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, 1999
Commission File Number 0-11720
AIRT, 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.
2,764,653 Common Shares, par value of $.25 per share were outstanding as of
November 5, 1999.
This filing contains 35 pages.
The exhibit index is on page 19.
</page>
AIRT, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings (Loss)
for the three and six-month periods ended
September 30, 1999 and 1998 (Unaudited) 3
Consolidated Balance Sheets at
September 30, 1999 (Unaudited)
and March 31, 1999 4
Consolidated Statements of Cash
Flows for the six-month periods
ended September 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16-18
Exhibit Index 19
Exhibits 20-35
2 </page>
AIRT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Operating Revenues:
Cargo $ 4,613,910 $ 4,894,720 $ 8,970,977 $ 9,571,459
Maintenance 3,458,748 3,413,048 6,934,573 6,761,717
Ground equipment 3,923,913 3,333,572 4,654,533 6,693,595
Aircraft services and other 1,909,816 1,274,704 4,136,357 2,399,414
13,906,387 12,916,044 24,696,440 25,426,185
Operating Expenses:
Flight operations 3,508,802 3,507,872 6,561,119 6,739,720
Maintenance and brokering 5,013,094 4,241,617 10,174,343 8,205,083
Ground equipment 3,740,064 2,616,757 4,379,046 5,486,880
General and administrative 2,036,934 1,922,929 3,625,709 3,671,693
Depreciation and amortization 225,045 180,386 464,402 351,763
14,523,939 12,469,561 25,204,619 24,455,139
Operating Income (Loss) (617,552) 446,483 (508,179) 971,046
Non-operating Expense (Income):
Interest 173,073 73,990 302,331 124,686
Deferred retirement expense 6,505 6,249 12,754 12,498
Investment income (45,786) (59,877) (91,040) (103,422)
133,792 20,362 224,045 33,762
Earnings (Loss) Before
Income Taxes (751,344) 426,121 (732,224) 937,284
Income Taxes Expense (Benefit)
Provision (286,600) 186,988 (278,000) 391,453
Net Earnings (Loss) $ (464,744) $ 239,133 $ (454,224)$ 545,831
Net Earnings (Loss) Per Share:
Basic $ (0.17) $ 0.09 $ (0.16)$ 0.20
Diluted $ (0.17) $ 0.09 $ (0.16)$ 0.19
Average Shares Outstanding:
Basic 2,764,653 2,696,320 2,764,653 2,703,986
Diluted 2,764,653 2,793,565 2,764,653 2,802,220
<FN>
See notes to consolidated financial statements.
3</page>
AIRT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 March 31,1999
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 124,939 $ 263,362
Marketable securities 1,675,576 2,086,259
Accounts receivable, net 6,635,241 7,008,987
Inventories 8,787,169 6,925,545
Deferred tax asset, net 424,980 424,980
Prepaid expenses and other 203,227 174,450
Total Current Assets 17,851,132 16,883,583
Property and Equipment 6,091,505 5,856,182
Less accumulated depreciation (3,406,765) (2,992,556)
2,684,740 2,863,626
Deferred Tax Asset 233,625 233,625
Intangible Pension Asset 546,119 498,119
Other Assets 505,258 372,691
Total Assets $ 21,820,874 $ 20,851,644
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 5,224,756 $ 3,893,502
Accounts payable 4,989,068 4,267,890
Accrued expenses 1,450,778 1,690,036
Current portion of long-term obligations 55,241 57,853
Total Current Liabilities 11,719,843 9,909,281
Capital Lease Obligation (less current
Portion) 23,374 23,920
Deferred Retirement Obligation (less current
Portion) 1,299,652 1,282,545
Stockholders' Equity:
Preferred stock, $1 par value, authorized
10,000,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,764,653 and
2,764,653 shares issued 690,491 690,491
Additional paid in capital 7,049,157 7,049,157
Accumulated other comprehensive loss (338,134) (154,745)
Retained earnings 1,376,493 2,050,995
8,778,006 9,635,898
Total Liabilities and Stockholders' Equity $ 21,820,874 $ 20,851,644
<FN>
See notes to consolidated financial statements.
4</page>
AIRT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $ (454,224) $ 545,831
Adjustments to reconcile net earnings (loss)
to net cash used in operations:
Depreciation and amortization 464,402 351,763
Change in retirement obligation 17,106 35,274
Change assets and liabilities:
Accounts receivable 373,746 128,549
Inventories (1,861,624) (1,058,137)
Prepaid expenses and other (209,344) 4,460
Accounts payable 721,178 (631,789)
Accrued expenses (242,416) 26,102
Income taxes payable - (762,961)
Total adjustments (736,952) (1,906,739)
Net cash used in
operating activities (1,191,176) (1,360,908)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (285,517) (385,584)
Purchase of marketable securities (100,000) -
Sale of marketable securities 327,294 458,614
Net cash (used in) provided by
investing activities (58,223) 73,030
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 1,331,254 2,099,743
Payment of cash dividend (220,278) (377,687)
Repurchase of common stock - (149,500)
Net cash provided by
financing activities 1,110,976 1,572,556
NET (DECREASE) INCREASE IN CASH
& CASH EQUIVALENTS (138,423) 284,678
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD 263,362 193,918
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 124,939 $ 478,596
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Unrealized loss on available-
for-sale securities $ 183,389 -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 247,616 $ 115,796
Income/Franchise taxes 53,402 1,287,130
<FN>
See notes to consolidated financial statements.
5</page>
AIRT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Financial Statements
The Consolidated Balance Sheet as of September 30, 1999, the
Consolidated Statements of Earnings (Loss)for the three and six-month
periods ended September 30, 1999 and 1998 and the Consolidated
Statements of Cash Flows for the six-month periods ended September 30,
1999 and 1998 have been prepared by AirT, Inc. (formerly Air
Transportation Holding Company, Inc.) (the Company) without audit. On
August 13, 1999, Air Transportation Holding Company, Inc. stockholder's
approved a name change to AIRT, Inc.; AIRT, Inc. common shares will
continue to be traded on NASDAQ under the symbol AIRT. 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 September 30, 1999, 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,
1999. 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, 1999 and March 31, 1999 consolidated
balance sheets.
The Company records a valuation allowance in order to reduce its
deferred tax asset to an amount which is more likely than not to be
realized. At September 30, 1999 and March 31, 1999, the Company had no
valuation allowance.
The income tax provisions for the six-months ended September 30,
1999 and 1998 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 per share, shares issuable under employee stock options were
considered common share equivalents and were included in the weighted
average common shares. For the three and six-months ended September
30, 1999, shares issuable under employee stock options were excluded
from the diluted loss per share calculation due to an anti-dilutive
effect.
6</page>
The computation of basic and diluted earnings (loss) per common share
is as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
Net earnings (loss) $(464,744)$ 239,133 $(454,224)$ 545,831
Weighted average common shares:
Shares outstanding - basic 2,764,653 2,696,320 2,764,653 2,703,986
Dilutive stock options - 97,245 - 98,234
Shares outstanding - diluted 2,764,653 2,793,565 2,764,653 2,802,220
Net earnings (loss) per common share:
Basic $ (0.17)$ 0.09 $ (0.16)$ 0.20
Diluted $ (0.17)$ 0.09 $ (0.16)$ 0.19
7</page>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Overview
On August 13, 1999, Air Transportation Holding Company, Inc.
stockholder's approved a name change to AIRT, Inc.; AIRT Inc. common
shares will continue to be traded on NASDAQ under the symbol AIRT.
Statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" or made by management of
the Company which contain more than historical information may be
considered forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) which are subject to
risks and uncertainties. Actual results may differ materially from
those expressed in the forward-looking statements because of important
risks and uncertainties, including but not limited to the effects of
economic, competitive and market conditions in the aviation industry.
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 four types of aircraft operated by
MAC and CSA-Cessna Caravan, Fokker F-27, Short Brothers SD3-60, and
Short Brothers SD3-30. Cessna Caravan, Fokker F-27 and Shorts SD3-60
aircraft (a total of 94 aircraft at March 31, 1999) are owned by and
dry-leased from a major air express company (Customer), and Short
Brothers SD3-30 aircraft (two aircraft at March 31, 1999) are owned by
the Company and periodically 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.
8</page>
In May 1997, to expand its revenue base, the Company's Mountain
Aircraft Services, LLC (MAS) subsidiary expanded its offering of
aircraft component repair services. MAS's revenue contributed
$4,072,000 and $2,210,000 to the Company's revenues for the six-month
periods ended September 30, 1999 and 1998, 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, operated as a subsidiary of MAS, contributed
approximately $4,655,000 and $6,694,000 for the six-month periods ended
September 30, 1999 and 1998, respectively.
In June 1999, Global was awarded a four-year, $25,000,000 contract
to supply deicing equipment to the United States Air Force. The
Company was subsequently made aware that a competing bidder had filed a
protest opposing the awarding of the contract to Global. In September
1999 the General Accounting Office finalized the denial of the protest
and upheld the awarding of the Air Force contract to Global.
As a result of the delays created by this protest, revenue
originally anticipated to commence during the quarter ending December
31, 1999, is currently projected to be delayed until the quarter ending
March 31, 2000. Additionally, the protest and its resulting delay
caused Global to incur substantial legal fees and additional overhead
costs per direct labor hour due to reallocation of fixed production
costs to other product lines during the six-month period ended
September 30, 1999.
Seasonality
Global's business has historically been highly seasonal. In
general, the bulk of Global's revenues and earnings have typically
occurred during the second and third fiscal quarters, and comparatively
little 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 and earnings by broadening its product
line to increase revenues in the first and fourth fiscal quarters. The
remainder of the Company's business is not materially seasonal.
Results of Operations
Consolidated revenue decreased $730,000 (2.9%) to $24,696,000 and
increased $990,000 (7.7%) to $13,906,000, respectively, for the six and
three-month periods ended September 30, 1999 compared to their
equivalent 1998 periods. The six-month current period net decrease in
revenue primarily resulted from decreased sales by Global and MAC,
partially offset by increased revenue at MAS, while the three-month
increase in revenue primarily resulted from increases in Global's sales
and component repair services revenue at MAS, partially offset by
decreased MAC revenue.
9>/page>
Results of Operations (Cont'd)
Operating expenses increased $749,000 (3.1%) to $25,205,000 for
the six-month period ended September 30, 1999 and $2,054,000 (16.5%) to
$14,524,000 for the three-month period ended September 30, 1999
compared to their equivalent 1998 periods. The change in operating
expenses for the six-month period consisted of the following: cost of
flight operations decreased $179,000 (2.7%), primarily as a result of
decreases in pilot and flight personnel and costs associated with pilot
travel offset by a $88,000 prior period worker's compensation insurance
adjustment ; maintenance and brokerage expense increased $1,969,000
(24.0%), primarily as a result of increases associated with personnel
and cost of parts and labor related to the expansion of MAS's repair
shop, and increased personnel cost and a $72,000 prior period worker's
compensation adjustment at MAC; ground equipment decreased $1,108,000
(20.2%), as a result of decreased Global sales partially offset by
higher than normal production costs associated with the introduction of
new products and the reallocation of unused plant capacity and legal
costs related to the Air Force contract protest and resulting delays;
depreciation and amortization increased $113,000 (32.0%)
as a result of increased depreciation related to the expansion of MAS
and Global; general and administrative expense decreased $46,000 (1.3%)
primarily as a result of decreased wages and benefits, advertising and
staff travel expense associated with changes at Global partially offset
by increased legal fees.
The change in operating expenses for the three-month period
consisted of the following: cost of flight operations increased a net
of $1,000, primarily as a result of the $88,000 prior period worker's
compensation premium adjustment offsetting decreased personnel and
travel cost; maintenance and brokerage expense increased $771,000
(18.2%), primarily as a result of increases associated with personnel
and cost of parts and labor related to the expansion of MAS's repair
shop and increased personnel cost and a $72,000 prior period worker's
compensation premium adjustment at MAC; ground equipment increased
$1,123,000 (42.9%), as a result of increased Global sales and higher
than normal production costs associated with the introduction of new
products and the reallocation of unused plant capacity and legal costs
related to the Air Force contract protest and resulting delays;
depreciation and amortization increased $45,000 (24.8%) as a result of
increased depreciation related to the expansion of MAS and Global;
general and administrative expense increased $114,000 (5.9%) primarily
as a result of increased legal fees associated with finalizing Global's
Air Force contract.
Non-operating expense increased $190,000 and $113,000,
respectively, for the six and three-month periods ended September 30,
1999 and September 30, 1998. The increases were principally due to
increased credit line interest.
10</page>
Results of Operations (Cont'd)
Pretax earnings decreased $1,670,000 and $1,177,000, respectively,
for the six and three-month periods ended September 30, 1999, compared
to their respective September 30, 1998 periods. The six-month decrease
was principally due to a $1,216,000 increase in the loss at Global and
$686,000 decreased earnings at MAC, partially offset by an increase in
CSA and MAS earnings. Global's net loss increased $808,000 for the
three-month period ended September 30, 1999 compared to 1998 was
partially offset by increased profitability at MAS and CSA. The
substantial increase in Global's current period loss was primarily due
to lost revenue, reallocation of unused productive capacity and legal
cost associated with the protest and delay in finalizing the Air Force
contract, higher than normal production, engineering and design cost
associated with the introduction of new products and higher levels of
interest expense to fund its operations. MAC's decreased earnings are
primarily related to decreased wet lease cargo and maintenance revenue,
increased operating costs and costs related to prior period worker's
compensation premium adjustment.
The provision for income taxes decreased $669,000 and $474,000 for
the six and three-month periods ended September 30, 1999, respectively
compared to their respective 1998 periods due to decreased taxable
income.
Liquidity and Capital Resources
As of September 30, 1999 the Company's working capital amounted to
$6,131,000, a decrease of $843,000 compared to March 31, 1999.
In August 1999, the Company renewed its $7,000,000 unsecured line
of credit to August 2000. In October 1999, the Company temporarily
increased its unsecured line of credit to $7,500,000 for a ninety-day
period to end December 31, 1999. The line, which matures August 31,
2000, is expected to be renewed before its expiration date. Amounts
advanced under the line of credit bear interest at the 30-day "LIBOR"
rate plus 137 basis points.
Under the terms of the line of credit the Company must maintain
certain financial ratios and may not encumber certain real or personal
property. At September 30, 1999 the Company was in a net borrowing
position against its credit line of $5,225,000. Management believes
that funds anticipated from operations and the continuation of existing
credit facilities will provide adequate cash flow to meet the Company's
future financial needs.
The respective six-month periods ended September 30, 1999 and 1998
resulted in the following changes in cash flow: operating activities
used $1,191,000 and $1,361,000, investing activities used $58,000 and
provided $73,000 and financing activities provided $1,111,000 and
$1,573,000. Net cash decreased $138,000 and increased $285,000 for the
respective six-month periods ended September 30, 1999 and 1998.
11</page>
Liquidity and Capital Resources (Cont'd)
Cash used in operating activities was $170,000 less for the six-
months ended September 30, 1999 compared to the similar 1998 period,
principally due to decreased earnings, increases in accounts payable
and taxes payable partially offset by decreased earnings and increased
inventory.
Cash used in investing activities for the six-months ended
September 30, 1999 was approximately $131,000 more than the comparable
period in 1998, principally due to marketable securities transactions
and fewer capital expenditures in 1999.
Cash provided by financing activities for the six-months ended
September 30, 1999 was approximately $462,000 less than the comparable
1998 period, principally due to a decrease in borrowings under the line
of credit in 1999, partially offset by a decrease in cash dividend and
repurchase of common stock in 1999.
There are currently no commitments for significant capital
expenditures. The Company's Board of Directors, on August 7, 1998,
adopted the policy to pay an annual cash dividend in the first quarter
of each fiscal year, in an amount to be determined by the board. The
Company paid a $0.08 per share cash dividend in June 1999.
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 inflation could
be passed on to its customers, 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.
12</page>
Year 2000 Issue
The Company has initiated a comprehensive review of its operations
and computer systems to identify the extent to which it 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. The Company has broken down its review to assess its
information technology systems (IT Systems), the aspects of its
operations that rely on devices that may contain embedded microchips
(Non-IT Systems) and its relationships and reliance on vendors,
suppliers, customers and others with whom the Company deals whose
operations may be affected by the year 2000 issue. This review was
conducted by the Company's Year 2000 compliance committee, authorized
to assess the Company's risks and develop a comprehensive plan to
address the year 2000 issue.
State of Readiness
IT Systems. As a result of such review, as of the date of this
Quarterly Report on Form 10-Q, the Company has catalogued all IT
Systems utilized directly by the Company. The Company has revised,
and tested, certain customized IT Systems to enable such systems to
work properly following the year 2000 and has verified that recently
acquired IT Systems from third-party vendors are "year 2000 compliant".
Management utilized external resources to upgrade internal software
systems to become year 2000 compliant. Management believes that such
systems have been completely tested and are currently compliant.
Non-IT Systems. The Company utilizes a number of devices that include
embedded microchips that may be affected by the year 2000 issue,
including aircraft operated under lease agreements with its major
customer. The Company has completed the testing and replacing of any
noncompliant devices. Under its agreements with its major customer the
cost of replacing such components in aircraft leased by the Company
from its customer was passed on to the customer.
Material Third Parties. The Company has made concerted efforts to
understand the year 2000 compliance readiness of third parties
(including, among others, domestic and international government
agencies and air traffic control systems material to the Company's
operations, vendors, suppliers and major customers) whose year 2000 non-
compliance could either have a material adverse effect on the Company's
business, financial condition or results of operations or involve a
safety risk to employees or customers.
13</page>
The Company has actively encouraged year 2000 compliance on the part of
third parties and has developed contingency plans in the event of their
year 2000 non-compliance. The Company has contacted, in writing and by
telephone, each "mission critical" vendor and supplier, requesting
completion of a questionnaire to assess such third party's year 2000
compliance. The Company's vendors and suppliers are under no
contractual obligation to provide such information to the Company.
Although the Company has received written or verbal assurances of
compliance, year 2000 issue disruptions experienced by "mission
critical" vendors could adversely affect the Company's operations.
The Company has met with its major air cargo customer on numerous
occasions, to discuss and co-ordinate year 2000 readiness and
contingency planning. In addition, the Company has reviewed public
filings of its major customer to assess the customer's state of year
2000 compliance. Such discussions and filings indicate plans by such
customer to be 100% internal systems year 2000 compliant, including
operating subsidiaries, by September 1, 1999 and Non-IT system
compliant by November 1, 1999. However, such customer's operations
rely on many third parties, including governmental agencies, airports
and air traffic control systems described below.
In conjunction with the Company's major air cargo customer and industry
trade associations, the Company is involved in an industry-wide effort
to understand the year 2000 compliance status of airports, air traffic
systems, and other U.S. and international government agencies that may
affect the Company's air cargo operations. The Company's air cargo
routes are selected and scheduled by its major customer.
In addition to general risks raised by the year 2000 issue, the
Company's primary business segment, providing air cargo services to the
overnight express delivery industry, is subject to significant
additional risks. First, the Company's relationship with its major air
cargo customer is based, in significant part, on the Company's
operating reliability. A failure to timely confirm its year 2000
compliance to the customer could result in a loss of such relationship.
The Company has provided this customer with detailed plans and the time
schedule for completion of its year 2000 compliance program, which the
Company has verified fits within the customer's planned schedule. In
addition, the bulk of the Company's aircraft fleet is leased from such
customer and is dedicated for use in flying routes designated by the
customer.
Costs
The Company estimates the cost incurred to date for year 2000
compliance is approximately $120,000. No material future cost are
expected to be incurred. The foregoing costs do not include the
allocation of substantial internal employee time since the Company does
not track such internal costs.
14</page>
Contingency Plans
The Company has developed contingency plans for year 2000 non-
compliance, including the pre-arranging of alternative operating
methods and locations, the stockpiling of critical inventory and
supplies and implementing back-up systems and procedures, including
manual systems to perform mission-critical functions while IT systems
can be brought back on line. Contingency plans also call for
alternative Company-wide communications systems and complete on site
staffing of key executive and management personnel during the
transition to January 1, 1999. Due to the Company's dependence upon,
and its current uncertainty with, the year 2000 compliance of certain
government agencies, third-party suppliers, vendors and customers with
whom the Company deals, the Company is unable to determine at this time
its most reasonably likely worst case scenario. While costs related to
the lack of year 2000 compliance by third parties, business
interruptions, litigation and other liabilities related to year 2000
issues could materially and adversely affect the Company's business,
results of operations and financial condition, the Company believes its
internal year 2000 compliance efforts and contingency planning have
reduced significantly the Company's level of uncertainty about the
impact of year 2000 issues affecting both its IT Systems and non-IT
Systems.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold or issue derivative financial instruments for
trading or other purposes. The Company is exposed to changes in
interest rates on 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 quarter-end
balance of the line of credit, annual interest expense would have
increased by approximately $49,000.
15</page>
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 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 Bank of America, the Company and its
subsidiaries, dated August 31, 1999
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 options 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 30,000 30,000 40,000
John J. Gioffre 20,000 20,000 25,000
William H. Simpson 40,000 40,000 60,000
incorporated by reference to Exhibit 10.8 of the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1993
16</page>
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*
10.9 Employment Agreement dated January 1, 1996 between Company, Mountain
Air Cargo Inc. and Mountain Aircraft Services, LLC and J. Hugh
Bingham, incorporated by reference to Exhibit 10.10 to the Company's
Annual Report Form 10-K for the fiscal year end March 31, 1996.*
10.10 Employment Agreement dated September 30, 1997 between Mountain
Aircraft Services, LLC and J. Leonard Martin, incorporated by refer-
ence to Exhibit 10.10 to the Company's Quarterly Report
Form 10-Q for the quarter ended December 31, 1997.*
10.11 Omibus Securities Award Plan, incorporated by reference to Exhibit
10.11 for the quarter ended June 30, 1999.*
10.12 Commercial and Industrial Lease Agreement dated August 25, 1998
between William F. Bieber and Global Ground Support, LLC, incorporated
by reference to Exhibit 10.12 of the Company's Quarterly Report on 10Q
for the period ended September 30, 1998.
10.13 Amendment, dated February 1, 1999, to Aircraft Dry Lease and Service
Agreement dated February 2, 1994 between Mountain Air Cargo, Inc. and
Federal Express Corporation, incorporated by reference to Exhibit
10.13 of the Company's Quarterly Report on 10Q for the period ended
December 31, 1998.
21.1 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 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)
_______________________
* 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 first six months of the
fiscal year ending March 31, 2000.
17</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.
AIRT, INC.
(Registrant)
Date: November 9, 1999 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: November 9, 1999 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
18</page>
AIRT, INC.
EXHIBIT INDEX
EXHIBIT PAGE
10.2 Loan Agreement among Bank of America, the Company
and its subsidiaries, dated August 31, 1999. 20-35
19</page>