AIR T INC
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
AIRT$27.70-1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-12.
0000353184-24-000010
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0000353184-24-000097
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 83 current paragraphs.
47 unchanged; 30 reworded; 6 added; 28 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
The commercial jet engines and parts segment generated operating income of $1.1 million in the fiscal quarter ended June 30, 2024 compared to operating income of $1.5 million in the prior year comparable quarter. The decrease was primarily attributable to lower sales at Contrail mentioned above partially offset by higher gross profit margins in the current year quarter's sales compared to the prior year's comparable quarter.
Current report
The corporate and other segment's operating loss for the three months ended June 30, 2024 was relatively flat compared to the first quarter of the prior fiscal year.
Current report
Inflation
Current report
On May 30, 2024, Contrail, a majority-owned subsidiary the Company, entered in the Redemption Agreement with Seller. Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16% of its 21% interest in Contrail, effective as of April 1, 2024. The purchase price for the redeemed interest was $4.6 million, plus an earnout amount. The cash purchase price is payable through the OCAS Loan, payable beginning on May 1, 2024 and monthly thereafter for a 12-month period of interest payments only with the outstanding balance amortized and paid over the following 3 years. Interest accrues on the principal amount at an annual rate equal to the 10-year Treasury bond yield plus 375 basis points, compounded monthly. The rate adjusts on each anniversary date of the note. The payment obligation under the note may be deferred if Contrail’s forecast indicates that any payment following the first 12-month period would cause a loan default or a loan default exists. Initially, the payment obligation would revert back to interest only, unless a default exists, in which case no payment would be required. If Contrail is unable to make a payment for 12 months, then interest shall cease to accrue. The note is expressly subordinated to the payment in full of all indebtedness of Contrail on or prior to the date of the note or thereafter created. See additional details on the OCAS Loan in Note 11 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report.
Current report
Net cash provided by operating activities was $0.1 million for the three months ended June 30, 2024 compared to $3.5 million in the prior year comparable period. The decrease in net cash provided by operating activities was driven by a lower decrease in inventory of $4.3 million and a decrease in payables and accrued expenses of $3.6 million in the current year fiscal quarter compared to the prior year comparable quarter. This is offset by a net change in accounts receivable of $4.9 million quarter over quarter.
Current report
Net cash used in financing activities for the three months ended June 30, 2024 was $1.3 million compared to $4.1 million in the prior year comparable period. The decrease in cash usage in financing activities was primarily driven by lower payments on the lines of credit of $7.7 million, partially offset by lower proceeds from line of credit of $3.6 million and higher payments on term notes of $1.3 million in the current quarter compared to the prior period comparable quarter.
Removed paragraphs (28)
Previous report
The air cargo segment's operating income for the three-month period ended December 31, 2023 was $1.6 million compared to operating income of $1.0 million in the same quarter in the prior fiscal year. This increase was primarily attributable to the increased revenue noted in the segment revenue discussion above.
Previous report
The commercial jet engines and parts segment generated an operating loss of $0.6 million in the current year quarter compared to an operating income of $0.7 million in the prior year quarter. The change was primarily attributable to lower component sales at Contrail in the current quarter, partially offset by higher revenue driven by pass-through consignment revenue at Worthington compared to the prior year comparable quarter.
Previous report
The corporate and other segment's operating loss for the three-month period ended December 31, 2023 was $2.1 million compared to the prior year comparable quarter's operating loss of $2.7 million. The decrease in operating loss was attributable to increased sales noted in the segment revenue discussion above in addition to lower general and administrative expenses.
Previous report
First Nine Months of Fiscal 2024 Compared to First Nine Months of Fiscal 2023
Previous report
Revenues from the air cargo segment for the nine months ended December 31, 2023 increased by $20.5 million (31.8%) compared to the nine months ended December 31, 2022. The increase was principally attributable to higher administrative fees due to increased fleet, higher pass-through revenues from FedEx and outside customer revenue, and the WASI acquisition mentioned in Note 2 of the Notes to Condensed Consolidated Financial Statements of this report, which contributed $9.0 million of revenues to the current year nine-month period but none in the prior year comparable nine-month period.
Previous report
The ground equipment sales segment's revenue for the nine-month period ended December 31, 2023 was $32.5 million compared to $40.0 million in the same period in the prior fiscal year. The decrease was primarily driven by the lower number of deicing trucks sold in the current year compared to the prior year.
Previous report
The commercial jet engines and parts segment contributed $90.5 million of revenues in the nine months ended December 31, 2023 compared to $63.6 million in the comparable prior year nine months period. The increase was primarily driven by Contrail's higher component part sales in the first six months of the current fiscal year and Worthington's higher pass-through consignment revenue in the current year quarter. In addition, Contrail also sold three engines at zero profit margin in the current year as they had previously written these assets down to the sales price in the prior year.
Previous report
Revenues from the corporate and other segment in the nine months ended December 31, 2023 increased by $1.3 million (27.4%) compared to the nine months ended December 31, 2022. The increase was primarily attributable increased software subscriptions at Shanwick.
Previous report
Consolidated operating income for the nine months ended December 31, 2023 was $189.0 thousand compared to an operating income of $1.1 million for the comparable nine months of the prior year.
Previous report
The ground equipment sales segment's operating loss for the nine months ended December 31, 2023 was $0.6 million compared to operating income of $3.1 million in the prior year comparable period was primarily attributable to the decline in sales noted above.
Previous report
The commercial jet engines and parts segment generated operating income of $2.0 million in the current year nine-month period compared to operating income of $3.6 million in the prior year nine-month period. The decrease was primarily attributable to Contrail's zero profit margin engine sales mentioned above, in addition to a lower profit margin on component sales in the current nine-month period compared to the prior year comparable period.
Previous report
The corporate and other segment's operating loss for the nine-month period ended December 31, 2023 was $7.1 million compared to an operating loss of $8.5 million in the prior year comparable period. The decrease in operating loss was primarily driven by the revenue increase noted above in addition to lower general and administrative expenses.
Previous report
The Company had a net non-operating loss of $2.7 million for the nine months ended December 31, 2023 compared to a net non-operating loss of $3.7 million in the prior year nine-month period. The decrease in non-operating loss was primarily driven by a $0.8 million decrease in interest expense and a $0.6 million fluctuation in foreign currency exchange rates, partially offset by a $0.4 million decrease in net income allocated to the Company from equity method investments.
Previous report
During the nine-month period ended December 31, 2022, the Company recorded income tax benefit of $0.5 million at an ETR of 20.9%. The Company records income taxes using an estimated annual effective tax rate for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21% and the Company's effective tax rate for the nine-month period ended December 31, 2022 were the change in valuation allowance related to Delphax and other capital losses, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the foreign rate differentials between the federal and foreign tax rates for Air T's ownership of foreign operations in Puerto Rico, the Netherlands, and Singapore, and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.
Previous report
Supply Chain, Inflation, and Interest Rates
Previous report
As mentioned in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on June 23, 2023, the Company and MBT entered into amendments to the MBT revolving credit agreement and related promissory note. The amendments extended the maturity date of the credit facility to August 31, 2024 and include the following changes:
Previous report
A $2.0 million seasonal increase in the maximum amount available under the facility. The maximum amount of the facility will now increase to $19.0 million between May 1 and November 30 of each year and will decrease to $17.0 million between December 1 and April 30 of each year;
Previous report
The reference rate for the interest rate payable on the revolving facility will change from Prime to SOFR, plus a spread. The exact spread over SOFR will change every September 30 and March 31 based on the Company calculated funded debt leverage ratio (defined as total debt divided by EBITDA). Depending on the result of the calculation, the interest rate spread applicable to the facility will range between 2.25% and 3.25%;
Previous report
The unused commitment fee on the revolving credit facility will increase from 0.11% to 0.15%; and,
Previous report
The covenant restricting the Company’s use of funds for “Other Investments” was revised to limit the Company to $5.0 million of “Other Investments” per year.
Previous report
As mentioned in Note 15 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, in 2016, Contrail entered into an Operating Agreement with the Seller providing for the put and call options with regard to the 21.0% non-controlling interest retained by the Seller. The Seller is the founder of Contrail and its current Chief Executive Officer. The Put/Call Option permits the Seller or the Company to require Contrail Aviation to purchase all of the Seller’s equity membership interests in Contrail Aviation commencing on July 18, 2021. If either side were to exercise the option, the Company anticipates that the price would approximate the fair value of the Contrail RNCI, as determined on the transaction date. The Company currently expects that it would fund any required payment from cash provided by operations.
Previous report
As mentioned in Note 15 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this report, on May 5, 2021, the Company formed CAM and acquired its ownership interest in CAM. The operations of CAM are not consolidated into the operations of the Company. For its Investment Function (as defined in Note 15 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report), CAM's initial commitment to CJVII was approximately $51.0 million. The Company and MRC have commitments to CAM in the respective amounts of $7.0 million and $44.0 million. As of March 31, 2023, the Company has fulfilled its capital commitments to CAM.
Previous report
On March 22, 2023, Contrail entered into the First Amendment to Second Amendment to Master Loan Agreement and Third Amendment to Master Loan Agreement ("the Amendment") with ONB whereby, among other things, in exchange for a $20 million principal prepayment of Term Note G, Contrail obtained a waiver of the debt service coverage ratio covenant. $6.7 million of the $20.0 million prepayment was paid on March 30, 2023 and the remaining $13.3 million payment was paid in September 2023.
Previous report
As mentioned in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, on September 5, 2023, Contrail entered into the Sixth Amendment to Supplement #2 to Master Loan Agreement and the Fifth Amended and Restated Promissory Note with ONB. The principal purpose of the amended documents was to extend the maturity date of the revolving $25.0 million facility to November 24, 2025 or such earlier date on which the revolving note becomes due and payable pursuant to the supplement or the master loan agreement.
Previous report
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
Previous report
As previously reported in the Company's September 30, 2023 Form 10-Q, a condition existed that raised substantial doubt about its ability to continue as a going concern, for which management's plans alleviated such condition. As of the issuance of this report, management has executed their plans and such condition no longer exists. As described in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, the Company successfully raised $7.3 million of additional funds via sales of our TruPs through the Company's at-the-market offering that commenced on October 18, 2023 and through various private placements. In addition, the Company also implemented cost reduction measures and liquidated select investments as well as reduced capital expenditures.
Previous report
Net cash provided by operating activities was $23.1 million for the nine-month period ended December 31, 2023 compared to net cash used in operating activities of $3.8 million in the prior year nine-month period. The change in operating cash flows was primarily driven by a net change of $29.5 million in the inventory balance, as inventory decreased by $17.0 million in the current year due to increased sales, whereas inventory increased by $12.5 million in the prior year due to increased purchases. This was partially offset by a net change of $2.6 million in customer deposits in our ground equipment sales segment in the current year nine-month period compared to the prior year period.
Previous report
Net cash used in financing activities for the nine-month period ended December 31, 2023 was $25.2 million compared to net cash provided by financing activities of $4.9 million in the prior year period. The cash used in financing activities in the current year nine-month period was primarily driven by $25.5 million less proceeds and $12.4 million more payments on the Company's term loans and revolving lines of credit compared to the prior year nine-month period, partially offset by $7.3 million of proceeds from the sale of TruPs through ATM offerings and private placements that did not occur in the prior year nine-month period.
Reworded paragraphs (30)
Previous wording
Air T, Inc. (the “Company,” “Air T,” “we” or “us”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically diversify Air T’s earnings power and compound the growth in its free cash flow per share over time.
Current wording
Air T, Inc. (the “Company,” “Air T,” “we” or “us”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically diversify Air T’s earnings power, compounding its free cash flow per share over time.
Previous wording
Third Quarter Fiscal 2024 Compared to Third Quarter Fiscal 2023
Current wording
First Quarter Fiscal 2025 Compared to First Quarter Fiscal 2024
Previous wording
Consolidated revenue for the three-month period ended December 31, 2023 increased by $2.4 million (3.8%) compared to the same quarter in the prior fiscal year.
Current wording
Consolidated revenue for the three months ended June 30, 2024 decreased by $5.0 million (7.0%) compared to the same quarter in the prior fiscal year.
Previous wording
Revenues from the air cargo segment for the three-month period ended December 31, 2023 increased by $7.2 million (32.9%) compared to the third quarter of the prior fiscal year. The increase was principally attributable to higher administrative fees due to increased fleet, higher pass-through revenues from FedEx, higher maintenance and outside customer revenue, and the WASI acquisition mentioned in Note 2 of the Notes to Condensed Consolidated Financial Statements of this report, which contributed $2.0 million of revenues to the current year quarter but none in the prior year comparable period.
Current wording
Revenues from the air cargo segment for the three months ended June 30, 2024 increased by $2.7 million (9.6%) compared to the first quarter of the prior fiscal year. The increase was principally attributable to higher administrative fees due to increased fleet of 105 aircraft in the current year quarter compared to 85 aircraft in the prior year quarter, partially offset by lower pass-through revenues from FedEx due to initial provisioning for new aircraft in the prior year that did not recur in the current year quarter.
Previous wording
The ground equipment sales segment contributed approximately $8.4 million and $16.1 million to the Company’s revenues for the three-month periods ended December 31, 2023 and 2022 respectively, representing a $7.7 million (47.7%) decrease in the current quarter. The decrease was primarily driven by the lower number of deicing trucks sold in the current year quarter compared to prior year's comparable quarter. At December 31, 2023, the ground equipment sales segment’s order backlog was $6.2 million compared to $12.5 million at December 31, 2022.
Current wording
The ground equipment sales segment contributed approximately $7.4 million and $11.8 million to the Company’s revenues for the three month ended June 30, 2024 and 2023 respectively, representing a $4.4 million (37.6%) decrease in the current fiscal quarter. The decrease was primarily driven by the lower number of deicing trucks sold offset by a slight increase in catering truck sales in the current year quarter compared to the prior year's fiscal comparable quarter. At June 30, 2024, the ground equipment sales segment’s order backlog was $9.9 million compared to $13.7 million at June 30, 2023.
Previous wording
The commercial jet engines and parts segment contributed $24.1 million of revenues in the quarter ended December 31, 2023 compared to $21.7 million in the comparable prior year quarter, which is an increase of $2.4 million (11.1%). The increase in the current quarter compared to prior year comparable quarter was primarily driven by higher pass-through revenue at Worthington Aviation, LLC ("Worthington"), a wholly-owned subsidiary of the Company, in transactions that Worthington acted as the principal of the consignment agreements ("pass-through consignment revenue").
Current wording
The commercial jet engines and parts segment contributed $26.3 million of revenues in the quarter ended June 30, 2024 compared to $29.8 million in the comparable prior year quarter, which is a decrease of $3.6 million (12.0%). The decrease was primarily driven by lower component part sales at Contrail in the current quarter compared to the prior year comparable quarter.
Previous wording
Revenues from the corporate and other segment for the three-month period ended December 31, 2023 increased by $0.5 million (28.3%) compared to the third quarter of the prior fiscal year. The increase was primarily attributable to increased software subscriptions at Shanwick.
Current wording
Revenues from the corporate and other segment for the three months ended June 30, 2024 increased by $0.4 million (17.1%) compared to the first quarter of the prior fiscal year. The increase was primarily attributable to more subscriptions sales at Shanwick.
Previous wording
Consolidated operating loss for the quarter ended December 31, 2023 was $1.6 million, compared to an operating income of $0.1 million in the comparable quarter of the prior year.
Current wording
Consolidated operating loss for the quarter ended June 30, 2024 was $0.6 million, compared to an operating income of $0.7 million in the comparable quarter of the prior year.
Previous wording
The air cargo segment's operating income for the nine months ended December 31, 2023 was $5.6 million compared to operating income of $2.9 million in the prior year comparable period primarily due to the revenue increase noted above.
Current wording
The air cargo segment's operating income for the three months ended June 30, 2024 was relatively flat compared to the first quarter of the prior fiscal year.
Previous wording
The ground equipment sales segment's operating loss for the quarter ended December 31, 2023 was $0.5 million compared to the prior year comparable quarter's operating income of $1.1 million. This decrease was primarily attributable to the decreased sales noted in the segment revenue discussion above.
Current wording
The ground equipment sales segment's operating loss for the quarter ended June 30, 2024 was $0.8 million compared to the prior year comparable quarter's operating loss of $0.1 million. This change was primarily attributable to the decrease in sales noted above.
Previous wording
The Company had a net non-operating loss of $0.3 million during the quarter ended December 31, 2023, compared to net non-operating loss of $0.2 million in the prior year quarter. The increase in non-operating loss was primarily driven by the decrease of net income allocated to the Company from equity method investments, partially offset by lower interest expense in the current year quarter.
Current wording
The Company had a net non-operating income of $0.7 million during the quarter ended June 30, 2024, compared to a net non-operating loss of $0.5 million in the prior comparable quarter. The increase in non-operating income was primarily driven by the increase of net income allocated to the Company from equity method investments as mentioned in Note 8 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report.
Previous wording
During the three-month period ended December 31, 2023, the Company recorded $0.2 million in income tax expense at an ETR of (7.8)%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2023 were the valuation allowance related to the Company's U.S. consolidated group, DTI, LGSS, DSI, BCCM Kenya, and the foreign rate differentials for Air T's operations located in the Netherlands and Puerto Rico.
Current wording
During the three months ended June 30, 2024, the Company recorded $0.1 million in income tax expense at an effective tax rate of 68.9%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three months ended June 30, 2024 were valuation allowance related to the Company's U.S. consolidated group, DTI, LGSS, DSI, and BCCM Kenya, and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.
Previous wording
During the three-month period ended December 31, 2022, the Company recorded income tax benefit of $0.2 million at an ETR of 325.0%. The Company records income taxes using an estimated tax rate for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended December 31, 2022 were the change in valuation allowance related to the Company's subsidiaries in the corporate and other segment, DSI and DTI, other capital losses, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the foreign rate differentials between the federal tax rates for Air T's ownership of foreign operations in Puerto Rico, the Netherlands, and Singapore, and the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail.
Current wording
During the three-month period ended June 30, 2023, the Company recorded $0.2 million in income tax expense at an ETR of 114.7%. The primary factors contributing to the difference between the federal statutory rate of 21.0% and the Company's effective tax rate for the three-month period ended June 30, 2023 were the change in valuation allowance related to the Company’s U.S. consolidated group, DTI, LGSS, DSI, the estimated benefit for the exclusion of income for SAIC under Section 831(b), the exclusion from the tax provision of the minority owned portion of the pretax income of Contrail, and the foreign rate differentials for Air T’s operations located in the Netherlands, Puerto Rico and Singapore.
Previous wording
Although we have employed significant resources to develop our security measures against breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including hacking, viruses, malicious software, break-ins, phishing attacks, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of client information or other interruption to our business operations. As techniques used to obtain unauthorized access to sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate, or implement adequate measures to protect against these attacks. If we are unable to avert these attacks and security breaches in the future, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us or other participants, or the communication infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income.
Current wording
Although we have employed significant resources to develop our security measures against breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including hacking, viruses, malicious software, break-ins, phishing attacks, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems. Although prior breaches of our systems have not resulted in material negative consequences, breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of client information or other interruption to our business operations. As techniques used to obtain unauthorized access to sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate, or implement adequate measures to protect against these attacks. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us or other participants, or the communication infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income.
Previous wording
Future economic developments such as inflation and increased interest rates as well as further business issues present uncertainty and risk with respect to our financial condition and results of operations. Supply chain disruption caused an increase in material costs, which directly impacted the performance of our ground equipment sales segment. We expect that issues caused by economic and business issues will continue beyond fiscal 2024. The fluidity of this situation precludes any prediction as to the ultimate adverse impact these issues on economic and market conditions and our businesses in particular, and, as a result, presents material uncertainty and risk with respect to us and our results of operations. The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2023.
Current wording
Future economic developments such as inflation and increased interest rates as well as further business issues present uncertainty and risk with respect to our financial condition and results of operations. High inflation increased material and component prices, labor rates and supplier costs, and put pressure on our margins. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are contributing to these supply chain issues. We expect that issues caused by economic and business issues will continue beyond fiscal 2025. The fluidity of this situation precludes any prediction as to the ultimate adverse impact of these issues on economic and market conditions and our businesses in particular, and, as a result, presents material uncertainty and risk with respect to us and our results of operations. The Company believes the estimates and assumptions underlying the Company’s consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2024.
Previous wording
As of December 31, 2023, the Company held approximately $5.2 million in cash and cash equivalents and restricted cash. The Company also held $1.5 million in restricted investments held as statutory reserve of SAIC. The Company has an aggregate of approximately $35.5 million in available funds under its lines of credit as of December 31, 2023.
Current wording
As of June 30, 2024, the Company held approximately $8.7 million in cash and cash equivalents and restricted cash, $0.6 million of which related to cash reserved for payments of SAIC's insurance claims. The Company also held $1.2 million in restricted investments held as statutory reserve of SAIC. The Company has approximately $2.0 million of marketable securities and an aggregate of approximately $39.0 million in available funds under its lines of credit as of June 30, 2024.
Previous wording
As of December 31, 2023, the Company’s working capital amounted to $44.5 million, a decrease of $7.7 million compared to March 31, 2023.
Current wording
As of June 30, 2024, the Company’s working capital amounted to $53.8 million, a decrease of $2.2 million compared to March 31, 2024.
Previous wording
As mentioned in Note 12 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, the Revolver - MBT has $6.5 million outstanding as of December 31, 2023 and matures on August 31, 2024. We are currently seeking to refinance the Revolver - MBT prior to its maturity date; however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.
Current wording
As mentioned in Note 11 of Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 of this Report on Form 10-Q, the Revolver - MBT has $4.4 million outstanding as of June 30, 2024 and matures on August 31, 2024. We are currently seeking to refinance the Revolver - MBT prior to its maturity date; however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.
Previous wording
The Company believes they have sufficient cash on hand and available liquidity, to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.
Current wording
The Company believes it is probable that the cash on hand and current financings, net cash provided by operations from its remaining operating segments, together with amounts available under its current revolving lines of credit, as amended, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.
Previous wording
Following is a table of changes in cash flow for the nine months ended December 31, 2023 and 2022 (in thousands):
Current wording
Following is a table of changes in cash flow for the three months ended June 30, 2024 and 2023 (in thousands):
Previous wording
Net cash provided by investing activities for the nine-month period ended December 31, 2023 was $0.2 million compared to net cash used in investing activities of $3.1 million in the prior year period. The cash provided by investing activities was primarily driven by having received $1.5 million less distributions from equity method investments in the prior year period compared to the current year period. In addition, the Company also made $1.5 million more investments in unconsolidated entities in the prior year period compared to the current year period.
Current wording
Net cash provided in investing activities for the three months ended June 30, 2024 was $2.0 million compared to net cash used in investing activities of $21.0 thousand in the prior year comparable period. The increase in cash provided by investing activities was primarily driven by less contributions to and more distributions received from unconsolidated entities in the current year fiscal quarter.
Previous wording
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 and $0.5 million for the three months ended December 31, 2023 and 2022, respectively.
Current wording
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. There was no depreciation expense for leased engines for the three months ended June 30, 2024 and June 30, 2023.
Previous wording
The tables below provide a reconciliation of operating income to Adjusted EBITDA for the three and nine months ended December 31, 2023 and 2022 (in thousands):
Current wording
The tables below provide a reconciliation of operating income (loss) to Adjusted EBITDA for the three months ended June 30, 2024 and 2023 (in thousands):
Previous wording
The asset impairment, restructuring or impairment charges for the three months ended December 31, 2023 was attributable to a write-down of $0.3 million on the commercial jet engines and parts segment's inventory.
Current wording
Included in the asset impairment, restructuring or impairment charges for the quarter ended June 30, 2024 was a write-down of $0.4 million on the commercial jet engines and parts segment's inventory attributable to our evaluation of the carrying value of inventory as of June 30, 2024, 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.
Previous wording
The table below provides Adjusted EBITDA by segment for the three and nine months ended December 31, 2023 and 2022 (in thousands):
Current wording
The table below provides Adjusted EBITDA by segment for the three months ended June 30, 2024 and 2023 (in thousands):
Previous wording
Distributions on the Trust Preferred Securities are payable to record holders at the annual rate of 8% of the stated $25.00 liquidation amount, payable quarterly in arrears on the 15th day of February, May, August, and November in each year. The Trust Preferred Securities issued by the Trust are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Air T. Air T guarantees the payment of distributions by Air T Funding and payments on liquidation of or redemption of the Trust Preferred Securities (subordinate to the right to payment of senior and subordinated debt of Air T, as defined in Note 12 of Notes to condensed Consolidated Financial Statements included under Part I, Item 1 of this report). If Air T Funding has insufficient funds to pay distributions on the Trust Preferred Securities (i.e., if Air T has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Air T to enforce payment of such distributions.
Current wording
Distributions on the Trust Preferred Securities are payable to record holders at the annual rate of 8% of the stated $25.00 liquidation amount, payable quarterly in arrears on the 15th day of February, May, August, and November in each year. The Trust Preferred Securities issued by the Trust are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Air T. Air T guarantees the payment of distributions by Air T Funding and payments on liquidation or redemption of the Trust Preferred Securities (subordinate to the right to payment of senior and subordinated debt of Air T, as defined in Note 11 of Notes to Consolidated Financial Statements included under Part I, Item 1 of this report). If Air T Funding has insufficient funds to pay distributions on the Trust Preferred Securities (i.e., if Air T has failed to make required payments under the Junior Subordinated Debentures), a holder of the Trust Preferred Securities would have the right to institute a legal proceeding directly against Air T to enforce payment of such distributions.
Previous wording
All of the Common Securities of the Air T Funding are owned by Air T. The Common Securities rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement, as amended resulting from an event of default under the indenture, the rights of the Company as holder of the common securities to payment in respect of distributions and payments upon liquidation, redemption or otherwise would be subordinated to the rights of the holders of the Trust Preferred Securities.
Current wording
All of the Common Securities of Air T Funding are owned by Air T. The Common Securities rank pari passu, and payments will be made thereon pro rata, with the Trust Preferred Securities, except that upon the occurrence and during the continuance of an event of default under the Trust Agreement, as amended resulting from an event of default under the indenture, the rights of the Company as holder of the common securities to payment in respect of distributions and payments upon liquidation, redemption or otherwise would be subordinated to the rights of the holders of the Trust Preferred Securities.
Previous wording
The Company also has an optional right to redeem the Junior Subordinated Debentures (i) on or after June 7, 2024, in whole at any time or in part from time to time at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, or (ii) at any time, in whole (but not in part), upon the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event (each as defined in the indenture) at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. In the event a Tax Event, an Investment Company Event or Capital Treatment Event has occurred and is continuing and the Company does not elect to redeem the Junior Subordinated Debentures and thereby cause a mandatory redemption of the Trust Preferred Securities or to liquidate Air T Funding and cause the Junior Subordinated Debentures to be distributed to holders of the Trust Securities in liquidation of Air T Funding, such Trust Preferred Securities will remain outstanding and additional sums may be payable on the Junior Subordinated Debentures.
Current wording
The Company has an optional right to repay the Junior Subordinated Debentures (i) to Air T Funding on or after June 7, 2024, in whole at any time or in part from time to time at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, or (ii) at any time, in whole (but not in part), upon the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event (each as defined in the indenture) at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. In the event a Tax Event, an Investment Company Event or Capital Treatment Event has occurred and is continuing and the Company does not elect to redeem the Junior Subordinated Debentures and thereby cause a mandatory redemption of the Trust Preferred Securities or to liquidate Air T Funding and cause the Junior Subordinated Debentures to be distributed to holders of the Trust securities in liquidation of Air T Funding, such Trust Preferred Securities will remain outstanding and additional sums may be payable on the Junior Subordinated Debentures.
Previous wording
The Trust Preferred Securities are subject to mandatory redemption at any time on or after June 7, 2024. Upon the repayment or redemption at any time, in whole or in part, of any Junior Subordinated Debentures, the proceeds from such repayment or redemption would be applied to redeem a like amount of the Trust Preferred Securities, at the liquidation amount plus any accumulated and unpaid distributions. If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a redemption date, then the proceeds from such repayment or redemption would be allocated to the redemption of the Trust Preferred Securities pro rata.
Current wording
At any time on or after June 7, 2024, the Trust Preferred Securities are subject to mandatory redemption upon the Company's repayment of the Junior Subordinated Debentures at maturity or their earlier redemption in an amount equal to the amount of Junior Subordinated Debentures maturing on or being redeemed at a redemption price equal to the aggregate liquidation amount of the Trust Preferred Securities plus accumulated and unpaid distributions thereon to the date of redemption. If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a redemption date, then the proceeds from such repayment or redemption would be allocated to the redemption of the Trust Preferred Securities pro rata.
Previous wording
Air T Funding has a term of 30 years, but may terminate earlier as provided in the Trust Agreement, as amended. The Trust Agreement was most recently amended on March 3, 2021 and on January 28, 2022 and currently allows for the issuance of up to $100.0 million of Trust Preferred Securities. As of December 31, 2023, there are $32.7 million in Trust Preferred Securities outstanding.
Current wording
Air T Funding has a term of 30 years, but may terminate earlier as provided in the Trust Agreement, as amended. The Trust Agreement was most recently amended on March 3, 2021 and on January 28, 2022 and currently allows for the issuance of up to $100.0 million of Trust Preferred Securities. As of June 30, 2024, there are $43.3 million in Trust Preferred Securities outstanding ($9.0 million held by wholly-owned subsidiaries of the Company).
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Following is a table detailing revenue by segment, net of intercompany during the nine months ended December 31, 2023 compared to the same period in the prior fiscal year (in thousands):
Previous report — wording carried elsewhere
Following is a table detailing operating income (loss) by segment during the nine months ended December 31, 2023 compared to the same nine months in the prior fiscal year (in thousands):
Previous report — wording carried elsewhere
Following is a table detailing non-operating income (expense) during the nine months ended December 31, 2023 compared to the same nine months in the prior fiscal year (in thousands):
Previous report — wording carried elsewhere
During the nine-month period ended December 31, 2023, the Company recorded income tax expense of $0.9 million at an ETR of (29.4)%. The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding loss jurisdictions with no tax benefit and the application of discrete items, if any, for interim reporting. The primary factors contributing to the difference between the federal statutory rate of 21% and the Company's effective tax rate for the nine-month period ended December 31, 2023 were the valuation allowance related to the Company's U.S. consolidated group, DTI, LGSS, DSI and BCCM Kenya, and the foreign rate differentials for Air T's operations located in the Netherlands and Puerto Rico.