Air T(AIRT) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, showing a net income turnaround to $0.3 million, asset growth to $145.1 million, and detailed notes on accounting policies and new business formations Condensed Consolidated Statements of Income (Loss) The company reported a net income of $327 thousand for Q1 2022, a significant turnaround from a $956 thousand net loss in Q1 2021, with diluted EPS of $0.10 Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Operating Revenues | $36,968 | $36,970 | | Overnight air cargo | $18,851 | $16,171 | | Ground equipment sales | $8,182 | $15,828 | | Commercial jet engines and parts | $9,594 | $4,693 | | Operating Loss | ($4) | ($266) | | Net Income (Loss) | $327 | ($956) | | Net Income (Loss) Attributable to Air T, Inc. Stockholders | $289 | ($841) | | Diluted Income (Loss) per share | $0.10 | ($0.29) | Condensed Consolidated Balance Sheets Total assets increased to $145.1 million as of June 30, 2021, driven by inventories and receivables, with total liabilities rising to $123.2 million Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,085 | $10,996 | | Inventories, net | $75,770 | $71,971 | | Total Current Assets | $109,430 | $105,774 | | Total Assets | $145,120 | $140,750 | | Total Current Liabilities | $30,253 | $28,179 | | Long-term debt | $83,804 | $81,857 | | Total Liabilities | $123,237 | $119,438 | | Total Equity | $14,879 | $14,714 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $8.8 million, while financing activities provided $5.8 million, ending the period with $11.4 million in cash Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,821) | ($3,335) | | Net cash used in investing activities | ($1,449) | ($548) | | Net cash provided by financing activities | $5,819 | $5,040 | | Net (Decrease) Increase in Cash | ($4,500) | $1,085 | | Cash and Restricted Cash at End of Period | $11,427 | $16,656 | Notes to Condensed Consolidated Financial Statements Detailed notes disclose accounting policies, the formation of a new aircraft asset management business with a $53 million commitment, COVID-19 impacts, and total debt of $94.4 million - On May 5, 2021, the Company formed a new aircraft asset management business, Contrail Asset Management, LLC ("CAM"), and a new aircraft capital joint venture, Contrail JV II LLC ("CJVII"). CAM has an initial commitment to CJVII of approximately $53 million, comprised of $8 million from the Company and $45 million from Mill Road Capital ("MRC")[32][94] - The COVID-19 pandemic continues to present uncertainty, with the company experiencing a reduction in demand for commercial aircraft, jet engines, and parts compared to historical periods. Management expects the impact to continue to some extent[33] Disaggregated Revenues by Type (in thousands) | Revenue Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Product Sales | $21,941 | $22,781 | | Support Services | $14,504 | $13,511 | | Leasing Revenue | $243 | $455 | | Other | $282 | $223 | | Total | $36,968 | $36,970 | Total Debt Summary (in thousands) | Debt Category | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Air T Debt | $44,577 | $38,807 | | AirCo 1 Debt | $6,200 | $6,200 | | Contrail Debt | $43,598 | $43,598 | | Delphax Solutions Debt | $33 | $32 | | Total Debt | $94,408 | $88,637 | | Total Debt, net | $93,341 | $87,496 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A covers Q1 FY2022 financial performance, noting flat revenue at $37.0 million, significant segment shifts, improved operating loss, and increased Adjusted EBITDA to $0.3 million Results of Operations Q1 FY2022 consolidated revenue remained flat at $37.0 million, with Commercial Jet Engines and Parts revenue surging 104% while Ground Equipment Sales declined 48%, narrowing the operating loss to $4 thousand Revenue by Segment (in thousands) | Segment | Q1 FY2022 | Q1 FY2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Overnight Air Cargo | $18,851 | $16,171 | $2,680 | 17% | | Ground Equipment Sales | $8,182 | $15,828 | ($7,646) | (48)% | | Commercial Jet Engines and Parts | $9,594 | $4,693 | $4,901 | 104% | | Corporate and Other | $341 | $278 | $63 | 23% | | Total | $36,968 | $36,970 | ($2) | —% | - The Ground Equipment Sales segment's order backlog was $7.1 million at June 30, 2021, a sharp decrease from $48.7 million at June 30, 2020, primarily due to the expiration of a USAF contract[103] Operating Income (Loss) by Segment (in thousands) | Segment | Q1 FY2022 | Q1 FY2021 | Change ($) | | :--- | :--- | :--- | | Overnight Air Cargo | $732 | $555 | $177 | | Ground Equipment Sales | $1,423 | $2,216 | ($793) | | Commercial Jet Engines and Parts | ($238) | ($902) | $664 | | Corporate and Other | ($1,921) | ($2,135) | $214 | | Total | ($4) | ($266) | $262 | Liquidity and Capital Resources The company maintains strong liquidity with $11.4 million cash and $54.5 million available credit, actively managing debt including an $8.2 million PPP loan forgiveness application and a $6.9 million unfunded joint venture commitment - As of June 30, 2021, the Company had approximately $11.4 million in cash and restricted cash, $2.4 million in marketable securities, and an aggregate of $54.5 million in available funds under its lines of credit[112] - The company has applied for forgiveness of its $8.2 million Paycheck Protection Program (PPP) loan obtained in April 2020[117] - The company has an unfunded capital commitment of approximately $6.9 million to its new aircraft capital joint venture, CJVII, as of June 30, 2021[119] Non-GAAP Financial Measures Adjusted EBITDA, a non-GAAP measure, significantly improved to $283 thousand for Q1 2022 from $87 thousand in the prior year, driven by strong segment performance Reconciliation of Operating Loss to Adjusted EBITDA (in thousands) | Line Item | Three months ended 6/30/2021 | Three months ended 6/30/2020 | | :--- | :--- | :--- | | Operating loss | ($4) | ($266) | | Depreciation and amortization (excluding leased engines) | $279 | $353 | | Loss on disposition of assets | $3 | — | | Amortization of security issuance expenses | $5 | — | | Adjusted EBITDA | $283 | $87 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on variable-rate debt and uses derivative instruments like interest rate swaps for protection - The Company is exposed to interest rate risk and utilizes derivative instruments as part of its risk management policy to provide protection against rising interest rates on its variable rate debt[129] Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The Certifying Officers concluded that the Company's disclosure controls and procedures were effective as of June 30, 2021[131] - No material changes were made to the Company's internal control over financial reporting during the quarter ended June 30, 2021[132] PART II - OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or share repurchases occurred during the quarter ended June 30, 2021 - No shares were repurchased under the company's stock repurchase program during the quarter ended June 30, 2021[133] Item 5. Other Information No other information required disclosure under this item for the reporting period Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including agreements for Contrail Asset Management, an At the Market Offering, and required officer certifications - Exhibits filed with this report include agreements related to the new Contrail Asset Management venture, an At the Market Offering Agreement, and officer certifications[135]