Air T, Inc. (AIRT) - 10-K Summary for Fiscal Year Ended March 31, 2010
Business Context and Reporting Period
This report covers the fiscal year ended March 31, 2010. Air T, Inc. operates three primary segments: Overnight Air Cargo (subsidiaries Mountain Air Cargo and CSA Air), Ground Equipment Sales (Global Ground Support), and Ground Support Services (Global Aviation Services). The Company is a smaller reporting company with common stock traded on NASDAQ.
Key Financial Metrics
| Metric | Fiscal 2010 | Fiscal 2009 |
|---|---|---|
| Operating Revenues | $81.1 million | $90.7 million |
| Net Earnings | $3.76 million | $4.38 million |
| Diluted EPS | $1.54 | $1.81 |
| Operating Income | $5.43 million | $6.67 million |
| Operating Margin | 6.7% | 7.4% |
| Net Cash from Operations | $5.51 million | $6.85 million |
| Total Assets | $29.6 million | $29.3 million |
| Long-term Debt | $21,000 | $481,000 |
| Working Capital | $21.6 million | $17.7 million |
Material Changes vs. Prior Period
- Revenue Decline: Consolidated revenue decreased 11% ($9.6 million) due to a 9% drop in air cargo revenue and an 18% drop in ground equipment sales. Ground support services revenue increased 19%.
- Air Cargo Segment: Revenue fell to $39.0 million as the number of aircraft operated for FedEx decreased from 82 to 80. This reduced administrative fee revenue by $364,000 without a corresponding reduction in overhead.
- Ground Equipment Segment: Revenue fell to $32.9 million, primarily due to a significant reduction in orders from the U.S. Air Force following the expiration of a multi-year contract in June 2009. A new one-year contract was awarded in July 2009, but no orders were received under it during fiscal 2010.
- Profitability: Net earnings decreased 14% to $3.76 million. Operating income declined 18% to $5.43 million.
- Liquidity: Cash and cash equivalents increased to $9.8 million. The Company paid off a $450,000 aircraft term loan balloon payment in April 2009 and had no outstanding balance on its $7 million revolving credit line.
Guidance, Outlook, and Risks
- Customer Concentration Risk: The Company is highly dependent on FedEx (48% of revenue) and the U.S. Air Force (21% of revenue). FedEx contracts are terminable with 30 days' notice. The Air Force contract is for one year with four one-year extension options.
- Delta Airlines Contract: The Ground Support Services segment derives 64% of its revenue from Delta Airlines. The contract expires in December 2010, and the Company is currently bidding for renewal.
- Margin Pressure: Management expects margins in the ground equipment segment to decline in the coming year due to reduced margins under the new Air Force contract.
- Seasonality: Ground equipment sales are historically seasonal, though military contracts have helped mitigate this. Mild winter weather can reduce demand for deicing equipment.
- Dividends: A cash dividend of $0.33 per share was declared on May 19, 2010.
Key Facts for Investor Verification
- FedEx Fleet Size: Verify if the number of aircraft operated for FedEx remains at 80 or decreases further, as this directly impacts administrative fee revenue.
- Air Force Orders: Monitor order volume under the new one-year U.S. Air Force contract to assess the recovery of the ground equipment segment.
- Delta Renewal: Confirm the outcome of the competitive bid process with Delta Airlines for the Ground Support Services contract expiring in December 2010.
- Backlog: Note that the reported backlog of $1.3 million excludes $4.6 million in orders received in May and June 2010 under the new Air Force contract.
- Legal Contingencies: The 2005 Philadelphia deicing boom incident was settled in March 2010 with minimal financial impact; verify no new material litigation has arisen.