10-Q 1 airt-20231231.htm 10-Q airt-20231231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2023
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____to _____
Commission File Number 001-35476
Air T, Inc.
(Exact name of registrant as specified in its charter)
Delaware52-1206400
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11020 David Taylor Drive, Suite 305, Charlotte, North Carolina 28262
(Address of principal executive offices, including zip code)
(980) 595 – 2840
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockAIRTNASDAQ Global Market
Alpha Income Preferred Securities (also referred to as 8% Cumulative Capital Securities) (“AIP”)AIRTPNASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x                    No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x                    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐                    No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Common StockCommon Shares, par value of $.25 per share
Outstanding Shares at January 31, 20242,821,504




AIR T, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
PART I
Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023 (Unaudited)
Item 3.
Item 5.
Exhibit Index
Certifications
Interactive Data Files

2


Item 1.    Financial Statements
AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share data)Three Months Ended
December 31,
Nine Months Ended
December 31,
2023202220232022
Operating Revenues:
Overnight air cargo$29,018 $21,831 $84,944 $64,464 
Ground equipment sales8,441 16,147 32,474 39,981 
Commercial jet engines and parts24,139 21,736 90,463 63,577 
Corporate and other2,158 1,682 6,273 4,924 
63,756 61,396214,154 172,946
Operating Expenses:
Overnight air cargo24,504 19,174 71,841 56,696 
Ground equipment sales6,964 13,492 27,854 32,362 
Commercial jet engines and parts19,322 15,357 72,562 43,685 
General and administrative13,554 11,503 39,672 33,898 
Depreciation and amortization699 1,097 2,088 2,984 
Inventory write-down321 638 326 1,658 
Asset impairment   516 
65,364 61,261 214,343 171,799 
Operating (Loss) Income(1,608)135 (189)1,147 
Non-operating (Expense) Income:
Interest expense(1,528)(2,204)(5,189)(6,021)
Income from equity method investments1,038 2,118 2,4772,917 
Other142 (97)8 (608)
(348)(183)(2,704)(3,712)
Loss before income taxes(1,956)(48)(2,893)(2,565)
Income Taxes Expense (Benefit) 153 (156)851 (536)
Net (Loss) Income(2,109)108 (3,744)(2,029)
Net Income Attributable to Non-controlling Interests(870)(698)(1,375)(1,226)
Net Loss Attributable to Air T, Inc. Stockholders$(2,979)$(590)$(5,119)$(3,255)
Loss per share (Note 6)
Basic$(1.06)$(0.21)$(1.82)$(1.14)
Diluted$(1.06)$(0.21)$(1.82)$(1.14)
Weighted Average Shares Outstanding:
Basic2,822 2,836 2,820 2,855 
Diluted2,822 2,836 2,820 2,855 
See notes to condensed consolidated financial statements.
3


AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

Three Months Ended
December 31,
Nine Months Ended
December 31,
(In Thousands)2023202220232022
Net (Loss) Income$(2,109)$108 $(3,744)$(2,029)
Foreign currency translation gain (loss)216 775 (19)(360)
Unrealized (loss) gain on interest rate swaps(38)(61)2 1,371 
Reclassification of interest rate swaps into earnings(188)18 (568)52 
Total Other Comprehensive (Loss) Income(10)732 (585)1,063 
Total Comprehensive (Loss) Income(2,119)840 (4,329)(966)
Comprehensive Income Attributable to Non-controlling Interests(870)(698)(1,375)(1,226)
Comprehensive (Loss) Income Attributable to Air T, Inc. Stockholders$(2,989)$142 $(5,704)$(2,192)
See notes to condensed consolidated financial statements.
4


AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(In thousands, except share amounts)December 31, 2023March 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents $4,480 $5,806 
Marketable securities326  
Restricted cash707 1,284 
Restricted investments1,463 2,161 
Accounts receivable, net of allowance for doubtful accounts of $1,371 and $1,160
18,141 27,218 
Income tax receivable354 536 
Inventories, net53,887 71,125 
Employee retention credit receivable 940 
Other current assets9,971 7,487 
Total Current Assets89,329 116,557 
Property and equipment, net of accumulated depreciation of $7,520 and $6,624
20,883 21,439 
Intangible assets, net of accumulated amortization of $5,141 and $4,191
11,459 12,103 
Right-of-use ("ROU") assets 11,893 11,666 
Equity method investments15,038 13,230 
Goodwill10,624 10,563 
Other assets3,556 4,004 
Total Assets162,782 189,562 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable13,537 10,449 
Income tax payable36 304 
Accrued expenses and other (Note 4)12,029 13,133 
Current portion of long-term debt17,367 38,736 
Short-term lease liability1,832 1,664 
Total Current Liabilities44,801 64,286 
Long-term debt83,419 86,349 
Deferred income tax liabilities, net2,581 2,417 
Long-term lease liability10,941 10,771 
Other non-current liabilities  47 
Total Liabilities141,742 163,870 
Redeemable non-controlling interests13,086 12,710 
Commitments and contingencies (Note 15)
Equity:
Air T, Inc. Stockholders' Equity:
Preferred stock, $1.00 par value, 2,000,000 shares authorized
  
Common stock, $0.25 par value; 4,000,000 shares authorized, 3,030,245 and 3,026,495 shares issued, 2,821,504 and 2,818,374 shares outstanding
758 757 
Treasury stock, 208,741 shares at $19.63 and 208,121 shares at $19.62
(4,098)(4,083)
Additional paid-in capital990 728 
Retained earnings9,014 13,686 
Accumulated other comprehensive income231 816 
Total Air T, Inc. Stockholders' Equity6,895 11,904 
Non-controlling Interests1,059 1,078 
Total Equity7,954 12,982 
Total Liabilities and Equity$162,782 $189,562 
See notes to condensed consolidated financial statements.
5


AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(In Thousands)Nine Months Ended
December 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss$(3,744)$(2,029)
Adjustments to reconcile Net Loss to net cash provided by (used in) operating activities:
Depreciation and amortization2,088 2,984 
Inventory write-down326 1,658 
Asset impairment 516 
Income from equity method of investments(2,477)(2,917)
Other1,132 614 
Change in operating assets and liabilities:
Accounts receivable8,865 4,936 
Inventories17,061 (12,469)
Accounts payable3,087 (109)
Accrued expenses(1,105)1,447 
Employee retention credit receivable940 2,456 
Other(3,028)(902)
Net cash provided by (used in) operating activities23,145 (3,815)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated entities(1,086)(2,609)
Capital expenditures related to property & equipment(678)(1,008)
Capital expenditures related to assets on lease or held for lease (29)
Other1,983 556 
Net cash provided by (used in) investing activities219 (3,090)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from lines of credit84,735 102,015 
Payments on lines of credit(99,426)(91,865)
Proceeds from term loan 8,177 
Payments on term loan(17,116)(12,300)
Proceeds from issuance of Trust Preferred Securities ("TruPs")7,285  
Other(629)(1,161)
Net cash (used in) provided by financing activities(25,151)4,866 
Effect of foreign currency exchange rates on cash and cash equivalents(116)181 
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH(1,903)(1,858)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD7,090 8,368 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD$5,187 $6,510 
See notes to condensed consolidated financial statements.
6


AIR T, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)

(In Thousands)Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Non-controlling
Interests
Total
Equity
SharesAmountSharesAmount
Balance, March 31, 20223,023 $756 156 $(3,002)$393 $26,729 $(263)$1,104 $25,717 
Net loss*— — — — — (1,433)— (6)(1,439)
Stock compensation expense— — — — 79 — — — 79 
Foreign currency translation loss— — — — — — (529)— (529)
Adjustment to fair value of redeemable non-controlling interest— — — — — 926 — — 926 
Unrealized gain on interest rate swaps, net of tax— — — — — — 475 — 475 
Reclassification of interest rate swaps into earnings— — — — — — 17 — 17 
Balance, June 30, 20223,023 756 156 (3,002)472 26,222 (300)1,098 25,246 
Net loss*— — — — — (1,232)— (4)(1,236)
Repurchase of common stock— — 19 (351)— — — — (351)
Exercise of stock options3 1 — — 20 — — — 21 
Stock compensation expense— — — — 79 — — — 79 
Foreign currency translation loss— — — — — — (606)— (606)
Adjustment to fair value of redeemable non-controlling interest— — — — — (188)— — (188)
Unrealized gain on interest rate swaps, net of tax— — — — — — 957 — 957 
Reclassification of interest rate swaps into earnings— — — — — — 17 — 17 
Balance, September 30, 20223,026 757 175 (3,353)571 24,802 68 1,094 23,939 
Net loss*— — — — — (590)— (7)(597)
Repurchase of common stock— — 29 (642)— — — — (642)
Stock compensation expense— — — — 79 — — — 79 
Foreign currency translation gain— — — — — — 775 — 775 
Adjustment to fair value of redeemable non-controlling interest— — — — — (1,059)— — (1,059)
Unrealized loss on interest rate swaps, net of tax— — — — — — (61)— (61)
Reclassification of interest rate swaps into earnings— — — — — — 18 — 18 
Balance, December 31, 20223,026 $757 204 $(3,995)$650 $23,153 $800 $1,087 $22,452 

(In Thousands)Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Non-controlling
Interests
Total
Equity
SharesAmountSharesAmount
Balance, March 31, 20233,027 $757 208 $(4,083)$728 $13,686 $816 $1,078 $12,982 
Net loss*— — — — — (531)— (9)(540)
Repurchase of common stock— — 1 (15)— — — — (15)
Stock compensation expense— — — — 79 — — — 79 
Foreign currency translation loss— — — — — — (65)— (65)
Adjustment to fair value of redeemable non-controlling interest— — — — — 134 — — 134 
Unrealized gain on interest rate swaps, net of tax— — — — — — 24 — 24 
Reclassification of interest rate swaps into earnings— — — — — — (192)— (192)
Balance, June 30, 20233,027 757 209 (4,098)807 13,289 583 1,069 12,407 
Net loss*— — — — — (1,609)— (19)(1,628)
Exercise of stock options3 1 — — 25 — — — 26 
Stock compensation expense— — — — 79 — — — 79 
Foreign currency translation loss— — — — — — (170)— (170)
Adjustment to fair value of redeemable non-controlling interest— — — — — 412 — — 412 
Unrealized gain on interest rate swaps, net of tax— — — — — — 16 — 16 
Reclassification of interest rate swaps into earnings— — — — — — (188)— (188)
Balance, September 30, 20233,030 758 209 (4,098)911 12,092 241 1,050 10,954 
Net (loss) income*— — — — — (2,979)— 9 (2,970)
Stock compensation expense— — — — 79 — — — 79 
Foreign currency translation gain— — — — — — 216 — 216 
Adjustment to fair value of redeemable non-controlling interest— — — — — (99)— — (99)
Unrealized loss on interest rate swaps, net of tax— — — — — — (38)— (38)
Reclassification of interest rate swaps into earnings— — — — — — (188)— (188)
Balance, December 31, 20233,030 $758 209 $(4,098)$990 $9,014 $231 $1,059 $7,954 

*Excludes amount attributable to redeemable non-controlling interests in Contrail Aviation Support, LLC ("Contrail") and Shanwick B.V. ("Shanwick")
See notes to condensed consolidated financial statements.
7


AIR T, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    Financial Statement Presentation
The condensed consolidated financial statements of Air T, Inc. (“Air T”, the “Company”, “we”, “us” or “our”) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results for the periods presented have been made.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2023. The results of operations for the period ended December 31, 2023 are not necessarily indicative of the operating results for the full year.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Liquidity
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.

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, the Company successfully raised $7.3 million of additional funds via sales of our trust preferred securities 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.

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.
Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04- Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. In December 2022, the FASB issued ASU 2022-06- Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this Update defer the implementation deadline of Topic 848 from December 31, 2022, to December 31, 2024. The Company completed the process of converting its material LIBOR-based contracts, hedging relationships, and other transactions to other reference rates as of September 30, 2023.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07- Segment Reporting (Topic 848): Improvements to Reportable Segment Disclosures. The amendments in this Update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses utilized by the chief operating decision maker for a company along with details about who the chief operating decision maker is and their title. The Update additionally requires that all annual disclosures under Topic 280 be included in interim periods financial statements, clarifies when an entity can disclose multiple segment measures of profit or loss, and provides new segment disclosure requirements for entities with a single reportable segment. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this amendment on its condensed consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09- Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this Update require the addition of specific categories to be disclosed in the rate reconciliation if they meet a quantitative threshold, disclosure of disaggregated income taxes paid to federal, state, and foreign jurisdictions, and disclosure of income or loss from continuing operations disaggregated by federal, state, and foreign jurisdictions. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this amendment on its consolidated financial statements and disclosures.
8


2.    Acquisitions

Worldwide Aviation Services, Inc.
On January 31, 2023, the Company acquired Worldwide Aircraft Services, Inc. ("WASI"), a Kansas corporation that services the aircraft industry across the United States and internationally through the operation of a repair station which is located in Springfield, Missouri at the Branson National Airport. The acquisition was funded with cash and the loans described in Note 12 of this report. WASI is included within the Overnight air cargo segment.
The acquisition date's fair value of the consideration is summarized in the table below (in thousands):
January 31, 2023
Cash consideration$1,628 
Seller's Note1,370 
Total consideration$2,998 
The transaction was accounted for as a business combination in accordance with ASC Topic 805 "Business Combinations." Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their fair values as of January 31, 2023, with the excess of total consideration above fair value of net assets acquired recorded as goodwill. The following table outlines the consideration transferred and purchase price allocation at the respective fair values as of January 31, 2023 (in thousands):
January 31, 2023
ASSETS
Accounts receivable$1,037 
Inventory517
Other current assets97
Property, plant and equipment, net403
Intangible -Trade Name342
Intangible - Non-competition Agreement19
Intangible - Customer Relationships683
Other assets20
Total assets$3,118 
LIABILITIES
Accounts payable61
Accrued expenses and deferred revenue635
Total liabilities$696 
Net assets acquired$2,422 
Consideration paid2,998 
Less: Cash acquired(500)
Less: Net assets acquired(2,422)
Goodwill$76 
As of March 31, 2023, the purchase price allocation was final. The following table sets forth the revenue and expenses of WASI that are included in the Company’s condensed consolidated statement of income for the fiscal year ended March 31, 2023 (in thousands):
Income Statement
Post-Acquisition
Revenue$929 
Cost of Sales676 
Operating Expenses425 
Operating Loss(172)
Non-operating expense(22)
Net loss$(194)
Pro forma financial information is not presented as the results are not material to the Company’s consolidated financial statements.
9


3.    Revenue Recognition
Substantially all of the Company’s non-lease revenue is derived from contracts with an initial expected duration of one year or less. As a result, the Company has applied the practical expedient to exclude consideration of significant financing components from the determination of transaction price, to expense costs incurred to obtain a contract, and to not disclose the value of unsatisfied performance obligations.
The following is a description of the Company’s performance obligations:
Type of RevenueNature, Timing of Satisfaction of Performance Obligations, and Significant Payment Terms
Product SalesThe Company generates revenue from sales of various distinct products such as parts, aircraft equipment, jet engines, airframes, and scrap metal to its customers. A performance obligation is created when the Company accepts an order from a customer to provide a specified product. Each product ordered by a customer represents a performance obligation.

The Company recognizes revenue when obligations under the terms of the contract are satisfied; generally, this occurs at a point-in-time upon shipment or when control is transferred to the customer. Transaction prices are based on contracted terms, which are at fixed amounts based on standalone selling prices. While the majority of the Company's contracts do not have variable consideration, for the limited number of contracts that do, the Company records revenue based on the standalone selling price less an estimate of variable consideration (such as rebates, discounts or prompt payment discounts). The Company estimates these amounts based on the expected incentive amount to be provided to customers and reduces revenue accordingly. Performance obligations are short-term in nature and customers are typically billed upon transfer of control. The Company records all shipping and handling fees billed to customers as revenue.

The terms and conditions of the customer purchase orders or contracts are dictated by either the Company’s standard terms and conditions or by a master service agreement or by the contract.
Support ServicesThe Company provides a variety of support services such as aircraft maintenance and short-term repair services to its customers. Additionally, the Company operates certain aircraft routes on behalf of FedEx. A performance obligation is created when the Company agrees to provide a particular service to a customer. For each service, the Company recognizes revenues over time as the customer simultaneously receives the benefits provided by the Company's performance. This revenue recognition can vary from when the Company has a right to invoice to the output or input method depending on the structure of the contract and management’s analysis.

For repair-type services, the Company records revenue over-time based on an input method of costs incurred to total estimated costs. The Company believes this is appropriate as the Company is performing labor hours and installing parts to enhance an asset that the customer controls. The vast majority of repair-services are short term in nature and are typically billed upon completion of the service.

Some of the Company’s contracts contain a promise to stand ready as the Company is obligated to perform certain maintenance or administrative services. For most of these contracts, the Company applies the 'as invoiced' practical expedient as the Company has a right to consideration from the customer in an amount that corresponds directly with the value of the entity's performance completed to date. A small number of contracts are accounted for as a series and recognized equal to the amount of consideration the Company is entitled to less an estimate of variable consideration (typically rebates). These services are typically ongoing and are generally billed on a monthly basis.
In addition to the above type of revenues, the Company also has Leasing Revenue, which is in scope under Topic 842 (Leases) and out of scope under Topic 606 and Other Revenues (Freight, Management Fees, etc.) which are immaterial for disclosure under Topic 606.
The following table summarizes disaggregated revenues by type (in thousands):
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Product Sales
Air Cargo$10,050 $6,416 $28,428 $20,303 
Ground equipment sales8,080 15,909 31,556 39,125 
Commercial jet engines and parts21,381 18,515 81,535 54,545 
Corporate and other153 112 775 247 
Support Services
Air Cargo18,929 15,399 56,378 43,979 
Ground equipment sales223 96 474 396 
Commercial jet engines and parts2,533 2,428 8,393 6,958 
Corporate and other1,478 1,157 3,967 3,155 
Leasing Revenue
Ground equipment sales24 42 58 115 
Commercial jet engines and parts12 729 35 1,939 
Corporate and other397 353 1,209 1,223 
Other
Air Cargo39 16 138 182 
Ground equipment sales114 100 386 345 
Commercial jet engines and parts213 64 500 135 
Corporate and other130 60 322 299 
Total$63,756 $61,396 $214,154 $172,946 
See Note 13 for the Company's disaggregated revenues by geographic region and Note 14 for the Company’s disaggregated revenues by segment. These notes disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Contract Balances and Costs

Contract liabilities relate to deferred revenue, our unconditional right to receive consideration in advance of performance with respect to subscription revenue and advanced customer deposits with respect to product sales. The following table presents outstanding contract liabilities as of April 1, 2023 and December 31, 2023 and the amount of contract liabilities as of April 1, 2023 that were recognized as revenue during the nine-month period ended December 31, 2023 (in thousands):

Outstanding contract liabilitiesOutstanding contract liabilities as of April 1, 2023
Recognized as Revenue
As of December 31, 2023$3,389 
As of April 1, 2023$5,000 
For the nine months ended December 31, 2023$4,433 

10


4.     Accrued Expenses and Other

(In thousands)December 31, 2023March 31, 2023
Salaries, wages and related items$5,707 $4,748 
Profit sharing and bonus1,379 1,672 
Other Deposits794 2,560 
Other4,149 4,153 
Total$12,029 $13,133 

11


5.    Income Taxes

During the three-month period ended December 31, 2023, the Company recorded $0.2 million in income tax expense at an effective rate ("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, Delphax Technologies, Inc. (“DTI”) and Landing Gear Support Services PTE LTD (“LGSS”), Delphax Solutions, Inc. ("DSI") and BCCM Advisors (Kenya) Limited ("BCCM Kenya"), and the foreign rate differentials for Air T’s operations located in the Netherlands and Puerto Rico.

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, and other capital losses, the estimated benefit for the exclusion of income for the Company's captive insurance company subsidiary ("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.

During the nine-month period ended December 31, 2023, the Company recorded $0.9 million in income tax expense 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 21.0% 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.

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 DSI and DTI 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.

12


6.    Net Earnings (Loss) Per Share
Basic earnings (loss) per share has been calculated by dividing net income (loss) attributable to Air T, Inc. stockholders by the weighted average number of common shares outstanding during each period. For purposes of calculating diluted earnings (loss) per share, shares issuable under stock options were considered potential common shares and were included in the weighted average common shares unless they were anti-dilutive.
During the three months ended September 30, 2023, 3,750 options were exercised under the Air T's 2012 Stock Option Plan at $7.04 per share, which was disclosed within our condensed consolidated statement of equity. As of September 30, 2023, all stock options under the Air T's 2012 Stock Option Plan have either been exercised or expired. Further, no options under the Air T's 2020 Omnibus Stock and Incentive Plan were exercisable as of December 31, 2023.
The computation of basic and diluted earnings per common share is as follows (in thousands, except for per share figures):
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Net (loss) income$(2,109)$108 $(3,744)$(2,029)
Net income attributable to non-controlling interests(870)(698)(1375)(1,226)
Net loss attributable to Air T, Inc. Stockholders$(2,979)$(590)$(5,119)$(3,255)
Loss per share:
Basic$(1.06)$(0.21)$(1.82)$(1.14)
Diluted$(1.06)$(0.21)$(1.82)$(1.14)
Antidilutive shares excluded from computation of loss per share
 5  5 
Weighted Average Shares Outstanding:
Basic2,822 2,836 2,820 2,855 
Diluted2,822 2,836 2,820 2,855 




13


7.    Intangible Assets and Goodwill
Intangible assets as of December 31, 2023 and March 31, 2023 consisted of the following (in thousands):
December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Book Value
Purchased software$623 $(484)$139 
Internally developed software3,711(720)2,991 
In-place lease and other intangibles1,094(318)776 
Customer relationships8,162(1,302)6,860 
Patents1,112(1,108)4 
Other1,768(1,209)559 
16,470(5,141)11,329 
In-process software130130 
Intangible assets, total$16,600 $(5,141)$11,459 
March 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Book Value
Purchased software$544 $(433)$111 
Internally developed software3,672(465)3,207
In-place lease and other intangibles1,094(229)865
Customer relationships8,050(851)7,199
Patents1,112(1,105)7
Other1,782(1,108)674
16,254(4,191)12,063
In-process software4040
Intangible assets, total$16,294 $(4,191)$12,103 
Based on the intangible assets recorded at December 31, 2023 and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:
(In thousands)
Year ending March 31,Amortization
2024 (excluding the nine months ended December 31, 2023)$310 
20251,201
20261,118
20271,045
2028990
2029982
Thereafter5,683 
$11,329 
The carrying amount of goodwill as of December 31, 2023 and March 31, 2023 was $10.6 million. There was no impairment on goodwill during the nine months ended December 31, 2023.
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8.    Investments in Securities and Derivative Instruments
As part of the Company’s interest rate risk management strategy, the Company, from time to time, uses derivative instruments to minimize significant unanticipated earnings fluctuations that may arise from rising variable interest rate costs associated with existing borrowings (Air T Term Note A and Term Note D). To meet these objectives, the Company entered into interest rate swaps with notional amounts consistent with the outstanding debt to provide a fixed rate of 4.56% and 5.09%, respectively, on Term Notes A and D. The swaps mature in January 2028.
On August 31, 2021, Air T and Minnesota Bank & Trust ("MBT") refinanced Term Note A and fixed its interest rate at 3.42%. As a result of this refinancing, the Company determined that the interest rate swap on Term Note A was no longer an effective hedge. The Company will amortize the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Term Note A at the time of de-designation into earnings over the remainder of its term. In addition, any changes in the fair value of Term Note A's swap after August 31, 2021 are recognized directly into earnings. The remaining swap contract associated with Term Note D is designated as an effective cash flow hedging instrument in accordance with ASC 815.
On January 7, 2022, Contrail completed an interest rate swap transaction with Old National Bank ("ONB") with respect to the $43.6 million loan made to Contrail in November 2020 pursuant to the Main Street Priority Loan Facility as established by the U.S. Federal Reserve ("Contrail - Term Note G"). The purpose of the floating-to-fixed interest rate swap transaction was to effectively fix the loan interest rate at 4.68%. As of February 24, 2022, this swap contract has been designated as a cash flow hedging instrument and qualified as an effective hedge in accordance with ASC 815. During the period between January 7, 2022 and February 24, 2022, the Company recorded a loss of approximately $0.1 million in the consolidated statement of income (loss) due to the changes in the fair value of the instrument prior to the designation and qualification of this instrument as an effective hedge. After it was deemed an effective hedge, the Company recorded changes in the fair value of the instrument in the consolidated statement of comprehensive income (loss). On March 30, 2023, Contrail made a prepayment of $6.7 million on Contrail - Term Note G. As a result of this prepayment, the Company determined that the interest rate swap on Contrail - Term Note G was no longer an effective hedge. The Company will amortize the fair value of the interest-rate swap contract included in accumulated other comprehensive income (loss) associated with Contrail - Term Note G at the time of de-designation into earnings over the remainder of its term. In addition, any changes in the fair value of Contrail - Term Note G's swap after March 30, 2023 are recognized directly into earnings.
For the swaps related to Air T Term Note D, the effective portion of changes in the fair value on this instrument is recorded in other comprehensive income (loss) and is reclassified into the consolidated statement of income (loss) as interest expense in the same period in which the underlying hedged transaction affects earnings. During the three and nine months ended December 31, 2023, the Company recorded a loss of approximately $38.0 thousand and a gain of $2.0 thousand, net of tax, respectively. During the three and nine months ended December 31, 2022, the Company recorded a loss of approximately $0.1 million and a gain of $1.4 million, net of tax, respectively, with prior year's gain inclusive of Contrail - Term Note G due to its effective hedge designation at the time. These gains and losses are included in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of these instruments. The interest rate swaps are considered Level 2 fair value measurements. As of December 31, 2023 and March 31, 2023, the fair value of these interest-rate swap contracts was an asset of $1.8 million and $2.4 million, respectively, which is included within other assets in the condensed consolidated balance sheets.

The Company also invests in exchange-traded marketable securities and accounts for that activity in accordance with ASC 321, Investments- Equity Securities. Marketable equity securities are carried at fair value, with changes in fair market value included in the determination of net income. The fair market value of marketable equity securities is determined based on quoted market prices in active markets and are therefore, considered Level 1 fair value measurements. During the three months ended December 31, 2023, the Company had a gross unrealized gain aggregating to $0.5 million and no gross unrealized loss. During the nine months ended December 31, 2023, the Company had a gross unrealized gain aggregating to $1.4 million and a gross unrealized loss aggregating to $1.8 million. During the three months ended December 31, 2022, the Company had a gross unrealized gain aggregating to $0.3 million and a gross unrealized loss aggregating to $0.5 million. During the nine months ended December 31, 2022, the Company had a gross unrealized gain aggregating to $0.3 million and a gross unrealized loss aggregating to $0.8 million. These unrealized gains and losses are included in other income (loss) on the condensed consolidated statement of income (loss).


15


9.    Equity Method Investments
The Company’s investment in Lendway, Inc. - NASDAQ: LDWY ("Lendway"), formerly Insignia Systems, Inc. ("Insignia"), is accounted for under the equity method of accounting. The Company elected a three-month lag upon adoption of the equity method. On August 2, 2023, Insignia reincorporated in the state of Delaware as Lendway, Inc. Subsequent to reincorporation, Lendway sold its legacy business on August 4, 2023 to pivot the business towards non-bank lending. As of December 31, 2023, the Company owned 0.5 million Lendway shares, representing approximately 27.8% of Lendway's outstanding shares. During the three and nine months ended December 31, 2023, the Company's share of Lendway's net income for the three and nine months ended September 30, 2023 was $0.3 million and $0.8 million, respectively, principally driven by the gain recognized on the aforementioned sale of Lendway's legacy business on August 4, 2023. The Company's net investment basis in Lendway is $2.4 million as of December 31, 2023.
The Company's 20.1% investment in Cadillac Casting, Inc. ("CCI") is accounted for under the equity method of accounting. Due to the differing fiscal year-ends, the Company has elected a three-month lag to record the CCI investment at cost, with a basis difference of $0.3 million. The Company recorded income of $0.2 million and $1.5 million as its share of CCI's net income for the three and nine months ended December 31, 2023, along with a basis difference adjustment of $12.0 thousand and $37.0 thousand, respectively. The Company's net investment basis in CCI is $4.2 million as of December 31, 2023.
Summarized unaudited financial information for the Company's equity method investees for the three and nine months ended September 30, 2023 and 2022 is as follows (in thousands):
Three Months EndedNine Months Ended
September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Revenue$34,365 $37,532 $133,427 $111,522 
Gross Profit2,746 4,045 18,076 13,210 
Operating (loss) income(124)13,382 9,100 17,172 
Net income2,050 13,375 10,439 16,180 
Net income attributable to Air T, Inc. stockholders$499 $2,183 $2,295 $2,926 

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10.    Inventories
Inventories consisted of the following (in thousands):
December 31,
2023
March 31,
2023
Overnight air cargo:
Finished goods$931 $546 
Ground equipment manufacturing:
Raw materials5,921 4,589 
Work in process2,997 153 
Finished goods2,344 6,976 
Corporate and other:
Raw materials1,118 794 
Finished goods725 726 
Commercial jet engines and parts:
Whole engines available for sale or tear-down 10,141 
Parts43,693 50,813 
Total inventories57,729 74,738 
Reserves(3,842)