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Diversified Holding Company Air T, Inc. Q1 2019 Revenue Rose 28% to $60.9M And Q1 2019 Operating Income Rose 18% to $2.6M; Announces Consideration of Trust Preferred Offering

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Diversified Holding Company Air T, Inc. Q1 2019 Revenue Rose 28% to $60.9M And Q1 2019 Operating Income Rose 18% to $2.6M; Announces Consideration of Trust Preferred Offering

PR Newswire

DENVER, N.C., Aug. 14, 2018 /PRNewswire/ -- Air T, Inc. (NASDAQ:AIRT) is organized as a powerful portfolio of businesses and financial assets, each of which is independent yet interrelated. These include overnight air cargo operations, ground support equipment manufacturing and local maintenance services, and commercial aircraft asset management and logistics.  Today the Company is reporting continued improved financial performance for its fiscal quarter ended June 30, 2018.

Q1 2019 Overview

  • Revenues rose to $60.9 million for the fiscal quarter ended June 30, 2018, a 28% increase over the prior year comparable quarter
  • Operating income increased to $2.6 million, as compared to the prior quarter's operating income of $2.2 million
  • Non-cash bargain purchase gain of $2.0 million in the first quarter of fiscal 2019 versus non-cash bargain purchase gain of $0.5 million in the same quarter of the prior year
  • Net income attributable to Air T stockholders increased to $2.8 million, as compared to net income of $1 million in Q1 2018, with the increase primarily due to the $2.0 million non-cash bargain purchase gain recognized as part of the acquisition of the assets of Worthington Aviation
  • Diluted earnings per share increased to $1.38 compared to prior comparable quarter's $0.47

Business Segment Results

Commercial Jet Engines and Parts

  • This segment provides surplus and aftermarket commercial jet engine parts, airframes, avionics, other aircraft parts and logistics to the aviation industry.
  • Recent acquisitions in this segment include the acquisition of the assets of AirCo in May 2017 and the acquisition of the assets of Worthington Aviation Parts in May 2018.
  • Revenues for this segment totaled $27.3 million in Q1 2019, an increase of 115% over the same period of fiscal 2018. This increase is due to higher volume sales as this segment sold 4 whole jet engines in the current quarter as compared to none in the prior year comparable quarter, as well as the incremental revenue associated with our recent acquisitions.

Overnight Air Cargo

  • The segment provides air express delivery services, substantially all for FedEx.
  • Revenues for this segment rose 5% to $17.6 million in Q1 2019 compared to $16.7 million in Q1 2018.
  • The revenue increase was due to a variety of factors including increases in pass-through expenses and the administrative fee effective with the contract renewal on June 1, 2018, as well as additional billable maintenance hours.

Aviation Ground Support Maintenance Services

  • This segment provides ground support equipment maintenance and facilities maintenance services to domestic airlines and aviation service providers across the United States.
  • Revenue from this segment totaled $9.0 million in Q1 2019, a slight decline of 1% over Q1 2018.
  • The revenue decrease was due to the closing of two unprofitable locations in the second half of fiscal 2018.

Aviation Ground Support Equipment

  • This segment manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers
  • Revenues for this segment, which is the world's largest manufacturer of aircraft de-icing equipment, totaled $6.4 million for the fiscal quarter ended June 30, 2018. This represents an increase of 7% over the revenue of $5.9 million in the prior comparable quarter.
  • The segment has a sales backlog of $17.5 million as of June 30, 2018 compared to $16.4 million a year-ago.

Other Investments and Financial Liquidity

  • Air T owned approximately 3.5 million shares of common stock of Insignia Systems, Inc. (NASDAQ:ISIG) with a market value of $5.7 million as of June 30, 2018
  • As of June 30, 2018, Air T had $9.6 million of securities (including Insignia at market value of $5.7 million)
  • Working capital as of June 30, 2018 totaled $25.2 million compared to $30.5 million as of March 31, 2018

Consideration of Trust Preferred Offering
Air T is considering issuing and distributing $3 million in face value of a new 8% fixed income security, Alpha Income Preferred (AIP), pro rata to existing holders of Air T common stock. At this time, it is contemplated that Air T stockholders would also receive warrants to purchase up to an additional $17 million in 8% AIP at a discount to face value, exercisable for up to one year. If the warrants are all exercised, there will be $20 million in face amount of 8% AIP outstanding. The 8% AIP will be preferred securities of a subsidiary trust to be formed by Air T. Air T currently expects that both the AIP and the warrants would be listed for trading upon issuance on The Nasdaq Stock Market or another exchange or quotation service.  Air T anticipates completing the distribution in the third or fourth quarter of calendar 2018. However, Air T's Board has not yet approved this distribution nor has Air T yet engaged a trustee or finalized the plans for the distribution, which are subject to delay or cancellation.

Air T believes the distribution and issuance of the 8% AIP, if successfully implemented, will benefit Air T and its stockholders by increasing Air T's financial flexibility. Exercises of warrants will provide additional cash resources for Air T's investments and operations. In addition, the distribution will provide holders of Air T's securities with the ability to adjust their portfolios of securities according to their investment priorities.

ABOUT AIR T, INC.
Established in 1980, Air T Inc. is a powerful portfolio of businesses and financial assets, each of which is independent yet interrelated. Its four core segments are: overnight air cargo, aviation ground support equipment manufacturing, aviation ground support maintenance services, and commercial aircraft asset management and logistics. Our ownership interests are designed to expand, strengthen and diversify Air T's cash earnings power.  Our goal is to build on Air T's core businesses, and when appropriate, to expand into adjacent and other industries that we believe fit into the Air T portfolio.  For more information, visit www.airt.net.

FORWARD-LOOKING STATEMENTS
Statements in this press release, 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 potential risks and uncertainties, including, but not limited to, the risk that contracts with major customers will be terminated or not extended, future economic conditions and their impact on the Company's customers, the Company's ability to recover on its investments, including its investments in Delphax and other recently acquired companies, the timing and amounts of future orders under the Company's Global Ground Support subsidiary's contract with the United States Air Force, and risks and uncertainties related to business acquisitions, including the ability to successfully achieve the anticipated benefits of the acquisitions, inflation rates, competition, changes in technology or government regulation, information technology disruptions, and the impact of future terrorist activities in the United States and abroad. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. The Company is under no obligation, and it expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

 

AIR T, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)




Three Months Ended June 30,



2018


2017

Operating Revenues:





     Overnight air cargo


$

17,640,658


$

16,742,175

     Ground equipment sales


6,384,781


5,949,656

     Ground support services


9,047,640


9,113,073

     Printing equipment and maintenance


298,823


3,131,381

     Commercial jet engines and parts


27,320,175


12,725,341

     Corporate


175,392


35,747



60,867,469


47,697,373






Operating Expenses:





     Overnight air cargo


15,174,396


14,562,143

     Ground equipment sales


4,937,312


4,754,215

     Ground support services


7,805,209


7,418,393

     Printing equipment and maintenance


145,528


1,501,056

     Commercial jet engines and parts


20,121,118


10,069,850

     Research and development


-


195,653

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