Air T, Inc. Reports Unaudited First Quarter Earnings

DENVER, N.C., Oct. 26, 2017 /PRNewswire/ -- Air T, Inc. (Air T) (NASDAQ: AIRT) today reported consolidated net income attributable to Air T, Inc. stockholders of $968,000 ($0.47 per diluted share) for the fiscal 2018 first quarter ended June 30, 2017 as compared to consolidated net loss attributable to Air T, Inc. stockholders of $5,751,000 ($2.42 per diluted share) for the fiscal 2017 comparable period.

Consolidated revenue increased $17,204,000 (56%) from $30,493,000 to $47,697,000 for the quarter ended June 30, 2017 compared to the comparable quarter in the prior fiscal year. Consolidated operating income increased $9,286,000 (131%) from an operating loss of $7,073,000 to operating income of $2,213,000 for the quarter ended June 30, 2017 compared to the comparable quarter in the prior fiscal year principally due to significant negative operating results of Delphax Technologies Inc. ("Delphax"), including related asset impairments, in the prior-year period that did not recur in the quarter ended June 30, 2017.

Overnight air cargo revenues increased $105,000 (1%) from $16,637,000 to $16,742,000 compared to the prior-year comparable quarter. The segment's operating income decreased by $163,000 to $817,000 due to higher operating costs not passed through to the customer, principally increased flight crew costs.

Ground equipment sales revenue, net of intercompany eliminations, increased $1,695,000 (40%) from $4,254,000 to $5,950,000 this quarter compared to the prior-year comparable quarter due to increased deicing truck sales.  Ground equipment sales operating income, net of intercompany eliminations, increased by $307,000 (218%) from a net operating loss of $141,000 in the prior year comparable quarter. The segment's order backlog was $16.4 million at June 30, 2017, as compared to $2.8 million at March 31, 2017 and $12.1 million at June 30, 2016.

Ground support services revenue increased $2,313,000 (34%) from $6,800,000 to $9,113,000, as a result of the segment's growth in new markets and in services offered to new and existing customers and strong parts sales.  Operating income for this segment for the same period increased by $467,000 (424%) from a net operating loss of $110,000 in the prior-year comparable quarter primarily due to the impact of increased revenues.

On November 24, 2015, Air T acquired from Delphax shares of its Series B Preferred Stock, then convertible into approximately 38% of the shares of Delphax common stock outstanding after conversion, and other equity and debt interests in Delphax and its Canadian subsidiary. Air T has concluded that as a result of its acquisition of these interests, Delphax is required to be consolidated with Air T for financial reporting purposes since the November 24, 2015 acquisition date and reports these results in its printing equipment and maintenance segment.  Delphax's net income or loss is attributed to Air T and the holders of non-controlling interests in Delphax.  As described in greater detail in the Company's Form 8-K dated October 5, 2017, Air T concluded it was not appropriate to base attribution of Delphax's net income or loss to non-controlling interests solely on the Company's ownership of the Series B Preferred Stock and that the attribution methodology should be based on consideration of all of Air T's investments in Delphax. As a result of the application of the above-described attribution methodology, for the quarter ended June 30, 2017, the attribution of Delphax net income to non-controlling interests was 3.4% and, for the quarter ended June 30, 2016, the attribution of Delphax net loss to non-controlling interests was 33%. Revenues from Delphax, net of intercompany eliminations, increased by $571,000 (22%) compared to the comparable quarter of the prior fiscal year, while operating income, net of intercompany eliminations, increased by $7,915,000 (113%) to $924,000 due to significant negative operating results of Delphax in the prior-year comparable quarter, including related asset impairments described above, that did not recur in the quarter ended June 30, 2017.

Results for the quarter ended June 30, 2017 include a non-operating charge of approximately $771,000 related to the Company's investment in marketable securities of Insignia Systems, Inc. ("Insignia"). While the Company does not intend to liquidate its securities holdings in Insignia within twelve months, the Company recognized an impairment loss on the investment during the quarter ended June 30, 2017 due in part to the magnitude of the loss position in the investment, which increased sharply during the quarter.

On July 18, 2016, Contrail Aviation Support, LLC ("Contrail Aviation"), a subsidiary of the Company, completed the purchase of substantially all of the assets of Contrail Aviation Support, Inc. The acquisition consideration included cash and equity membership units in Contrail Aviation representing 21% of the total equity membership units in Contrail Aviation. Additionally, Air T, through a subsidiary, acquired 100% of the outstanding equity interests of Jet Yard, LLC ("Jet Yard") on October 3, 2016. In May 2017, the Company's newly formed subsidiaries, AirCo, LLC and AirCo Services, LLC (collectively, "AirCo") acquired the inventory and principal business assets, and assumed specified liabilities, of Aircraft Instrument and Radio Company, Incorporated, and Aircraft Instrument and Radio Services, Inc.  The acquired business, which is based in Wichita, Kansas, distributes and sells airplane and aviation parts and maintains a license under Part 145 of the regulations of the Federal Aviation Administration. Contrail Aviation, Jet Yard and AirCo comprised the commercial jet engines and parts segment of the Company's operations during the quarter ended June 30, 2017, which contributed revenues of $12,725,000, net of intercompany eliminations, while segment operating income, net of intercompany eliminations, was $811,000.

On June 7, 2017, the Company's subsidiary, Space Age Insurance Company ("SAIC"), invested $500,000 for a 40% interest in TFS Partners LLC ("TFS Partners"), a single-purpose investment entity organized by SAIC and other investors for the purpose of making an investment in a limited liability company, The Fence Store LLC ("Fence Store LLC"), organized for the purpose of acquiring substantially all of the assets of The Fence Store, Inc. ("Fence Store Inc.").  TFS Partners acquired a 60% interest in Fence Store LLC, which has completed the purchase of substantially all of the assets of Fence Store Inc.  Prior to this transaction, Fence Store Inc. operated a business under the tradename "Town and Country Fence" selling and installing residential and commercial fencing in the greater Twin Cities, Minnesota area.  Fence Store LLC has continued this business. The Company accounts for its investment in TFS Partners using the equity method of accounting.

For a more detailed presentation and discussion of the Company's results of operations and financial condition, please read the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed today with the Securities and Exchange Commission.  Copies of the Form 10-Q may be accessed on the Internet at the SEC's website: http://www.sec.gov.

About Air T, Inc.

Established in 1980, Air T, Inc. is a diversified holding company with four core industry segments: overnight air cargo, aviation ground support equipment manufacturing, aviation ground support maintenance services, and aircraft engine aftermarket and parts.  Our ownership interests consist of a broad set of operating and financial assets that are designed to expand, strengthen and diversify Air T's cash earnings power.  Our goal is to build on Air T's core businesses, to expand into adjacent industries, and when appropriate, to acquire companies that we believe fit into the Air T family.  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, the timing and amounts of future orders under the Company's Global Ground Support subsidiary's contract with the United States Air Force, 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.

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SOURCE Air T, Inc.