Air T, Inc. Reports Second Quarter Fiscal 2021 Results

Rhea-AI Summary

Air T, Inc. (NASDAQ:AIRT) reported its fiscal Q2 2020 results, revealing revenues of $35.6 million, a 30% decline from the previous year. The company experienced an operating loss of $3.7 million, a significant drop from a profit of $0.5 million in Q2 2019. Adjusted EBITDA also fell to a loss of $2.7 million, compared to a profit of $1.2 million in the same quarter last year. Loss per share was $1.01, down from a profit of $1.89. Equity decreased by 17.2% from $25 million to $20.7 million over the same period, reflecting ongoing challenges amid the COVID-19 pandemic.

Positive

• Overnight Air Cargo segment's adjusted EBITDA improved by $0.3 million due to lower operating costs.
• Order backlog for the GGS segment increased to $36.8 million from $36.2 million year-over-year.

Negative

• Total revenues decreased by $15.1 million, or 30%, compared to the same quarter last year.
• Operating loss increased sharply to $3.7 million from a profit of $0.5 million in the previous year.
• Adjusted EBITDA loss of $2.7 million compared to a profit of $1.2 million in Q2 2019.
• Loss per share of $1.01 down from income per share of $1.89 in the prior year, indicating a substantial decline in profitability.
• Commercial Jet Engines and Parts revenue plummeted by $11.7 million due to the COVID-19 impact on aviation traffic.

DENVER, NC / ACCESSWIRE / November 12, 2020 / Air T, Inc. (NASDAQ:AIRT) is an industrious American company with a portfolio of businesses, each of which is independent yet interrelated. We seek dynamic individuals and teams to operate companies using processes that increase value over time. We believe we can apply corporate resources to help activate growth and overcome challenges.

Our core segments are overnight air cargo; aviation ground equipment manufacturing and sales; commercial jet engines and parts; and corporate and other.

Today the Company is announcing results for the fiscal quarter ended September 30, 2020:

• Revenues from Continuing Operations totaled $35.6 million for the quarter ended September 30, 2020, a decrease of $15.1 million, or 30% from the prior year comparable quarter.
• Operating Loss from Continuing Operations was $3.7 million for the quarter, a decrease of $4.2 million from last year's second quarter Operating Income from Continuing Operations of $0.5 million.
• Adjusted EBITDA* loss of $2.7 million for the quarter ended September 30, 2020, compared to profit of $1.2 million in the same quarter a year ago.
• Loss per share of $1.01 for the quarter ended September 30, 2020, compared to Income per share of $1.89 for the same quarter last year.
• Total Equity decreased from $25.0 million as of March 31, 2020 to $20.7 million as of September 30, 2020, a decrease of 17.2%.

*Adjusted EBITDA is a non-GAAP financial measure; see below for further explanation and reconciliation to GAAP measure.

Company Chairman and CEO Nick Swenson commented:

"AIRT continues to work through the many challenges that the COVID-19 pandemic laid on our doorstep. We are thankful for the great efforts that our employees and partners have been undertaking on a daily basis. This is the time when people are tested and our people are coming through this challenge looking good and doing their best. While it is difficult to say that things are improving, and they might very well be getting worse with a second peak in COVID-19 infections, we are acting with prudence and caution in each of our businesses. Fortunately we are able to rely on the robust book at GGS, and the smooth and steady operations of MAC/CSA. Big thank you to Mike Moore and Mike Bandalan, and their able teams. We often reflect humbly on the helpful timing of our GAS sale in September 2019, bearing in mind at times it is better to be lucky than good. We look forward to completing Contrail's Main Street loan in such a way that will assist them work through to the recovery. We are a small and relatively diversified company. We rely on the leadership and inspired work of each and every individual. If we pick the right paths, and remember our limits, we will transform ourselves and the organization."

Long-time AIRT shareholders will have noticed that we have added an interactive Q&A capability, through Slido.com, to our annual meeting process. We intend to keep that link (https://app.sli.do/event/j8drfixw) open and available for shareholder questions. Questions submitted through Slido will be answered "live" and in writing at our Annual Meeting; and via a written response on a quarterly basis, shortly following our Form 10-Q filings. Note that legal and pragmatic requirements restrict us from answering every question posted, yet we intend to address all reasonable and relevant questions with a written answer. We hope that quarterly Q&A, along with enhanced reporting brought to us by our CFO, Brian Ochocki, will be welcome improvements. We aspire to provide the right level of information and delivering insight to shareholders, without noise and distraction. Your participation in an ongoing Q&A with management will help this process along. Thank you in advance.

Business Segment Results

Overnight Air Cargo

• This segment provides air express delivery services, substantially all for FedEx.
• Revenues for this segment decreased 12% to $17.3 million in the quarter ended September 30, 2020 compared to $19.7 million in the prior year quarter, primarily due to a reduction in third-party maintenance revenue.
• Adjusted EBITDA* for this segment was $0.6 million, an increase of $0.3 million when compared to the same quarter a year ago. The improvement was due primarily to lower operating costs, which were driven by a much more efficient operation in the current fiscal quarter.

Aviation ground equipment manufacturing and sales ("GGS")

• This segment, which is the world's largest manufacturer of aircraft de-icing equipment, manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, and military and industrial customers.
• Revenues for this segment totaled $12.1 million for the quarter ended September 30, 2020, down 5% versus $12.7 million in the same quarter in 2019, due primarily to a slight decrease in the volume of deicers sold and reduced service/parts revenue due to COVID-19.
• Adjusted EBITDA* for this segment was $1.0 million in the quarter ended September 30, 2020, a decrease of $0.3 million compared to the prior year quarter, due primarily to the revenue decrease noted above.
• As of September 30, 2020 the order backlog was $36.8 million versus $36.2 million on September 30, 2019.

Commercial Jet Engines and Parts

• This segment leases commercial jet engines and aircraft; buys, sells and trades in surplus and aftermarket commercial jet engines, engine parts, airframes, and airframe parts, avionics, and other; then delivers the related documents and logistics.
• Revenues for this segment totaled $6.1 million for the quarter ended September 30, 2020, a decrease of $11.7 million over the previous year's second fiscal quarter. The decrease was driven completely by the unprecedented slowdown in commercial aviation traffic caused by the COVID-19 pandemic.
• Adjusted EBITDA* for this segment was a loss of $1.6 million for the quarter ended September 30, 2020 compared to Adjusted EBITDA* of $1.2 million in the prior year's quarter due to the revenue slowdown caused by the COVID-19 pandemic.

Corporate and Other

• This segment includes expenses attributable to core Corporate functions, investment research, and specialized resources that are available to business units.
• This segment's Adjusted EBITDA* for the quarter ended September 30, 2020 represented a loss of $2.7 million in the quarter, compared to a loss of $1.5 million in the same quarter a year ago.

*Adjusted EBITDA is a non-GAAP financial measure; see below for further explanation and reconciliation to GAAP measure.

Non-GAAP Financial Measures

The Company uses adjusted earnings before taxes, interest, and depreciation and amortization ("Adjusted EBITDA"), a non-GAAP financial measure as defined by the SEC, to evaluate the Company's financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation and amortization, adjusted for specified items. The Company calculates Adjusted EBITDA by removing the impact of specific items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. When calculating Adjusted EBITDA, the Company does not add back depreciation expense for aircraft engines that are on lease, as the Company believes this expense matches with the corresponding revenue earned on engine leases. Depreciation expense for leased engines totaled $0.8 million and $1.4 million for the three months ended September 30, 2020 and 2019, respectively. Depreciation expense for leased engines totaled $1.1 million and $3.0 million for the six months ended September 30, 2020 and 2019, respectively.

Management believes that Adjusted EBITDA is a useful measure of the Company's performance because it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EBITDA is not intended to replace or be an alternative to operating income from continuing operations, the most directly comparable amounts reported under GAAP.

The tables below provide a reconciliation of operating income from continuing operations to Adjusted EBITDA and Adjusted EBITDA by segment for the three and six months ended September 30, 2020 and 2019 (in thousands):

		Three Months Ended								Six Months Ended
		9/30/2020				9/30/2019				9/30/2020				9/30/2019
Operating income from continuing operations		$	(3,684	)		$	466			$	(3,949	)		$	1,465
Depreciation and amortization (excluding leased engines depreciation)			305				344				658				647
Asset impairment, restructuring or impairment charges			664				402				664				409
(Gains)/Losses on disposition of assets			(3	)			1				(4	)			(3	)
Security issuance expenses			-				34				-				269
Adjusted EBITDA		$	(2,718)			$	1,247			$	(2,631)			$	2,787

Included in the asset impairment, restructuring or impairment charges for the three and six months ended September 30, 2020 was a write-down of $0.5 million on the commercial jet engines and parts segment's inventories due to a management decision to monetize two engines by sale to a third party, in which the net carrying values exceeded the estimated proceeds.

The following table shows the Company's Adjusted EBITDA by segment for the three and six month periods ended September 30, 2020 and 2019, respectively.

		Three Months Ended								Six Months Ended
		9/30/2020				9/30/2019				9/30/2020				9/30/2019
Overnight Air Cargo		$	596			$	273			$	1,166			$	309
Ground Equipment Sales			970				1,285				3,254				2,685
Commercial Jet Engines and Parts			(1,614	)			1,190				(2,390	)			3,171
Corporate and Other			(2,670	)			(1,501	)			(4,661	)			(3,378	)
Adjusted EBITDA		$	(2,718)			$	1,247			$	(2,631)			$	2,787

ABOUT AIR T, INC.

Established in 1980, Air T Inc. is a portfolio of powerful businesses and financial assets, each of which is independent yet interrelated. Its core segments are overnight air cargo, aviation ground support equipment manufacturing, and commercial aircraft asset management and logistics. We seek to expand, strengthen and diversify Air T's after-tax cash flow per share. Our goal is to build Air T's core businesses, and when appropriate, to expand into adjacent and other industries. We seek to activate growth and overcome challenges while delivering meaningful value for all stakeholders. For more information, visit www.airt.net.

FORWARD-LOOKING STATEMENTS

Certain matters discussed in this press release may be considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements are subject to risks, uncertainties and assumptions about our operations and the investments we make, including, among other things, factors discussed under the heading "Risk Factors" in our 10-K, as well as the following:

• Conditions in the Company's markets;
• The ability of the Company and its business segments to generate sufficient cash flows from operations or through financings.
• The risk that contracts with FedEx could be terminated or adversely modified;
• The risk that the number of aircraft operated for FedEx will be reduced;
• The risks faced by commercial aircraft operators and maintenance, repair and overhaul companies because they are our customers.
• Our engine values and lease rates, which are dependent on the status of the types of aircraft on which engines are installed, and other factors.
• The Company and its customers operate in a highly regulated industry and changes in economic conditions, laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.
• We may experience losses and delays in connection with repossession of engines or aircraft when a lessee defaults.
• The risk that customers or potential customers will defer significant orders for deicing equipment under contracts with GGS;
• The impact of any terrorist activities or protests on United States soil or abroad;
• The Company's ability to manage its cost structure and operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production or equipment volume levels;
• The risk of injury or other damage arising from accidents involving the Company's overnight air cargo operations, equipment or parts sold and/or services provided;
• Market acceptance of the Company's commercial and military equipment and services;
• Competition from other providers of similar equipment and services;
• Changes in government regulation and technology;
• Changes in the value of marketable securities held as investments; and
• Mild winter weather conditions reducing the demand for deicing equipment.
• The Company's ability to meet debt service covenants, obtain additional financing and to refinance existing debt obligations
• The length, severity and impact of the COVID-19 pandemic; and
• The risks and uncertainties related to business acquisitions (including the ability to successfully achieve anticipated benefits) inflation rates, competition, changes in technology or government regulation, debt covenants, information technology disruptions, and the impact of future terrorist activities in the United States and abroad.

Forward-looking statements can be identified by the use of words like "believes," "could," "possibly," "probably," "anticipates," "estimates," "projects," "expects," "may," "will," "should," "seek," "intend," "plan," "expect," or "consider" or the negative of these expressions or other variations, or by discussions of strategy that involves risks and uncertainties. All forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. We base these forward-looking statements on current expectations and projections about future events and the information currently available to us. Although we believe that the assumptions for these forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Consequently, no representation or warranty can be given that the estimates, opinions, or assumptions made in or referenced in this press release will prove to be accurate. We undertake no obligation to update our forward-looking statements. We caution you that the forward-looking statements in this press release are only estimates and predictions, or statements of current intent. Actual results or outcomes, or actions that we ultimately undertake, could differ materially from those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions underlying these statements. These risks, uncertainties and assumptions include, but are not limited to, those discussed in this press release.

CONTACT

Air T, Inc.
Brian Ochocki, CFO
bochocki@airt.net
612-843-4302

SOURCE: Air T, Inc.

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FAQ

What were Air T's revenue figures for the quarter ended September 30, 2020?

Air T reported revenues of $35.6 million for the quarter, a 30% decrease from the prior year.

How did Air T's operating loss for Q2 2020 compare to the previous year?

The company reported an operating loss of $3.7 million, a decrease of $4.2 million from a profit of $0.5 million in Q2 2019.

What was Air T's adjusted EBITDA for the quarter ending September 30, 2020?

Adjusted EBITDA for the quarter was a loss of $2.7 million, compared to a profit of $1.2 million in the same quarter last year.

What was the loss per share reported by Air T for Q2 2020?

The loss per share for the quarter ended September 30, 2020, was $1.01, down from an income of $1.89 per share in the previous year.

How has Air T's equity changed compared to earlier this year?

Total equity decreased from $25 million as of March 31, 2020, to $20.7 million as of September 30, 2020, a decrease of 17.2%.