
30, 2003, compared to their respective September 30, 2002
periods. The six-month increase was principally due to the above
stated increase in air cargo and ground equipment earnings.
The provision for income taxes increased $877,000 and
$534,000 for the six and three-month periods ended September 30,
2003, respectively compared to their respective 2002 periods,
primarily due to the increased profits for the periods ended
September 30, 2003. The effective tax rate for the three and six-
month periods ended September 30, 2003 and 2002 averaged
approximately 39%.
</page>
<page>
Liquidity and Capital Resources
As of September 30, 2003 the Company's working capital
amounted to $8,536,000, a decrease of $1,049,000 compared to
March 31, 2003. The net decrease primarily resulted from
decreased assets held for sale and accounts receivable and
increased accrued expenses, partially offset by increased
inventory and decreased accounts payables and billings in excess
of cost. On August 31, 2003 the Company amended its $7,000,000
secured long-term revolving credit line to extend its expiration
date to August 31, 2005.
The credit facility contains customary events of default, a
subjective clause and restrictive covenants that, among other
matters, require the Company to maintain certain financial
ratios. Under the provisions of the revolving credit line, the
sale of MAS as described in Note H. would be considered an event
of default. The Company has obtained a waiver for this covenant
as of September 30, 2003. As of September 30, 2003, 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
September 30, 2003 was 1.11%. At September 30, 2003 and March 31,
2003, the amounts outstanding against the line were $271,000 and
$2,217,000, respectively. At September 30, 2003, an additional
$3,479,000 was available under the terms of the credit facility.
The Company has not currently, nor in the past, engaged in
the use of structured finance arrangements, known as off-balance
sheet financing transactions, with unconsolidated entities or
other persons.
The Company has classified the $271,000 outstanding balance
on its credit line as of September 30, 2003 as long-term to
reflect the terms included under the amendment signed on August
31, 2003.
The respective six-month periods ended September 30, 2003
and 2002 resulted in the following changes in cash flow:
operating activities provided $481,000 and $93,000, investing
activities provided $1,805,000 and used $52,000 and financing
activities used $1,953,000 and $1,000. Net cash increased
$333,000 and $40,000 for the respective six-month periods ended
September 30, 2003 and 2002.
Cash provided by operating activities was $388,000 more for
the six-months ended September 30, 2003 compared to the similar
2002 period, principally due to increased earnings and accrued
expenses, offset by decreased accounts payable, billings in
excess of cost and an increase in inventory.
Cash provided by investing activities for the six-months
ended September 30, 2003 was approximately $1,857,000 more than
the comparable period in 2002, principally due to proceeds from
the sale of MAS assets-discontinued operations and marketable
securities and decreased capital expenditures.
Cash used in financing activities for the six-months ended
September 30, 2003 was approximately $1,952,000 more than the
comparable 2002 period, principally due to a decrease in net
borrowings under the line of credit in 2003 partially offset by a
current period decrease in cash dividend.
There are currently no commitments for significant capital
expenditures. The Company's Board of Directors, on August 7,
1998, adopted the policy to pay an annual cash dividend in the
first quarter of each fiscal year, in an amount to be determined
by the board. On May 27, 2003, the Company declared that, due to
losses sustained in fiscal 2003, no common share dividend would
be paid during fiscal 2004.
</page>
<page>
Deferred Retirement Obligation
Contractual death benefits for the Company's former Chairman
and Chief Executive Officer who passed away on April 18, 1997 are
payable by the Company in the amount of $75,000 per year for 10
years from the date of his death.
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.
Recent Accounting Pronouncements
The FASB has issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets". SFAS No. 143
addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. It requires that the fair
value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount
of the long-lived asset. SFAS No. 143 was effective for the
Company beginning April 1, 2003. Adoption of SFAS No. 143 did
not have an effect on the Company's financial position and
results of operations.
SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" and amends Accounting Principles Bulletin (APB) No.
30 "Reporting the Results of Operations-Discontinued Events and
Extraordinary Items". Along with establishing a single
accounting model, based on the framework established in SFAS No.
121, for long-lived assets to be disposed of by sale, this
standard retains the basic provisions of APB No. 30 for the
presentation of discontinued operations in the income statement
but broadens that presentation to include a component of an
entity. SFAS No. 144 was effective for the Company beginning
April 1, 2002. The effect of the adoption of SFAS No. 144 on
management's plan to discontinue the operations of MAS is
reflected in the Company's condensed consolidated statements of
financial position and results of operations and is detailed in
Note H Discontinued Operations in the Company's financial
statements.
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others". This Interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it
has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements, initial recognition and
initial measurement provisions of this Interpretation are
currently effective and did not affect our financial position and
results of operations for the three and six months ended
September 30, 2003.
The Company's ground equipment subsidiary warranties its products
for up to a two-year period from date of sale. Product warranty
reserves are recorded at time of sale based on the historical
average warranty cost and are adjusted as actual warranty cost
becomes known. As of September 30, 2003 the Company's warranty
reserve amounted to $150,000.
Product warranty reserve activity during the six-months ended
September 30, 2003 is as follows:
Balance at 3/31/03 $116,000
Additions to reserve 66,000
Use of reserve (32,000)
Balance at 9/30/03 $150,000
</page>
<page>
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". This
Statement amends FASB Statement No. 123, "Accounting for Stock-
Based Compensation", to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and interim
financial statements about
the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The
Company has elected to continue to account for its stock-based
compensation under the provisions of Accounting Principles
Bulletin No. 25. The Company has applied the fair value
recognition provisions of SFAS NO. 123 to its stock-based
compensation and has determined that there is no effect on net
income and earnings per share for the three-month and six-month
periods ended September 30, 2003 and 2002 respectively.
In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities ("FIN 46"). This
Interpretation requires that variable interest entities created
after January 31, 2003, and variable interest entities in which
an interest is obtained after that date, be evaluated for
consolidation into an entity's financial statements. For
variable interest entities created or acquired prior to that
date, the provisions of FIN 46 must be applied for the first
interim or annual period ending after December 31, 2003. The
adoption of FIN 46 is not expected to have an impact on the
Company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". SFAS No. 150 is effective for the
Company beginning July 1,2003, although FASB has recently
proposed that implementation of certain provisions of SFAS NO.
150 be postponed indefinitely. The Company has determined that
the adoption of SFAS No. 150 will not have an impact on the
Company's financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
The Company does not hold or issue derivative financial
instruments for trading purposes. As of September 30, 2003 the
Company had outstanding one interest rate swap agreement to
reduce its exposure to the fluctuations of LIBOR-based variable
interest rates. The Company is exposed to changes in interest
rates on certain portions of its line of credit, which bears
interest based on the 30-day LIBOR rate plus 137 basis points.
If the LIBOR
interest rate had been increased by one percentage point, based
on the balance of the line of credit at September 30, 2003,
interest expense for the six months ended September 30, 2003
would have increased by approximately $1,500. On October 30,
2003 the Company terminated its remaining credit line swap for
$97,500.
Item 4. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial
Officer have evaluated the Company's disclosure controls and
procedures as of the end of the period covered by this Quarterly
Report on Form 10-Q, and they have concluded that these
disclosure controls and procedures are effective.
During the quarter ended September 30, 2003, the Company
made certain changes to its internal control procedures related
to operations to enhance procedures to verify the independence of
vendors and to periodically review nonstandard payment terms
required by vendors. There was no change in internal controls
over financial reporting during or subsequent to the most recent
fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over
financial reporting.
</page>
<page>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
3.1 Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 of the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 2003
3.2 By-laws of the Company, as amended, incorporated by
reference to Exhibit 3.2 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996
4.1 Specimen Common Stock Certificate, incorporated by reference
to Exhibit 4.1 of the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1994
10.15 Amendment No 2. to Loan Agreement among Bank of America
N.A. the Company and its subsidiaries, dated August 31, 2003.
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
31.1 Section 302 Certification of Walter Clark
31.2 Section 302 Certification of John J. Gioffre
32.1 Section 906 Certification of Walter Clark
32.2 Section 906 Certification of John J. Gioffre
_______________________
* 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 three months
ended September 30, 2003.
</page>
<page>
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: November 6, 2003
Walter Clark, Chief Executive Officer
Date: November 6, 2003
John J. Gioffre, Chief Financial
Officer
</page>
<page>
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: November 6, 2003 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: November 6, 2003 /s/ John Gioffre
John J. Gioffre, Chief Financial
Officer
</page>
<page>
AIR T, INC
EXHIBIT INDEX
PAGE
10.1 Amendment No 2. to Loan Agreement among Bank
of America N.A. the Company and its subsidiaries,
dated August 31, 2003.
31.1 Section 302 Certification of Walter Clark
22
31.2 Section 302 Certification of John J. Gioffre
23
32.1 Section 906 Certification of Walter Clark
24
32.2 Section 906 Certification of John J. Gioffre
25