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
DENVER, NC / ACCESSWIRE / November 10, 2022 / 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 second quarter ended September 30, 2022:
Revenues totaled $60.7 million for the quarter ended September 30, 2022, an increase of $17.5 million, or 40% from the prior year's comparable quarter.
Operating income was $0.2 million for the quarter ended September 30, 2022, a decrease of $0.5 million from the prior year's operating income of $0.7 million.
Adjusted EBITDA* profit of $2.3 million for the quarter ended September 30, 2022, compared to an Adjusted EBITDA* profit of $1.1 million in the prior year's comparable quarter.
Loss per share of $0.43 for the quarter ended September 30, 2022, compared to the income per share of $2.62 for the prior year's comparable quarter.
Total Equity decreased from $25.7 million as of March 31, 2022, to $23.9 million as of September 30, 2022, a decrease of $1.8 million, or 7%.
*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:
"The recovery in aviation continues and some of our businesses are the beneficiary. We think a lot about inflation (distortions in prices); and expect expectations of inflation to be a new factor in unpredictable ways. If inflation persists, will our large balance sheet of tangible assets and inventories provide a tailwind? Or will something else happen? If you are wondering, we don't see any letup in the economy, business activity and the ability of large corporates to ‘take price.' Shortly before the Ukraine War a very knowledgeable friend of ours said he believed the supply side was going to drive higher oil prices. Such a development surprised many.
The scale and intricacies of our balance sheet sometimes do not pair well with our income statement. This quarter our EBITDA demonstrated the aviation rebound but the asset impairments and other balance sheet-driven expenses reduced operating income. GAAP does the best it can with "The Accountancy" and we operate our businesses within the frameworks. At times this means it takes extra work to discern developments or they take time to become discernible. As a friend of mine says, "farm with what you've got."
It's important for us to work to absorb our significant corporate overhead expenses with more scale and diversity from our cash-generating assets and investments. Our corporate and other segment year to date operating loss is $1.8 million, which is higher than last year primarily due to higher health claims costs, as well as professional fees incurred in the establishment of our aircraft asset management joint venture. The team believes that AIRT Holdco has a lot of good things going for it and we work hard to make good investments and support our business units. Shareholders who know and appreciate the team here are excited about what the future holds."
This segment provides air express delivery services, substantially all for FedEx.
Revenues for this segment increased 17% to $22.1 million in the quarter ended September 30, 2022, compared to $18.8 million in the prior year quarter. The increase was principally attributable to higher administrative fees, maintenance labor and pass-through revenues from FedEx.
Adjusted EBITDA* for this segment was $1.2 million for the quarter ended September 30, 2022, an increase of $0.3 million when compared to the prior year quarter, primarily due to the revenue increase noted above.
Aviation ground equipment manufacturing and sales ("GGS")
This segment, which includes 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 $18.0 million for the quarter ended September 30, 2022, up 96% when compared to revenue of $9.2 million in the same quarter in 2021. The increase was primarily driven by significantly higher commercial ultimate deicers sales in the current quarter compared to the prior year comparable quarter.
Adjusted EBITDA* for this segment was $1.9 million in the quarter ended September 30, 2022, an increase of $1.9 million compared to the prior year quarter, due primarily to the revenue increase noted above.
As of September 30, 2022, this segment's order backlog was $21.1 million versus $10.9 million as of September 30, 2021.
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 $19.0 million for the quarter ended September 30, 2022, an increase of $4.1 million versus the previous year's second fiscal quarter. The increase was primarily driven by higher component part sales across all companies within the segment in the current quarter compared to the prior year comparable quarter.
Adjusted EBITDA* for this segment was $1.0 million for the quarter ended September 30, 2022, compared to an Adjusted EBITDA* income of $2.1 million in the prior year comparable quarter. The decrease was primarily attributable to the sale of an airframe with higher profit margin in the prior-year quarter that did not recur in the current-year quarter.
This segment includes expenses attributable to core Corporate functions, investment research, and specialized resources that are available to business units.
The corporate and other segment Adjusted EBITDA for the quarter ended September 30, 2022, represented a loss of $1.8 million in the quarter, which was relatively equivalent to an Adjusted EBITDA loss of $2.0 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 measures.
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 $0.4 million and $18.0 thousand for the three months ended September 30, 2022, and 2021, 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, the most directly comparable amounts reported under GAAP.
The table below provides a reconciliation of operating income to Adjusted EBITDA for the periods ended September 30, 2022, and 2021 (in thousands):Three months endedSix months ended9/30/20229/30/20219/30/20229/30/2021
Operating income$179$704$1,012$699
Depreciation and amortization (excluding leased engines depreciation)6453041,252584
Asset impairment, restructuring or impairment charges1,488-1,536-
(Gain) Loss on disposition of assets(1)-(2)3
Security expenses19603465
Adjusted EBITDA$2,330$1,068$3,832$1,351
Included in the asset impairment, restructuring or impairment charges for the three months ended September 30, 2022 was a write-down of $1.0 million on the commercial jet engines and parts segment's inventory. The write-down was attributable to our evaluation of the carrying value of inventory as of September 30, 2022, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory. Also included in that number is an impairment charge of $0.3 million related to previously capitalized costs on a software project that was deemed no longer probable to be completed and placed in service.
The following table shows the Company's Adjusted EBITDA by segment for the periods ended September 30, 2022, and 2021 (in thousands):Three months endedSix months ended9/30/20229/30/20219/30/20229/30/2021
Overnight Air Cargo$1,204$871$2,300$1,617
Ground Equipment Sales1,933742,1241,531
Commercial Jet Engines and Parts9792,0984,2482,024
Corporate and Other(1,786)(1,975)(4,840)(3,821)
Adjusted EBITDA$2,330$1,068$3,832$1,351
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 sales, commercial jet engines and parts, and corporate and other. 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 statements in this press release, including those contained in "Overview," are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the Company's financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements include those preceded by, followed by or that include the words "believes", "pending", "future", "expects," "anticipates," "estimates," "depends" or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as:
Economic and industry conditions in the Company's markets;
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 risk that GGS customers will defer or reduce significant orders for deicing equipment;
The impact of any terrorist activities on United States soil or abroad;
The Company's ability to manage its cost structure for operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production volume levels;
The Company's ability to meet debt service covenants and to refinance existing debt obligations, certain of which terminate in the next 12 months;
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;
Mild winter weather conditions reducing the demand for deicing equipment;
Market acceptance and operational success of the Company's commercial jet engines and parts business and the Company's relatively new aircraft asset management business and related aircraft capital joint venture; and
The length and severity of the COVID-19 pandemic and the impact of the COVID-19 pandemic on the health of our employees, on our vendors and customers and on economic conditions affecting our business.
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. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.
Air T, Inc. Brian Ochocki, CFO