-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ng/y3oFSir+sjdmbgB2r1WytXupmZF7JF/KkcHh8/K4go7lHayiTiKilt2e7oUI7 IJsHUfQkyg1KV4odhs1BFw== 0000353184-98-000006.txt : 19980629 0000353184-98-000006.hdr.sgml : 19980629 ACCESSION NUMBER: 0000353184-98-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980626 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIR TRANSPORTATION HOLDING CO INC CENTRAL INDEX KEY: 0000353184 STANDARD INDUSTRIAL CLASSIFICATION: AIR COURIER SERVICES [4513] IRS NUMBER: 521206400 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-11720 FILM NUMBER: 98654561 BUSINESS ADDRESS: STREET 1: 3524 AIRPORT RD CITY: MAIDEN STATE: NC ZIP: 28650 BUSINESS PHONE: 704648741X227 MAIL ADDRESS: STREET 1: P O BOX 488 CITY: DENVER STATE: NC ZIP: 28037 FORMER COMPANY: FORMER CONFORMED NAME: ATLANTA EXPRESS AIRLINE CORP DATE OF NAME CHANGE: 19840321 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________ Form 10-K _________________ (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended March 31, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _______________ to _____________ commission file number 0-11720 AIR TRANSPORTATION HOLDING COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 3524 Airport Road Maiden, North Carolina 28650 (Address of principal (Zip Code) executive offices) (704) 377-2109 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.25 per share (Title of Class) __________________ 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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [] The aggregate market value of voting stock held by non-affiliates of the registrant as of May 1, 1998, computed by reference to the average of the closing bid and asked prices for such stock on such date, was $10,417,000. As of the same date, 2,711,653 shares of Common Stock were outstanding. PART I Item 1. Business. Air Transportation Holding Company, Inc., incorporated under the laws of the State of Delaware in 1980 (the "Company"), operates in three industry segments, providing overnight air cargo services to the air express delivery industry through its wholly owned subsidiaries, Mountain Air Cargo, Inc. ("MAC") and CSA Air, Inc. ("CSA"), aviation related parts brokerage and overhaul services through its wholly owned subsidiary, Mountain Aircraft Services, LLC ("MAS"), and aviation ground support equipment products through its wholly owned subsidiary, Global Ground Support, LLC ("Global"). For the fiscal year ended March 31, 1998 the Company's air cargo services through MAC and CSA accounted for approximately 65.9% of the Company's consolidated revenues, aviation related parts brokerage and overhaul services through MAS accounted for 9.1% of consolidated revenues and aircraft deice equipment products through Global accounted for 25.0% of consolidated revenues. The Company's air cargo services are provided to one customer -- Federal Express Corporation ("Federal Express"). Revenues from contracts with Federal Express accounted for approximately 64.0% of the Company's consolidated revenues for the year ended March 31, 1998. Certain financial data with respect to the Company's overnight air cargo, aviation services deice equipment segments are set forth in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. Such data are incorporated herein by reference. The principal place of business of the Company, MAC and MAS is Maiden, North Carolina, the principal place of business of CSA is Iron Mountain, Michigan and the principal place of business for Global is Olathe, Kansas. Recent Diversification and Acquisition. In October 1993, the Company organized MAS to diversify its customer base and business mix. MAS provides aircraft maintenance, parts and other aviation related services to the commercial and military aviation industries. MAS is organized as a limited liability company, of which the Company and MAC are members (99% of the profits and losses are allocated to the Company and 1% to MAC). In August 1997, the Company organized Global to acquire the Simon Deicer Division of Terex Aviation Ground Equipment, and the acquisition was completed that month. Global is located in Olathe, Kansas and manufactures, sells and services aircraft deicers sold to domestic and international passenger and cargo airlines, as well as to airports. Global is organized as a limited liability company, of which the Company and MAS are members (99% of the profits and losses are allocated to MAS and 1% to the Company). The organization of MAS and Global reflects the Company's strategy to diversify its operations within the aviation industry to reduce its dependence on the air cargo service segment. Overnight Air Cargo Services. MAC and CSA provide small package overnight air freight delivery services on a contract basis throughout the eastern half of the United States and Canada, and in Puerto Rico and the U.S. Virgin Islands. MAC and CSA's revenues are derived principally pursuant to "dry-lease" service contracts. Under the dry-lease service contracts, the customer leases its aircraft to MAC (or CSA) for a nominal amount and pays an administrative fee to MAC (or CSA). Under these arrangements, all direct costs related to the operation of the aircraft (including fuel, maintenance, landing fees and pilot costs) are passed through to the customer. For the most recent fiscal year, operations under dry-lease service contracts accounted for 93.8% of MAC and CSA's revenues (61.8% of the Company's consolidated revenues). For the fiscal year ended March 31, 1998, MAC and CSA provided air delivery service exclusively to Federal Express. As of March 31, 1998, MAC and CSA operated an aggregate of 95 aircraft under agreements with Federal Express. Separate agreements cover the three types of aircraft operated by MAC and CSA for Federal Express -- Cessna Caravan, Fokker F-27 and Short Brothers SD3-30. Cessna Caravan and Fokker F-27 aircraft are dry- leased from Federal Express, and Short Brothers SD3-30 aircraft are owned by the Company and operated under "wet-lease" arrangements with Federal Express which provide for a fixed fee per flight regardless of the amount of cargo carried. Pursuant to such agreements, Federal Express determines the schedule of routes to be flown by MAC and CSA. As of March 31, 1998, MAC and CSA were flying approximately 102 routes pursuant to their agreements with Federal Express. Agreements with Federal Express are renewable annually and may be terminated by Federal Express any time upon 15 to 30 days' notice. The Company believes that the short term and other provisions of its agreements with Federal Express are standard within the air freight contract delivery service industry. Loss of Federal Express as a customer would have a material adverse affect on MAC, CSA and the Company. MAC and CSA operate under separate aviation certifications. MAC is certified to operate under Part 121 and Part 135 of the regulations of the Federal Aviation Administration (the "FAA"). This certification permits MAC to operate aircraft that can carry up to 18,000 pounds of cargo. CSA is certified to operate under Part 135 of the FAA regulations. This certification permits CSA to operate aircraft with a maximum cargo capacity of 7,500 pounds. MAC and CSA, together, operated or held for sale the following aircraft as of March 31, 1998: Form of Number of Type of Aircraft Model Year Ownership Aircraft Cessna Caravan, 208A and 208B (single turbo prop) 1985-1996 dry lease 71 Fokker F-27 (twin turbo prop) 1968-1981 dry lease 22 Short Brothers SD3-30 (twin turbo prop) 1981 owned 2 __________ Total 95 Of the 95 aircraft fleet, 93 aircraft (the Cessna Caravan and Fokker F-27 aircraft) are owned by Federal Express. Under the dry-lease service contracts, certain maintenance expense, including cost of parts inventory, and maintenance performed by personnel not employed by the Company, is passed directly to the customer, and the expense of daily, routine maintenance and aircraft service checks is charged to the customer on an hourly basis. Accordingly, the Company does not anticipate maintenance expense, such as engine overhauls, to be material to the Company's operating results. All FAA Part 135 aircraft, including Cessna Caravan models 208A and 208B, and Short Brothers SD3-30 aircraft are maintained on FAA approved inspection programs. The inspection intervals range from 100 to 200 hours. The engines are produced by Pratt & Whitney, and overhaul periods are based on FAA-approved schedules. The current overhaul period on the Cessna aircraft is 6,500 hours. The Short Brothers manufactured aircraft are maintained on an "on condition" maintenance program (i.e., maintenance is performed when performance deviates from certain specifications) with engine inspections at each phase inspection and in-shop maintenance at predetermined intervals. The Fokker F-27 aircraft are maintained under a FAA Part 121 maintenance program. The program consists of A, B, C, D and I service checks. The engine overhaul period is 5,700 hours. The Company operates in highly competitive markets and competes with approximately 50 other contract cargo carriers in the United States. MAC and CSA's contracts are renewed on an annual basis. Accurate industry data is not available to indicate the Company's position within its marketplace (in large measure because most of the Company's competitors are privately held), but management believes that MAC and CSA, combined, constitute one of the largest contract carriers of the type described immediately above. The Company's air cargo operations are not materially seasonal. Aviation Related Parts Brokerage and Overhaul Services. In October 1993, the Company organized MAS to diversify its customer base and business mix. MAS provides aircraft maintenance and parts and other aviation related services to the commercial and military aviation industries. MAS's principal offices are located in Maiden, North Carolina and its primary maintenance facilities are located at the Global TransPark in Kinston, North Carolina, Maiden, North Carolina and Miami, Florida. Services offered by MAS include engine overhaul management, aircraft maintenance and component repair. Services are provided under standard purchase contracts. In addition, MAS sells aircraft parts, of which approximately 5% of the amount sold in the fiscal year ended March 31, 1998 were used in connection with maintenance performed by MAS. Sales of parts by MAS do not include any parts purchased for maintenance of aircraft operated by MAC or CSA. MAS's inventory of parts held for sale was approximately $1,321,000 at March 31, 1998 and included parts for use in primarily six types of commercial and military aircraft, all of which are generally in current use. MAS maintains its own inventory controls and documentation, sets stocking levels and determines the conditions for surplus parts disposal. MAS's customers include the commercial air cargo and passenger aviation industries and manufacturers of commercial and military aircraft and contract maintenance companies serving the commercial and military aviation industry. MAS generally does not provide parts or services under contracts directly with the U.S. government. For the fiscal year ended March 31, 1998, MAS provided services or parts to over 120 customers, with no single customer accounting for more than 5% of the Company's revenues for the year. MAS's operations are not materially seasonal. Aircraft Deice Equipment Products. In August 1997, the Company organized Global to acquire the Simon Deicer Division of Terex Aviation Ground Equipment to further diversify the Company's customer base and business mix within the aviation industry. Global manufactures, sells, services and supports aircraft devices on a worldwide basis. Global's primary customers are passenger and cargo airlines, as well as airports located in the United States and in international markets. Global's operations are located in Olathe, Kansas. In the manufacture of its deicing equipment, Global assembles components acquired from third party suppliers. Components are readily available from a number of different suppliers. The primary components are the chassis (which is similar to the chassis of a medium to heavy truck) and heating equipment. Global manufactures four basic models of deicing equipment: a 3200 gallon capacity model, a 2100 gallon capacity model, a 1200 gallon capacity model and a 700 gallon capacity model. Each model can be customized as requested by the customer, including the addition of fire suppressant equipment, modifications for open or enclosed cab design, and color and style of the exterior finish. Global competes primarily on the basis of reliability of its products, prompt delivery and price. The market for deicing equipment is highly competitive. Although the Company believes that Global is the second largest supplier of deicing equipment in the United States, the Company believes that FMC Corp. is the dominant competitor in the industry and is several times larger and has more financial resources than Global. Global's business has historically been highly seasonal, with the bulk of deicing equipment being purchased by customers in the late summer and fall in preparation for winter months. Accordingly, the bulk of Global's revenues have occurred during the second and third fiscal quarters, and comparatively little revenue has occurred during the first and fourth fiscal quarters. The Company plans to reduce Global's seasonal fluctuation in revenues by broadening its product line to increase revenues in the first and fourth fiscal quarters. Backlog. The Company's backlog consists of "firm" orders supported by customer purchase orders with fixed delivery dates for deicing equipment sold by Global and for parts and equipment sold by MAS. At March 31, 1998, the Company's backlog of orders was $5.8 million, of which $4.8 million was attributable to Global and approximately $1.0 million was attributable to MAS, all of which the Company expects to be filled in the current fiscal year. Governmental Regulation. Under the Federal Aviation Act of 1958, as amended, the FAA has safety jurisdiction over flight operations generally, including flight equipment, flight and ground personnel training, examination and certification, certain ground facilities, flight equipment maintenance programs and procedures, examination and certification of mechanics, flight routes, air traffic control and communications and other matters. The FAA also has power to suspend or revoke for cause the certificates it issues and to institute proceedings for imposition and collection of fines for violation of federal aviation regulations. The Company has secured appropriate operating certificates and airworthiness certificates for all aircraft operated by it. The FAA is currently conducting a periodic routine review of MAC and CSA's operating procedures and flight and maintenance records. The Airline Deregulation Act of 1978 created a new class of domestic certificated all-cargo carriers. Pursuant to such certificate, aircraft of specified size may be operated within the United States, without restriction on routes. The Company has been subject to FAA regulation since the commencement of its business activities. The FAA is concerned with safety and the regulation of flight operations generally, including equipment used, ground facilities, maintenance, communications and other matters. The FAA can suspend or revoke the authority of air carriers or their licensed personnel for failure to comply with its regulations and can ground aircraft if questions arise concerning airworthiness. The Company, through its subsidiaries, holds all operating airworthiness and other FAA certificates that are currently required for the conduct of its business, although these certificates may be suspended or revoked for cause. The FAA has authority under the Noise Control Act of 1972, as amended, to monitor and regulate aircraft engine noise. The aircraft operated by the Company are in compliance with all such regulations promulgated by the FAA. Moreover, because the Company does not operate jet aircraft noncompliance is not likely. Such aircraft also comply with standards for aircraft exhaust emissions promulgated by the Environmental Protection Agency pursuant to the Clean Air Act of 1970, as amended. Because of the extensive use of radio and other communication facilities in its aircraft operations, the Company is subject to the Federal Communications Act of 1934, as amended. Maintenance and Insurance. The Company, through its subsidiaries, maintains its aircraft under the appropriate FAA standards and regulations. The Company has secured public liability and property damage insurance in excess of minimum amounts required by the United States Department of Transportation. The Company has also obtained all-risk hull insurance on Company-owned aircraft. The Company maintains cargo liability insurance, workers' compensation insurance and fire and extended coverage insurance, for leased as well as owned facilities and equipment. Employees. At May 1, 1998, the Company had 444 full-time and full-time- equivalent employees, of which 301 are employed by MAC, 58 are employed by CSA, 24 are employed by MAS and 61 are employed by Global. None of the Company's employees are represented by a union. The Company believes its relations with its employees are good. Item 2. Properties. The Company leases the Little Mountain Airport in Maiden, North Carolina from a corporation whose stock is owned in part by J. Hugh Bingham, William H. Simpson and John J. Gioffre, officers and directors of the Company and the estate of David Clark. The facility consists of approximately 65 acres with one 3,000 foot paved runway, approximately 20,000 square feet of hangar space and approximately 9,700 square feet of office space. The operations of the Company and MAC are headquartered at this facility. The lease for this facility was renewed in May 1996, and is currently scheduled to expire on May 31, 2001, and may be renewed for an additional five-year period. In connection with the renewal, the monthly rental payment for this facility increased to $8,073. The Company also leases approximately 800 square feet of office space and approximately 6,000 square feet of hangar space at the Ford Airport in Iron Mountain, Michigan. CSA's operations are headquartered at these facilities. These facilities are leased under an annually renewable agreement with a monthly rental payment, as of March 31, 1998, of approximately $1,500. On November 16, 1995, the Company entered into a twenty-one and a half year premises and facilities lease with Global TransPark Foundation, Inc. to lease approximately 53,000 square feet of a new 66,000 square foot aircraft hangar shop and office facility at the North Carolina Global TransPark in Kinston, North Carolina. On August 10, 1996, MAS's component repair services and part of MAC's aircraft maintenance operations were relocated to this facility. Rent under this lease increases over time as follows: the first 18 months, no rent; the next 5-year period, $2.25 per square foot; the next 5-year period, $3.50 per square foot; the next 5-year period, $4.50 per square foot; and the final 5-year period, $5.90 per square foot. This lease is cancelable under certain conditions at the Company's option. The Company began operations at this facility in August 1996. MAS operates an engine overhaul management facility in Miami, Florida, leasing approximately 4,700 square feet of shop space. The lease expires in April 2000, and the monthly rental payment is $2,750. Global leases a 34,000 square foot production facility in Olathe, Kansas. The facility is leased under a lease agreement which expires in August 1999, but can be terminated by the landlord on six-months' notice. The monthly rental payment, as of March 31, 1998, was $17,030. As of March 31, 1998, the Company leased hangar space at 33 other locations for aircraft storage. Such hangar space is leased at prevailing market terms. The table of aircraft presented in Item 1 lists the aircraft operated by the Company's subsidiaries and the form of ownership. Item 3. Legal Proceedings. The Company is not aware of any pending or threatened lawsuits that if adversely decided would have a material adverse effect on the Company. The Company's fiscal year 1997, 1996 and 1995 tax returns are currently being examined by the Internal Revenue Service ("IRS"). Although the IRS has given the Company a preliminary indication that it may challenge the utilization of certain net operating carryforwards, no assessments against the Company for additional income taxes have been proposed. Company management believes that the ultimate outcome of the IRS audit will not have a material impact on future results of operations. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders. PART II Item 5. Registrant's Common Equity and Related Stockholder Matters. The Company's common stock is publicly traded in the over- the-counter market under the NASDAQ symbol "AIRT." As of May 1, 1998, the number of holders of record of the Company's Common Stock was approximately 380. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. The range of high and low bid quotations per share for the Company's common stock from April 1996 through March 1998 is as follows: Common Stock Quarter Ended High Low June 30, 1996 $4 3/8 $4 September 30, 1996 5 7/8 4 1/8 December 31, 1996 5 1/4 4 March 31, 1997 4 1/4 3 1/4 June 30, 1997 5 1/2 3 1/8 September 30, 1997 5 1/8 4 1/8 December 31, 1997 5 1/2 4 March 31, 1998 15 4 3/8 The Company's Board of Directors has adopted a policy to pay a regularly scheduled annual cash dividend in the first quarter of each fiscal year. The current year's $.14 per share cash dividend will be paid on June 12, 1998 to stockholders of record on May 19, 1998. Item 6. Selected Financial Data (In thousands except per share data) Year Ended March 31, 1998 1997 1996 1995 1994 Operating Revenues $51,026 $35,103 $35,432 $32,813 $30,674 Earnings before change in accounting principle 1,706 1,323 1,612 1,598 1,579 Change in accounting principle - - - - 715 Net earnings $1,706 $1,323 $1,612 $1,598 $2,294 Earnings per share-Basic: Before change in accounting principle $0.64 $0.51 $0.58 $0.56 $0.54 Change in accounting principle - - - - 0.25 Earnings per share-Basic $ 0.64 $0.51 $0.58 $0.56 $0.79 Earnings per share-Diluted: Before change in accounting principle $0.61 $0.47 $0.53 $0.48 $0.47 Change in accounting principle - - - - $0.22 Earnings per share-Diluted $0.61 $0.47 $0.53 $0.48 $0.69 Total assets $18,289 $11,118 $10,220 $10,161 $ 8,550 Long-term obligations, including current portion $ 885 $ - $ 10 $ 14 $ 20 Stockholders' equity $ 9,712 $ 8,254 $ 7,414 $ 7,130 $ 6,642 Average common shares outstanding 2,660 2,619 2,771 2,868 2,912 Dividend declared per common share (1)(2) $ 0.10 $ - $ 0.15 $ 0.06 $ 0.05 Dividend paid per common share (1)(2) $ 0.10 $ 0.08 $ 0.07 $ 0.06 $ 0.05 (1) On February 1, 1996, the Company declared a cash dividend of $.08 per common share that was paid on April 22, 1996. (2) On May 14, 1998, the Company declared a cash dividend of $.14 per common share payable on June 12, 1998 to stockholders of record on May 19, 1998. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company's most significant component of revenue is generated through its air cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA), which are short-haul express air freight carriers flying nightly contracts for a major express delivery company out of 80 cities, principally located in 30 states in the eastern half of the United States and in Puerto Rico, Canada and the Virgin Islands. Separate agreements cover the three types of aircraft operated by MAC and CSA-Cessna Caravan, Fokker F-27, and Short Brothers SD3-30. Cessna Caravan and Fokker F-27 aircraft (a total of 93 aircraft at March 31, 1998) are owned by and dry- leased from a major air express company (Customer), and Short Brothers SD3-30 aircraft (two aircraft at March 31, 1998) are owned by the Company and operated under wet-lease arrangements with the Customer. Pursuant to such agreements, the Customer determines the type of aircraft and schedule of routes to be flown by MAC and CSA, with all other operational decisions made by the Company. Under the terms of the dry-lease service agreements, which currently cover approximately 98% of the revenue aircraft operated, the Company passes through to its customer certain cost components of its operations without markup. The cost of fuel, flight crews, landing fees, outside maintenance, parts and certain other direct operating costs are included in operating expenses and billed to the customer as cargo and maintenance revenue, at cost. Agreements are renewable annually and may be terminated by the Customer at any time upon 15 to 30 days' notice. The Company believes that the short term and other provisions of its agreements with the Customer are standard within the air freight contract delivery service industry. The Company is not contractually precluded from providing such services to other firms, and has done so in the past. Loss of its contracts with the Customer would have a material adverse effect on the Company. In Fiscal 1994, to expand its revenue base, the Company organized Mountain Aircraft Services, LLC (MAS)to sell aircraft parts and offer engine overhaul management and engine component repair services to the commercial and military aviation industry. Revenue from this operation contributed approximately $4,626,000 (9.1%) and $3,449,000 (9.8%) to the Company's revenues in fiscal 1998 and 1997, respectively. In August 1997 the Company acquired certain assets and order backlog and assumed certain liabilities of Simon Deicer Company, a division of Terex Aviation Ground Equipment, Inc. located in Olathe, Kansas. The acquisition, renamed Global Ground Support, LLC (Global), manufactures, services and supports aircraft deicers on a worldwide basis. Global is operated as a subsidiary of MAS. Global's revenue contributed approximately $12,763,000 (25.0%) to Company revenue in fiscal 1998. The following table summarizes the changes and trends in the Company's expenses as a percentage of revenue: Fiscal Year Ended March 31 1998 1997 1996 Operating revenue (in thousands) $51,026 $35,103 $35,432 Expense as a percentage of revenue: Flight operations 27.28% 36.75% 35.71% Maintenance and brokerage 32.64 44.46 46.39 Ground equipment 20.88 - - General and administrative 11.70 12.06 10.77 Depreciation and amortization 1.11 1.06 1.37 Facility start-up/merger expense 0.37 0.99 - Total costs and expenses 93.98% 95.32% 94.24% Seasonality Global's business has historically been highly seasonal. In general, the bulk of Global's revenues have occurred earned during the second and third fiscal quarters, and comparatively little revenue has occurred during the first and fourth fiscal quarters due to the nature of its product line. The Company plans to reduce Global's seasonal fluctuation in revenues by broadening its product line to increase revenue in the first and fourth fiscal quarters. The remainder of the Company's business is not materially seasonal. Fiscal 1998 vs. 1997 Consolidated revenue increased $15,922,000 (45.4%) to $51,026, 000 for the fiscal year ended March 31, 1998 compared to the prior fiscal year. The increase in 1998 revenue primarily resulted from the $12,763,000 increase in revenue associated with the August 1997 acquisition of Global as well as increases in maintenance service, engine overhaul and parts revenue. Operating expenses increased $14,492,000 (43.3%) to $47,955,000 for fiscal 1998 compared to fiscal 1997. The increase in operating expenses consisted of the following changes: cost of flight operations increased $1,018,000 (7.9%) as a result of additional costs associated with flight crews, fuel and airport fees; maintenance expense increased $1,048,000 (6.7%) primarily as a result of increases in parts purchases and mechanic staffing; ground equipment increased $10,652,000, as a result of the August 1997 Global acquisition; depreciation and amortization increased $198,000 (53.2%) as a result of additional depreciable assets purchased in the acquisition of Global, offset by depreciation related to the sale of aircraft in fiscal 1997; the general and administrative expense increase of $1,736,000 (41.0%) is a result of $950,000 in G&A costs associated with the Company's operation of Global and increased insurance, employee benefits, staffing, salary and wage rates. Non-operating expense increased a net $697,000 (134.6%) due to a fiscal 1998 $418,000 provision to fulfill contractual benefits related to the death of the Company's Chairman and CEO, a fiscal 1997 $182,000 gain on sale of aircraft and increased current year interest related to the use of the Company's line of credit for the operation of Global. Pretax earnings increased $733,000 (33.9%) to $2,892,000 for fiscal 1998. The pretax earnings increase was primarily related to the profitable results of Global, which added $1,052,000 to the Company's pretax earnings and a $571,000 increase in pre-tax earnings for MAC partly offset by the increased non-operating expense discussed above. Provision for income taxes increased $350,000 (41.8%) due to the increased earnings generated by Global and MAC and also due to a higher effective rate in fiscal 1998 which resulted, in part, from the complete utilization of Company NOL's in the second quarter of fiscal 1997. The provision for income taxes for the fiscal years ended March 31, 1998 and 1997 were different from the Federal statutory rates due to state tax provisions and changes to the deferred tax valuation allowance. The Company's fiscal year 1997, 1996 and 1995 tax returns are currently being examined by the Internal Revenue Service (IRS). Although the IRS has given the Company a preliminary indication that it may challenge the utilization of certain net operating carryforwards, no assessments against the Company for additional income taxes have been proposed. Company management believes that the ultimate outcome of the IRS audit will not have a material impact on future results of operations. Fiscal 1997 vs. 1996 Consolidated revenue decreased $329,000 (0.9%) to $35,103,000 for the fiscal year ended March 31, 1997 compared to the prior fiscal year. The decrease in 1997 revenue primarily resulted from a $1,054,000 decrease in cargo revenue generated by Company-owned aircraft (one of which was sold in fiscal 1997), partially offset by a $308,000 increase in dry lease revenue and a $418,000 increase in revenue related to the expansion of MAS. Operating expenses increased $72,000 (0.2%) to $33,462,000 for fiscal 1997 compared to fiscal 1996. The increase in operating expenses consisted of the following changes: cost of flight operations increased $249,000 (2.0%) as a result of increases in pilot and flight personnel and costs associated with pilot travel; maintenance expense decreased $830,000 (5.1%) primarily as a result of decreases in parts purchases and contract service and outside maintenance costs; depreciation and amortization decreased $113,000 (23.3%) due to the sale of a Company-owned aircraft and the complete amortization of goodwill in the first quarter of fiscal 1997; the general and administrative expense increase of $418,000 (11.0%) resulted from increases in insurance, employee benefits and wage rates, and increases in operational and clerical staffing related to expansion of MAS; facility start-up/merger expense reflect $223,000 and $125,000 of cost, respectively associated with the start-up and relocation of maintenance operations to Kinston, North Carolina and professional fees related to the Company's letter of intent to acquire another entity. These merger discussions were terminated subsequent to fiscal year-end. Non-operating income increased a net $40,000 (8.4%) due to increased investment income offsetting decreased proceeds from the disposal of assets. Pretax earnings decreased $361,000 to $2,159,000 for fiscal 1997. The pretax earnings decrease was primarily related to the decreased level of earnings generated by Company-owned aircraft and costs associated with the above facility start-up and merger expense. Provision for income taxes decreased $72,000 (7.9%) to $836,000 in 1997. The decrease was due to decreased earnings offset by the complete utilization of net operating loss carryforwards in the second quarter of fiscal 1997. Liquidity and Capital Resources As of March 31, 1998 the Company's working capital amounted to $7,566,000, an increase of $782,000 compared to March 31, 1997. The net increase primarily resulted from profitable operations, offset by cash required for the acquisition and operation of Global. The Company's unsecured line of credit provides credit in the aggregate of up to $5,000,000 and matures in August 1998. Amounts advanced under the line of credit bear interest at the 30 day "LIBOR" rate plus 137 basis points. The Company anticipates that it will renew the line of credit before its scheduled expiration. Under the terms of the line of credit the Company may not encumber certain real or personal property. As of March 31, 1998, the Company was in a net borrowing position against its credit line of $916,000. Management believes that funds anticipated from operations and existing credit facilities will provide adequate cash flow to meet the Company's future financial needs. The respective years ended March 31, 1998, 1997 and 1996 resulted in the following changes in cash flow: operating activities used $759,000 in 1998, and provided $1,262,000 and $1,510,000 in 1997 and 1996. Investing activities used $2,093,000, $397,000 and $1,567,000 and financing activities provided $668,000 in 1998, and used $701,000 and $1,110,000, respectively, in 1997 and 1996. Net cash decreased $2,184,000, and $1,167,000 for 1998 and 1996, respectively, and increased $164,000 for 1997. Cash used in operating activities was $2,021,000 more for the year ended March 31, 1998 compared to 1997 principally due to the change in net assets resulting from the operations of Global, partially offset by the deferred retirement obligations booked. Cash used in investing activities for the year ended March 31, 1998 was approximately $1,696,000 more than 1997, principally due to expenditures related to the acquisition of Global, and an increase in capital expenditures. Cash provided by financing activities was $1,369,000 more in 1998 compared to 1997 principally due to an increase in borrowings under the line of credit, as well as decreased stock repurchases. During the fiscal year ended March 31, 1998 the Company repurchased 15,780 shares of its common stock at a total cost of $67,000. Pursuant to its previously announced stock repurchase program, $204,000 remains available for repurchase of common stock. Cost associated with the Company's start-up and certification of an FAA approved 145 component repair facility, which opened at Kinston, N. C. in May 1997, professional fees related to terminated first quarter merger discussions and start- up cost associated with Global amounted to $189,000 for fiscal 1998. There are currently no commitments for significant capital expenditures. The Company paid a $.10 per share cash dividend in June 1997. The Company's Board of Directors on August 7, 1997 adopted the policy to pay a regularly scheduled annual cash dividend in the first quarter of each fiscal year, in an amount to be determined by the board. The Company's Board of Directors on May 14, 1998 approved a $.14 per share cash dividend payable June 12, 1998 to stockholders of record May 19, 1998. Deferred Retirement Obligation The Company's former Chairman and Chief Executive Officer, David Clark, passed away on April 18, 1997. In addition to amounts previously expensed, under the terms of Mr. Clark's supplemental retirement agreement, death benefits with a present value of $418,000 were expensed in the first quarter of fiscal 1998. The death benefits are payable in the amount of $75,000 per year for 10 years. Impact of Inflation The Company believes the impact of inflation and changing prices on its revenues and net earnings will not have a material effect on its manufacturing operations since it is experiencing low inflation, or on its air cargo business since the major cost components of its operations, consisting principally of fuel, crew and certain maintenance costs are reimbursed, without markup, under current contract terms. Year 2000 Issue The Company has initiated a comprehensive review of its computer systems to identify the systems that could be affected by the "year 2000 issue", which is the result of computer programs written using two digits rather than four to define the applicable year. Like most owners of computer software, the Company will be required to modify significant portions of its software so that it will function properly in the Year 2000. The Company presently believes that, with modifications to existing software and conversions to new software, the Year 2000 problem will not pose significant operational problems for the Company's computer systems. Management does not believe the conversion will have a significant impact on the Company's financial position or results of operations. Item 8. Financial Statements and Supplementary Data. INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Air Transportation Holding Company, Inc. Denver, North Carolina We have audited the accompanying consolidated balance sheets of Air Transportation Holding Company, Inc. and subsidiaries (the "Company") as of March 31, 1998 and 1997, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Air Transportation Holding Company, Inc. and subsidiaries as of March 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1998 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Charlotte, North Carolina June 12, 1998 AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1998 1997 ASSETS CURRENT ASSETS Cash and cash equivalents $ 193,918 $ 2,377,898 Marketable securities (Note 3) 2,556,257 2,229,708 Accounts receivable, less allowance for doubtful accounts of $104,000 in 1998 and $57,000 in 1997 6,673,101 3,310,810 Inventories (Note 4) 5,325,613 1,069,206 Deferred tax asset (Note 10) 272,980 319,651 Prepaid expenses 33,922 119,828 Total Current Assets 15,055,791 9,427,101 PROPERTY AND EQUIPMENT (Note 1): Furniture, fixtures and improvements 3,765,745 2,555,994 Flight equipment and rotables inventory 927,523 842,642 4,693,268 3,398,636 Accumulated depreciation and amortization (2,429,031) (1,943,020) Property and equipment, net 2,264,237 1,455,616 DEFERRED TAX ASSET (Note 10) 152,000 25,329 INTANGIBLE PENSION ASSET (Note 11) 389,495 - OTHER ASSETS 427,880 210,365 Total Assets $18,289,403 $11,118,411 See notes to consolidated financial statements. AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1998 1997 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to bank (Note 6) $ 916,079 $ - Accounts payable 3,975,633 809,245 Accrued expenses (Note 5) 1,778,664 1,443,513 Income taxes payable (Note 10) 762,961 389,916 Current portion of long-term obligation 56,241 - Total Current Liabilities 7,489,578 2,642,674 CAPITAL LEASE OBLIGATION (less current portion) 30,904 - DEFERRED RETIREMENT OBLIGATIONS (less current portion) (Note 11) 1,056,795 221,533 STOCKHOLDERS' EQUITY (Note 8): Preferred stock, $1 par value, authorized 10,000,000 shares, none issued - - Common stock, par value $.25; authorized 4,000,000 shares; issued 2,711,653 shares in 1998 and 2,651,433 shares in 1997 677,241 662,858 Additional paid in capital 7,128,907 7,126,294 Retained earnings 1,905,978 465,052 Total Stockholders' Equity 9,712,126 8,254,204 Total Liabilities and Stockholders' Equity $18,289,403 $11,118,411 See notes to consolidated financial statements.
AIR TRANSPORTATION HOLDING COMPANY, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended March 31, 1998 1997 1996 Operating Revenues (Note 9): Cargo $18,999,331 $18,521,298 $19,129,860 Maintenance 14,226,260 12,966,027 13,104,829 Ground equipment 12,763,091 - - Aircraft services and other 5,036,958 3,615,947 3,197,607 51,025,640 35,103,272 35,432,296 Operating Expenses: Flight operations 13,920,520 12,902,342 12,653,601 Maintenance and brokerage 16,654,164 15,606,161 16,435,729 Ground equipment 10,652,102 - - General and administrative 5,970,003 4,234,113 3,815,987 Depreciation and amortization 569,329 371,615 484,711 Start-up/merger expense (Note 2) 188,520 347,960 - 47,954,638 33,462,191 33,390,028 Operating Income 3,071,002 1,641,081 2,042,268 Non-operating Expense (Income): Interest 22,382 566 986 Deferred retirement expense (Note 11) 438,833 - - Investment income (281,857) (336,222) (215,252) Gain on asset sale - (182,359) (263,508) 179,358 (518,015) (477,774) Earnings Before Income Taxes 2,891,644 2,159,096 2,520,042 Income Taxes (Note 10) 1,185,574 835,892 907,995 Net Earnings $ 1,706,070 $ 1,323,204 $ 1,612,047 Net Earnings Per Share (Note 12): Basic $ 0.64 $ 0.51 $ 0.58 Diluted $ 0.61 $ 0.47 $ 0.53 Average Shares Outstanding: Basic 2,659,765 2,618,599 2,771,025 Diluted 2,787,875 2,793,891 3,021,334 See notes to consolidated financial statements.
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional Retained (Note 8) Paid-In Earnings Shares Amount Capital (Deficit) Balance, March 31, 1995 2,865,933 $ 716,483 $7,891,108 $(1,477,577) Repurchase and retirement of common stock (238,500) (59,625) (669,563) (281,855) Exercise of stock options 98,000 24,500 77,500 - Cash dividend ($.07 per share) - - - (200,615) Cash dividend ($.08 per share) - - - (218,435) Net earnings - - - 1,612,047 Balance, March 31, 1996 2,725,433 681,358 7,299,045 (566,435) Repurchase and retirement of common stock (135,000) (33,750) (224,001) (291,717) Exercise of stock options 61,000 15,250 51,250 - Net earnings - - - 1,323,204 Balance, March 31, 1997 2,651,433 662,858 7,126,294 465,052 Repurchase and retirement of common stock (15,780) (4,617) (62,637) - Exercise of stock options 76,000 19,000 65,250 - Cash dividend ($.10 per share) - - - (265,144) Net earnings - - - 1,706,070 Balance, March 31, 1998 2,711,653 $ 677,241 $7,128,907 $ 1,905,978 See notes to consolidated financial statements .
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31, 1998 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $1,706,070 $1,323,204 $1,612,047 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 569,329 371,615 484,711 Change in deferred tax asset (80,000) 122,858 107,782 Change in retirement obligation 445,767 221,533 - Gain on sale of assets - (182,359) (263,508) Charge in lieu of income taxes credited to goodwill - 15,837 323,346 Changes in assets and liabilities which provided (used) cash: Accounts receivable (3,359,098) (177,140) 232,616 Inventories (2,733,378) (343,703) (455,850) Prepaid expense and other (131,608) (144,483) (88,180) Accounts payable 3,163,849 14,974 (794,443) Accrued expenses (712,731) (111,771) 154,009 Income taxes payable 373,045 151,803 197,059 Total adjustments (2,464,825) (60,836) (102,458) Net cash provided by (used in) operating activities (758,755) 1,262,368 1,509,589 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (1,042,995) (674,194) (1,889,819) Sale of marketable securities 716,446 334,305 - Business acquisition (715,981) - - Capital expenditures (1,050,626) (472,019) (127,156) Proceeds from sale of equipment - 415,000 450,000 Net cash used in investing activities (2,093,156) (396,908) (1,566,975) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit 916,079 - - Payment of cash dividend (265,144) (218,435) (200,615) Repurchase of common stock (67,254) (549,468) (1,011,043) Proceeds from exercise of stock options 84,250 66,500 102,000 Net cash provided by (used in) financing activities 667,931 (701,403) (1,109,658) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,183,980) 164,057 (1,167,044) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,377,898 2,213,841 3,380,885 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 193,918 $2,377,898 $2,213,841 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 20,108 $ 572 $ 981 Income/Franchise taxes 842,477 613,396 346,873 See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 1998, 1997, AND 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principal Business Activity - The Company, through its operating subsidiaries, is an air cargo carrier specializing in the overnight delivery of small package air freight, a provider of aircraft parts, engine overhaul management and component repair services and a manufacturer of aircraft deice equipment. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Mountain Air Cargo, Inc., CSA Air, Inc., Mountain Aircraft Services, LLC and Global Ground Support, LLC. All significant intercompany transactions and balances have been eliminated. Cash Equivalents - Cash equivalents consist of liquid investments with maturities of three months or less when purchased. Inventories - Inventories of the manufacturing subsidiary are carried at the lower of cost (first in, first out) or market. Parts and supplies inventory are carried at the lower of average cost or market. Consistent with industry practice, the Company includes in current assets aircraft parts and supplies, although a certain portion of these inventories are not expected to be used within one year. Property and Equipment - Property and equipment is stated at cost or, in the case of equipment under capital leases, the present value of future lease payments. Rotables inventory represents aircraft parts which are repairable and are, therefore, capitalized and depreciated over their estimated useful lives. Depreciation and amortization are provided on a straight-line basis over the asset's service life or related lease term, as follows: Flight equipment and intellectual property 7 years Other equipment and furniture 3 to 6 years Revenue Recognition - Cargo revenue is recognized upon completion of contract terms and maintenance revenue is recognized when the service has been performed. Revenue from product sales is recognized when goods are completed for shipment to customers. Operating Expenses Reimbursed by Customer - The Company, under the terms of its air cargo dry-lease service contracts, passes through to its major customer certain cost components of its operations without markup. The cost of flight crews, fuel, landing fees, outside maintenance and certain other direct operating costs are included in operating expenses and billed to the customer, at cost, as cargo and maintenance revenue. Stock Based Compensation - SFAS No. 123 "Accounting for Stock-Based Compensation," requires companies to measure employee stock compensation plans based on the fair value method of accounting. However, the Statement allows the alternative of continued use of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," with pro-forma disclosure of net earnings and earnings per share determined as if the fair value based method had been applied in measuring compensation cost. The Company adopted the new standard in fiscal 1997 and elected the continued use of APB Opinion No. 25. Pro- forma disclosure has not been provided since no employee stock options have been granted since 1992. Income Taxes - Income taxes are provided for temporary differences between the tax and financial accounting bases of assets and liabilities using the asset and liability method. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. Recent Accounting Pronouncements - In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) was issued. SFAS 130 will require disclosure of comprehensive income (which is defined as "the change in equity during a period excluding changes resulting from investments by shareholders and distributions to shareholders") and its components. SFAS 130 is effective for fiscal years beginning after December 15, 1997, with reclassification of comparative years. The Company will adopt SFAS 130 in the year ending March 31, 1999. Had the new standard been applied in the March 31, 1998 financial statements, there would have been no material difference between comprehensive and reported income. Statement of Financial Accounting Standard No. 131, "Disclosure about Segments of an Enterprise and Related Information" (SFAS 131) was also issued in June 1997. SFAS 131 is effective for the Company in the fiscal year ending March 31, 1999. SFAS 131 redefines how operating segments are determined and requires disclosure of certain financial information about a company's operating segments. Management has not yet determined the impact of the adoption of SFAS 131 on its current disclosures of its business segments. Accounting Estimates - The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. Reclassifications - Certain prior year reclassifications have been made to 1997 and 1996 amounts to conform to current year presentation. 2. BUSINESS ACQUISITION, FACILITY START-UP AND MERGER EXPENSES On August 29, 1997, the Company acquired certain assets and assumed certain liabilities of the Simon Deicer Division of Terex, Inc. for $716,000 cash. The acquired entity, renamed Global Ground Support, LLC (Global), manufactures, sells and services aircraft deice equipment on a worldwide basis. The acquisition was accounted for using the purchase method; accordingly, the assets and liabilities (which included $1,523,000 inventory, $288,000 fixed assets and $3,000 accounts receivable, net of $1,049,000 in customer deposits and $49,000 warranty obligation) of the acquired entity have been recorded at their estimated fair value at the date of acquisition. Global's results of operations have been included in the Consolidated Statements of Earnings since the date of acquisition. The following table presents unaudited pro-forma results of operations as if the acquisition had occurred on April 1, 1997 and 1996. These pro-forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of fiscal 1997 or of results, which may occur in the future. Furthermore, no effect has been given in the pro-forma information for operating benefits that are expected to be realized through the combination of the entities because precise estimates of such benefits cannot be quantified. Year Ended March 31, 1998 1997 Operating revenues $ 52,761,000 $ 43,461,000 Net earnings 1,718,000 549,000 Net earnings per share -diluted .65 .21 During fiscal year 1998 the Company incurred $189,000 in costs related to the start-up of a newly certificated FAA 145 component repair facility and professional fees associated with fiscal 1997 merger discussions, terminated in April 1997. These costs have been expensed in the accompanying Consolidated Statement of Earnings. During fiscal year 1997 the Company incurred $348,000 in start-up and merger expenses related to the relocation of certain of its aircraft maintenance facilities and the above mentioned proposed merger terminated in April 1997. 3. MARKETABLE SECURITIES Marketable securities consists primarily of individual stocks and bonds and mutual funds. The Company has classified marketable securities as available-for-sale and they are carried at fair value. If significant, unrealized gains and losses on such securities are excluded from earnings and reported as a separate component of stockholders' equity, net of the related income taxes, until realized. At March 31, 1998 and 1997, such unrealized amounts were immaterial. Realized gains and losses on marketable securities are determined by calculating the difference between the basis of each specifically identified marketable security sold and its sales price. During 1998 and 1997, the Company recorded realized gains of approximately $19,000 and $67,000, respectively, in the accompanying consolidated statements of earnings. At March 31, 1998 and 1997, marketable securities consist of the following investment types: 1998 1997 Mutual funds $ 1,398,719 $ 961,048 Equity securities 611,366 237,876 Government bonds 433,700 690,541 Corporate bonds 112,472 340,243 Total $ 2,556,257 $ 2,229,708 4. INVENTORIES Inventories consist of the following: March 31, 1998 1997 Aircraft parts and supplies $ 1,559,225 $ 1,069,206 Aircraft equipment manufacturing: Raw materials 3,197,008 - Work in process 5,871 - Finished goods 563,509 - Total $ 5,325,613 $ 1,069,206 5. ACCRUED EXPENSES Accrued expenses consist of the following: March 31, 1998 1997 Salaries, wages and related items $ 1,027,028 $ 741,835 Profit sharing 466,425 352,000 Other 285,211 349,678 $ 1,778,664 $ 1,443,513 6. FINANCING ARRANGEMENTS During fiscal 1998 the Company increased its bank financing line to $5,000,000 under an unsecured revolving line of credit which expires on August 31, 1998. The Company anticipates it will renew the line of credit prior to its scheduled expiration. Amounts advanced bear interest at the 30-day "LIBOR" rate plus 137 basis points. The LIBOR rate at March 31, 1998 was 5.69%. As of March 31, 1998, $916,079 was outstanding against the line; there were no advances outstanding as of March 31, 1997. 7. LEASE COMMITMENTS The Company has operating lease commitments for office equipment and its office and maintenance facilities. The Company leases its corporate office and certain maintenance facilities from a company controlled by Company officers for $8,073 per month under a five year lease which expires in May 2001. In August 1996, the Company relocated certain portions of its maintenance operations to a new maintenance facility located at the Global TransPark in Kinston, N. C. Under the terms of the long-term facility lease, after an 18 month grace period (from date of occupancy), rent will escalate from $2.25 per square foot to $5.90 per square foot over the life of the lease. However, based on the occurrence of certain events the lease may be canceled by the Company. The Company currently considers the lease to be non- cancelable for four years and has calculated rent expense on a straight-line basis over this portion of the lease term. In August 1997 Global, located in Olathe, Kansas, leased approximately 57,000 square feet of manufacturing space for $17,030 per month. The two-year operating lease expires in September 1999. At March 31, 1998, future minimum annual rental payments under non-cancelable operating leases with initial or remaining terms of more than one year are as follows: 1999 $ 466,218 2000 336,042 2001 136,883 2002 16,147 Total minimum lease payments$ 955,290 Rent expense for operating leases amounted to approximately $369,000, $236,000, and $177,000 for 1998, 1997 and 1996, respectively. Rent expense to related parties was $96,900, $94,700 and $84,000 for 1998, 1997 and 1996, respectively. 8. STOCKHOLDERS' EQUITY The Company may issue up to 10,000,000 shares of preferred stock, in one or more series, on such terms and with such rights, preferences and limitations as determined by the Board of Directors. No preferred shares have been issued as of March 31, 1998. The Company has granted options to purchase shares of common stock to certain Company employees at prices ranging from $1.00 to $1.25 per share. All options were granted at exercise prices which approximated the fair value of the common stock on the date of grant. Options vest over a five year period, and must be exercised within five years of the vesting date. Options outstanding at March 31, 1998 have a weighted average contractual life of 1.65 years. No options have been granted or have expired during fiscal year 1998, 1997 or 1996. The Company has reserved an aggregate of 110,000 common shares for issuance upon exercise of these stock options. Of the outstanding options at March 31, 1998 the exercise prices per share range from $1.00 to $1.25, and are all currently exercisable. Option information is summarized as follows: Weighted Average Executive Stock Option Plan Shares Exercise Price Per Share Outstanding March 31, 1995 345,000 $ 1.09 Exercised 98,000 $ 1.04 Outstanding March 31, 1996 247,000 $ 1.11 Exercised 61,000 $ 1.09 Outstanding March 31, 1997 186,000 $ 1.12 Exercised 76,000 $ 1.11 Outstanding March 31, 1998 110,000 $ 1.12 The Company has announced its intention to repurchase the Company's common stock under a share repurchase program. At March 31, 1998 the Company had repurchased a total of 667,780 shares at a total cost of $2,795,362 and may expend up to an additional $204,638 under this program. 9. REVENUES FROM MAJOR CUSTOMER Approximately 64.0%, 89.5% and 89.1% of the Company's revenues were derived from services performed for a major air express company in 1998, 1997 and 1996, respectively. 10. INCOME TAXES The provision for income taxes consists of: YEAR ENDED MARCH 31, 1998 1997 1996 Current: Federal $ 1,080,000 $ 519,000 $ 188,000 State 186,000 178,000 182,000 Total current 1,266,000 697,000 370,000 Deferred (80,000) 123,000 108,000 Charge in lieu of Federal taxes - 16,000 430,000 Total $ 1,186,000 $ 836,000 $ 908,000 Pre-acquisition net operating loss carryforwards have been utilized for federal income tax purposes for fiscal years 1997 and 1996. The income tax benefit ($16,000 in 1997, $323,000 in 1996) derived from these pre-acquisition net operating loss carryforwards was accounted for as a reduction of goodwill until goodwill was fully amortized in fiscal year 1997. The consolidated income tax provision was different from the amount computed using the statutory Federal income tax rate for the following reasons: 1998 1997 1996 Income tax provision at U.S. Statutory rate $ 983,000 $ 734,000 $ 857,000 State income taxes 159,000 118,000 120,000 Reduction in valuation allowance (133,200) (37,000) (115,000) Meal and entertainment disallowance 85,000 90,000 67,000 Other net 92,200 (69,000) (21,000) Income tax provision $ 1,186,000 $ 836,000 $ 908,000 The tax effect of temporary differences that gave rise to the Company's deferred tax asset at March 31, 1998 and 1997 are as follows: 1998 1997 Book accruals over tax, net $ 272,980 $ 452,851 Fixed assets 152,000 25,329 424,980 478,180 Less: Valuation allowance - (133,200) Deferred tax asset $ 424,980 $ 344,980 The deferred tax asset is classified in the accompanying 1998 and 1997 consolidated balance sheets according to the classification of the related asset and liability. The Company has recorded a valuation allowance in order to reduce its deferred tax asset to an amount which is more likely than not to be realized. At March 31, 1997, the Company had recorded a valuation allowance to reduce its deferred tax asset to an amount which management believed would more likely that not be realized. At March 31, 1998, Company management does not believe that a valuation allowance is necessary. The Company's fiscal year 1997, 1996 and 1995 tax returns are currently being examined by the Internal Revenue Service (IRS). Although the IRS has given the Company a preliminary indication that it may challenge the utilization of certain net operating carryforwards, no assessments against the Company for additional income taxes have been proposed. Company management believes that the ultimate outcome of the IRS audit will not have a material impact on future results of operations. 11. EMPLOYEE BENEFITS The Company has a 401K defined contribution plan (AirT 401(K) Retirement Plan). All employees of the Company are eligible to participate in the plan. The Company's contribution to the 401(K) plan for the years ended March 31, 1998, 1997 and 1996 was $203,000, $203,000, and $210,000, respectively. The Company, in each of the past three years, has paid a discretionary profit sharing bonus in which all employees have participated. The Company's March 31, 1998, 1997, and 1996 expense was $466,000, $352,000, and $409,000, respectively. Effective January 1, 1996 the Company entered into supplemental retirement agreements with certain key executives of the Company, to provide for a monthly benefit upon retirement. The following table sets forth the funded status of the plan at March 31, 1998 and 1997. March 31, 1998 1997 Vested benefit obligation $ 648,796 $ 1,007,084 Accumulated benefit obligation 648,796 1,007,084 Projected benefit obligation 648,796 1,007,084 Plan assets at fair value - - Projected benefit obligation greater than plan assets 648,796 1,007,084 Unrecognized prior service cost (389,495) (785,551) Adjustment required to recognize minimum liability 389,495 - Accrued pension cost recognized in the consolidated balance sheet $ 648,796 $ 221,533 In accordance with the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," the Company has recorded an additional minimum liability at March 31, 1998, representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability for its pension plan. The additional liability has been offset by an intangible asset to the extent of previously recognized prior service costs. The projected benefit obligation was determined using an assumed discount rate of 7%. The liability relating to these benefits has been included in accrued expenses in the accompanying financial statements. Net periodic pension expense for fiscal 1998 and 1997 included the following: 1998 1997 Future service cost $ 31,317 $ 29,267 Interest cost 61,229 63,969 Amortization 89,667 86,187 Net periodic pension cost $ 182,213 $ 179,423 The Company's Chairman and CEO passed away on April 18, 1997. Under the terms of his supplemental retirement agreement, approximately $498,000 in present value of death benefits is required to be paid to fulfill death benefit payments over the next 10 years. As of March 31, 1998 accruals related to the unpaid present value of the benefit amounted to approximately $458,000. 12. NET EARNINGS PER COMMON SHARE In February 1997, Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS 128) was issued. SFAS 128 became effective for the Company's fiscal year ended March 31, 1998 and as required by SFAS No. 128, per share data for all periods presented has been retroactively restated to conform to the new standard. Basic earnings per share has been calculated by dividing net earnings by the weighted average number of common shares outstanding during each period. For purposes of calculating diluted earnings per share, shares issuable under employee stock options were considered common share equivalents and were included in the weighted average common shares. The computation of basic and diluted earnings per common share is as follows: For year ended March 31, 1998 1997 1996 Net earnings $ 1,706,070 $ 1,323,204 $ 1,612,047 Weighted average common shares: Shares outstanding - basic 2,659,765 2,618,599 2,771,025 Dilutive stock options 128,110 175,292 250,309 Shares outstanding - diluted 2,787,875 2,793,891 3,021,334 Net earnings per common share: Basic $ 0.64 $ 0.51 $ 0.58 Diluted $ 0.61 $ 0.47 $ 0.53 13. QUARTERLY FINANCIALINFORMATION (UNAUDITED) (in thousands except per share data) FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER 1998 Operating Revenues $ 8,159 $10,752 $16,463 $15,652 Operating Income 465 615 1,373 618 Earnings Before Income Taxes 124 687 1,412 669 Net Earnings 94 419 893 300 Net Earnings Per Share-Basic $ 0.03 $ 0.15 0.34 0.12 Net Earnings Per Share-Diluted 0.03 0.15 0.32 0.11 1997 Operating Revenues $ 8,059 $ 8,280 $ 8,911 $ 9,853 Operating Income 544 92 404 601 Earnings Before Income Taxes 611 327 446 775 Net Earnings 405 128 305 485 Net Earnings Per Share-Basic $ 0.15 $ 0.05 $ 0.12 $ 0.19 Net Earnings Per Share-Diluted 0.14 0.05 0.11 0.17 The fiscal 1998 quarterly financial information presented above reflects the following unusual or infrequently occurring events, as described by quarter: First Quarter Fiscal 1998 - $251,000 net provision for a deferred retire- ment obligation related to the April 1997 death of the Company's Chairman & CEO. Third Quarter Fiscal 1998 - First full quarter operations of Global, an AirT subsidiary which was acquired in August 1997. Revenue for the quarter amounted to $6,368,000,net earnings was $599,000. Fourth Quarter Fiscal 1998 - Global revenue decreased to $4,842,000 due to the highly seasonal nature of its operations. In addition, Global recorded an inventory revaluation charge which reduced fourth quarter net earnings by $255,000. 14. SEGMENT INFORMATION The Company operates in three different business segments, overnight air cargo, aviation parts, overhaul and repair service, and manufacture of aircraft deice equipment. The aircraft deice equipment segment represents operations since the August 1997, date of its' acquisition. Segment data is summarized as follows: Year Ended March 31, 1998 1997 1996 Operating Revenues Overnight Air Cargo $33,609,527 $31,530,661 $32,224,146 Ground Equipment 12,763,091 - - Aviation Services 4,626,089 3,448,622 3,175,768 Corporate 26,933 123,989 32,382 Total $51,025,640 $35,103,272 $35,432,296 Operating Income Overnight Air Cargo $ 3,140,747 $ 2,456,249 $ 2,163,468 Ground Equipment 1,070,636 - - Aviation Services (138,663) 52,979 85,139 Corporate (1) (1,001,718) (868,147) (206,339) Total $ 3,071,002 $ 1,641,081 $ 2,042,268 Identifiable Assets Overnight Air Cargo $ 9,325,095 $ 7,385,257 $ 6,537,141 Ground Equipment 3,018,627 - - Aviation Services 449,972 1,766,081 1,353,021 Corporate 5,495,709 1,967,073 2,329,909 Total $18,289,403 $11,118,411 $10,220,071 Capital Expenditures, net Overnight Air Cargo $ 373,560 $ 228,998 $ 114,141 Ground Equipment 463,556 - - Aviation Services 213,510 243,021 13,015 Corporate - - - Total $ 1,050,626 $ 472,019 $ 127,156 Depreciation and Amortization Overnight Air Cargo $ 248,810 $ 178,302 $ 222,047 Ground Equipment 63,611 - - Aviation Services 176,546 72,756 67,709 Corporate 80,362 120,557 194,955 Total $ 569,329 $ 371,615 $ 484,711 (1) Includes income from inter-segment transactions. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. The Company had no disagreements on accounting or financial disclosure matters with its independent certified public accountants to report under this Item 9. PART III Item 10. Directors and Executive Officers of the Registrant. J. Hugh Bingham, age 52, has served as President and Chief Operating Officer of the Company since April 1997, as Senior Vice President of the Company from June 1990 until April 1997, as Executive Vice President from June 1983 to June 1990, and as a director since March 1987. Mr. Bingham also serves as Chief Executive Officer and a director of MAC, as Chief Executive Officer of MAS and as an Executive Vice President and director of CSA. Walter Clark, age 41, has served as Chairman of the Board of Directors of the Company and Chief Executive Officer since April 1997. Mr. Clark also serves as a director of MAC and CSA. Mr. Clark was elected a director of the Company in April 1996. Mr. Clark was self-employed in the real estate development business from 1985 until April 1997. John J. Gioffre, age 54, has served as Vice President- Finance and Chief Financial Officer of the Company since April 1984 and as Secretary/Treasurer of the Company since June 1983. He has served as a director of the Company since March 1987. Mr. Gioffre also serves as Vice-President, Secretary/Treasurer and a director of MAC and CSA and as Vice President-Finance, Treasurer and Secretary of MAS. J. Leonard Martin, age 61, was elected a director in August 1994 and joined the Company as a Vice President in April 1997. From June 1995 until April 1997, Mr. Martin was an independent aviation consultant. From April 1994 to June 1995, Mr. Martin has served as Chief Operating Officer of Musgrave Machine & Tool, Inc., a machining company. From January 1989 to April 1994, Mr. Martin served as a consultant to the North Carolina Air Cargo Authority in connection with the establishment of the Global TransPark air cargo facility in Kinston, North Carolina. From 1955 through 1988 Mr. Martin was employed by Piedmont Airlines, a commercial passenger airline, in various capacities, ultimately serving as Senior Vice President-Passenger Services. H. Wayne Ross, age 53, has served as President of CSA since October 1988. William H. Simpson, age 50, has served as Executive Vice President of the Company since June 1990, as Vice President from June 1983 to June 1990, and as a director of the Company since June 20, 1985. Mr. Simpson is also the President and a director of MAC, the Chief Executive Officer and a director of CSA and Executive Vice President of MAS. Menda J. Street, age 46, has served as Vice President of MAC since 1984, and in various other capacities at MAC since 1979. Claude S. Abernethy, Jr., age 71, was elected as director of the Company in June 1990. For the past five years, Mr. Abernethy has served as a Senior Vice President of Interstate/Johnson Lane Incorporated, a securities brokerage and investment banking firm. Mr. Abernethy is also a director of Interstate/Johnson Lane Incorporated, Carolina Mills, Inc. and Ridgeview Incorporated. Sam Chesnutt, age 64, was elected a director of the Company in August 1994. Mr. Chesnutt serves as President of Sam Chesnutt and Associates, an agribusiness consulting firm. From November 1988 to December 1994, Mr. Chesnutt served as Executive Vice President of AgriGeneral Company, L.P., an agribusiness firm. Allison T. Clark, age 42, has served as a director of the Company since May 1997. Mr. Clark is self-employed in the real estate development business since 1987. Herman A. Moore, age 68, was elected a director of the Company on June 22, 1998. Mr. Moore is the president of Herman A. Moore & Assoc., Inc., a real estate development company. George C. Prill, age 75, has served as a director of the Company since June 1982, as Chief Executive Officer and Chairman of the Board of Directors from August 1982 until June 1983, and as President from August 1982 until spring 1984. Mr. Prill has served as an Editorial Director for General Publications, Inc., a publisher of magazines devoted to the air transportation industry, since November 1992 and was retired from 1990 until that time. From 1979 to 1990, Mr. Prill served as President of George C. Prill & Associates, Inc., of Charlottesville, Virginia, which performed consulting services for the aerospace and airline industry. Mr. Prill has served as President of Lockheed International Company, as Assistant Administrator of the FAA, as a Senior Vice President of the National Aeronautic Association and Chairman of the Aerospace Industry Trade Advisory Committee. The officers of the Company and its subsidiaries each serve at the pleasure of the Board of Directors. Allison Clark and Walter Clark are brothers. Each director receives a director's fee of $500 per month and an attendance fee of $500 is paid to outside directors for each meeting of the board of directors or a committee thereof. To the Company's knowledge, based solely on review of the copies of reports under Section 16(a) of the Securities Exchange Act of 1934 that have been furnished to the Company and written representations that no other reports were required, during the fiscal year ended March 31, 1997 all executive officers, directors and greater than ten-percent beneficial owners have complied with all applicable Section 16(a) filing requirements, except that Mr. Allison Clark was late in filing his initial report on Form 3, Mr. Walter Clark was late in filing a Form 5 to report the receipt of a gift of 2,222 shares and Ms. Street was late in filing a report on Form 4 with respect to her exercise of options in September 1997 and a report on Form 4 with respect to two sale transactions in March 1998. Item 11. Executive Compensation. The following table sets forth a summary of the compensation paid during each of the three most recent fiscal years to the Company's Chief Executive Officer, to the four other executive officers on March 31, 1998 with total compensation of $100,000 or more and to David Clark. Mr. David Clark passed away on April 18, 1997. Prior to his death, David Clark served as the Company's Chief Executive Officer. SUMMARY COMPENSATION TABLE Annual Compensation Other Annual Name and Principal Year Salary Bonus Compensation Position ($) ($) ($) Walter Clark (1) 1998 76,236 10,000 - Chief Executive Officer 1997 - - - 1996 - - - David Clark (2) 1998 28,429 - 43,750(2) Former Chief Executive 1997 171,391 50,222 - Officer 1996 155,749 59,583 - J. Hugh Bingham 1998 184,445 70,721 - Senior Vice President 1997 148,289 50,222 - 1996 126,441 67,583 - John J. Gioffre 1998 127,142 52,641 - Vice President 1997 121,208 37,667 - 1996 101,250 49,937 - J. Leonard Martin (3) 1998 117,751 15,953 - Vice President 1997 - - - 1996 - - - William H. Simpson 1998 195,809 70,721 - Executive Vice President 1997 186,299 50,222 - 1996 155,364 73,583 - __________________________________________ (1) Mr. Walter Clark commenced his employment in April 1997. (2) Represents annual benefit paid by the Company to Mr. David Clark's estate upon his death. Mr. David Clark served as the Company's Chief Executive Officer until he passed away on April 18, 1997. (3) Mr. Martin commenced his employment in April 1997. The following table sets forth the number of shares of Common Stock underlying unexercised options at March 31, 1998 held by each of the executive officers listed in the Summary Compensation Table. The table also includes the value of such options at March 31, 1998 based upon the closing bid price of the Company's Common Stock in the over-the-counter market on that date ($13.50 per share) and the exercise price of the options. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES Shares Number of Securities Value of Unexercised Acquired Value Underlying Unexercised In-the-Money Options On Realized Options at FY-End (#) at FY-End ($) Name Exercise# ($) Exercis- Unexercis- Exercis- Unexercis- able able able able Walter Clark - - - - - - David Clark - - - - - - J. Hugh Bingham 20,000 71,000 38,000 - 470,500 - John J. Gioffre 13,000 46,125 20,000 - 247,000 - J. Leonard Martin - - - - - - William H.Simpson 28,000 99,500 52,000 - 644,000 - Employment Agreements. Effective January 1, 1996, the Company and each of its subsidiaries entered into employment agreements with J. Hugh Bingham, John J. Gioffre and William H. Simpson, each of substantially similar form. Each of such employment agreements provides for an annual base salary ($130,000, $103,443 and $165,537 for Messrs. Bingham, Gioffre and Simpson, respectively) which may be increased upon annual review by the Compensation Committee of the Company's Board of Directors. In addition, each such agreement provides for the payment of annual incentive bonus compensation equal to a percentage (2.0%, 1.5% and 2.0% for Messrs. Bingham, Gioffre and Simpson, respectively) of the Company's consolidated earnings before income taxes and extraordinary items as reported by the Company in its Annual Report on Form 10-K. Payment of such bonus is to be made within 15 days after the Company files its Annual Report on Form 10-K with the Securities and Exchange Commission. The initial term of each such employment agreement expires on March 31, 1999, and the term is automatically extended for additional one-year terms unless either such executive officer or the Company's Board of Directors gives notice to terminate automatic extensions which must be given by December 1 of each year (commencing with December 1, 1996). Each such agreement provides that upon the executive officer's retirement, he shall be entitled to receive an annual benefit equal $75,000 ($60,000 for Mr. Gioffre), reduced by three percent for each full year that the termination of his employment precedes the date he reaches age 65. The retirement benefits under such agreements may be paid at the executive officer's election in the form of a single life annuity or a joint and survivor annuity or a life annuity with a ten-year period certain. In addition, such executive officer may elect to receive the entire retirement benefit in a lump sum payment equal to the present value of the benefit based on standard insurance annuity mortality tables and an interest rate equal to the 90-day average of the yield on ten-year U.S. Treasury Notes. Retirement benefits shall be paid commencing on such executive officer's 65th birthday, provided that such executive officer may elect to receive benefits on the later of his 62nd birthday, in which case benefits will be reduced as described above, or the date on which his employment terminates, provided that notice of his termination of employment is given at least one year prior to the termination of employment. Any retirement benefits due under the employment agreement shall be offset by any other retirement benefits that such executive officer receives under any plan maintained by the Company. In the event such executive officer becomes totally disabled prior to retirement, he will be entitled to receive retirement benefits calculated as described above. In the event of such executive officer's death before retirement, the agreement provides that the Company shall be required to pay an annual death benefit to such officer's estate equal to the single life annuity benefit such executive officer would have received if he had terminated employment on the later of his 65th birthday or the date of his death, payable over ten years; provided that such amount would be reduced by five percent for each year such executive officer's death occurs prior to age 65, but in no event more than 50 percent. Each of the employment agreements provides that if the Company terminates such executive officer's employment other than for "cause" (as defined in the agreement), such executive officer be entitled to receive a lump sum cash payment equal to the amount of base salary payable for the remaining term of the agreement (at the then current rate) plus one-half of the maximum incentive bonus compensation that would be payable if such executive officer continued employment through the date of the expiration of the agreement(assuming for such purposes that the amount of incentive bonus compensation would be the same in each of the years remaining under the agreement as was paid for the most recent year prior to termination of employment). Each of the agreements further provides that if any payment on termination of employment would not be deductible by the Company under Section 280G(b)(2) of the Internal Revenue Code, the amount of such payment would be reduced to the largest amount that would be fully deductible by the Company. Item 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth information regarding the beneficial ownership of shares of Common Stock (determined in accordance with Rule 13d-3 of the Securities and Exchange Commission) of the Company as of May 1, 1998 by each person that beneficially owns five percent or more of the shares of Common Stock. Each person named in the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned, except as otherwise set forth in the notes to the table. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Amount of Beneficial Title of Name and Address of Ownership Class Beneficial Owner as of May 1, Percent 1998 of Class Common Walter Clark and Caroline 1,283,716(1) 47.3% Stock, par Clark, Executors(1) value $.25 P.O. Box 488 per share Denver, North Carolina 28650 William H. Simpson 261,980(2) 9.5% P.O. Box 488 Denver, North Carolina 28650 Kennedy Capital Management, 145,864 5.4% Inc.(3) 425 North Ballas Road St. Louis, Missouri 63141 _____________________________ (1) Includes 1,279,272 shares controlled by such individuals as the executors of the estate of David Clark who passed away on April 18, 1997, 2,222 shares owned by Walter Clark and 2,222 shares owned by Caroline Clark. (2) Includes 1,200 shares held jointly with J. Hugh Bingham and 52,000 shares under options granted by the Company. (3) Information regarding Kennedy Capital Management, Inc. is based upon information provided by Kennedy Capital Management Inc. to the Company on June 16, 1998. The following table sets forth information regarding the beneficial ownership of shares of Common Stock of the Company by each director of the Company and by all directors and officers of the Company as a group as of May 1, 1998. Each person named in the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned, except as otherwise set forth in the notes to the table. SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS Shares and Percent of Common Stock Beneficially Owned as of May 1, 1998 Name Position with Company No. of Shares Percent J. Hugh Bingham President, Chief 116,080(1)(2) 4.2% Operating Officer, Director Walter Clark Chairman of the Board 1,281,494(3) 47.3% of Directors and Chief Executive Officer John J. Gioffre Vice President-Finance, 57,980(4) 2.1% Secretary and Treasurer, Director J. Leonard Martin Vice President, 100(5) * Director William H. Simpson Executive Vice 261,580(1)(6) 9.5% President, Director Claude S. Abernethy, Jr. Director 22,611 * Sam Chesnutt Director 3,600 * Allison T. Clark Director 2,222 * Herman A. Moore Director - * George C. Prill Director 45,966 1.7% All directors and executive N/A 1,804,833(7) 64.0% officers as a group (12 persons) __________________________________________ * Less than one percent. (1) Includes 1,200 shares jointly held by Messrs. Simpson and Bingham. (2) Includes 38,000 shares under options granted by the Company to Mr. Bingham. (3) Includes 1,279,272 shares held by the estate of David Clark, of which Mr. Walter Clark is a co-executor. (4) Includes 20,000 shares under options granted by the Company to Mr. Gioffre. (5) Such 100 shares are held by Mr. Martin's spouse of which shares Mr. Martin disclaims beneficial ownership. (6) Includes 52,000 shares under options granted by the Company to Mr. Simpson. (7) Includes an aggregate of 110,000 shares of Common Stock members of such group have the right to acquire within 60 days. Item 13. Certain Relationships and Related Transactions. The Company leases its corporate and operating facilities at the Little Mountain, North Carolina airport from Little Mountain Airport Associates, Inc. ("Airport Associates"), a corporation whose stock is owned by J. Hugh Bingham, William H. Simpson, John J. Gioffre, the estate of David Clark and three unaffiliated third parties. On May 30, 1996, the Company renewed its lease for this facility, scheduled to expire on that date, for an additional five-year term, and adjusted the rent to account for increases in the consumer price index. The lease may be extended for an additional five-year term, with rental payments to be adjusted to reflect changes in the consumer price index. Upon the renewal, the monthly rental payment was increased from $7,000 to $8,073. The Company paid aggregate rental payments of $96,876 to Airport Associates pursuant to such lease during the fiscal year ended March 31, 1998. The Company believes that the terms of such lease are no less favorable to the Company than would be available from an independent third party. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K The following documents are filed as part of this report: 1. Financial Statements The following financial statements are incorporated herein by reference in Item 8 of Part II of this report: (i) Independent Auditors' Report. (ii) Consolidated Balance Sheets as of March 31, 1998 and 1997. (iii) Consolidated Statements of Earnings for each of the three years in the period ended March 31, 1998. (iv) Consolidated Statements of Stockholders' Equity for each of the three years in the period ended March 31, 1998. (v) Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 1998. (vi) Notes to Consolidated Financial Statements. 2. Financial Statement Schedules No schedules are required to be submitted. 3. Exhibits No. Description 3.1 Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994 3.2 By-laws of the Company, as amended, incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 4.1 Specimen Common Stock Certificate, incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994 10.1 Aircraft Dry Lease and Service Agreement dated February 2, 1994 between Mountain Air Cargo, Inc. and Federal Express Corporation, incorporated by reference to Exhibit 10.13 to Amendment No. 1 on Form 10-Q/A to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993 10.2 Loan Agreement among NationsBank of North Carolina, N.A., the Company and its subsidiaries, dated January 17, 1995, incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1994 10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between Mountain Air Cargo, Inc. and Federal Express Corporation, incorporated by reference to Exhibit 10.4 of Amendment No. 1 on Form 10-Q/Q to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1994 10.4 Adoption Agreement regarding the Company's Master 401(k) Plan and Trust, incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993* 10.5 Form of option to purchase the following amounts of Common Stock issued by the Company to the following executive officers during the following fiscal years ended March 31: * Number of Shares Executive Officer 1993 1992 1991 J. Hugh Bingham 150,000 150,000 200,000 John J. Gioffre 100,000 100,000 125,000 William H. Simpson 200,000 200,000 300,000 incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993 10.6 Premises and Facilities Lease dated November 16, 1995 between Global TransPark Foundation, Inc. and Mountain Air Cargo, Inc., incorporated by reference to Exhibit 10.5 to Amendment No. 1 on Form 10-Q/A to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1995 10.7 Employment Agreement dated January 1, 1996 between the Company, Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and William H. Simpson, incorporated by reference to Exhibit 10.8 to the Company's Annual Report Form 10-K for the fiscal year ended March 31, 1996 10.8 Employment Agreement dated January 1, 1996 between the Company, Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and John J. Gioffre, incorporated by reference to Exhibit 10.9 to the Company's Annual Report Form 10-K for the fiscal year ended March 31, 1996 21.1 List of subsidiaries of the Company, incorporated by reference to Exhibit 21.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1997. 27.1 Financial Data Schedules __________________ * Management compensatory plan or arrangement required to be filed as an exhibit to this report. b. Reports on Form 8-K. No Current Reports on Form 8-K were filed in the last quarter of the fiscal year ended March 31, 1998. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AIR TRANSPORTATION HOLDING COMPANY, INC. By: /s/ Walter Clark Walter Clark, Chief Executive Officer (Principal Executive Officer) Date: June 24, 1998 By: /s/ John J. Gioffre John J. Gioffre, Vice President - Finance (Principal Financial and Accounting Officer) Date: June 24, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Claude S. Abernethy Claude S. Abernethy, Jr., Director Date: June 24, 1998 By: /s/ J. Hugh Bingham J. Hugh Bingham, Director Date: June 24, 1998 By: /s/ Allison T. Clark Allison T. Clark, Director Date: June 24, 1998 By: /s/ Walter Clark Walter Clark, Director Date: June 24, 1998 By: /s/ Sam Chesnutt Sam Chesnutt, Director Date: June 24, 1998 By: /s/ John J. Gioffre John J. Gioffre, Director Date: June 24, 1998 By: /s/ J. Leonard Martin J. Leonard Martin, Director Date: June 24, 1998 By: /s/ George C. Prill George C. Prill, Director Date: June 24, 1998 By: /s/ William Simpson William Simpson, Director Date: June 24, 1998 EXHIBIT INDEX Exhibit Number Document 27.1 Financial Data Schedules EX-27 2
5 "This schedule contains summary financial information extracted from Air Transportation Holding Company, Inc. SEC Form 10-K for year ended March 31, 1998 (identify specific financial statements) and is qualified in its entirety by reference to such financial statements." 12-MOS MAR-31-1998 MAR-31-1998 193918 2556257 6673101 0 5325613 15055791 4693268 2429031 18289403 7489578 0 0 0 677241 0 18289403 51025640 51025640 0 47954638 179358 0 0 2891644 1185574 1706070 0 0 0 1706070 0.64 0.61
EX-27 3
5 As required by Accounting Standards FASB128 AIRT hereby submits restated FDS for its 3 quarters (6/30/97, 9/30,97 & 12/31/97) for fiscal 1998. These schedules contain summary financial information extracted from the above SEC forms as filed, adjusted for FASB128. 3-MOS 6-MOS 9-MOS MAR-31-1998 MAR-31-1998 MAR-31-1998 JUN-30-1997 SEP-30-1997 DEC-31-1997 2548328 1159830 1100796 2133045 2461317 2474019 2385923 3987440 7052685 0 0 0 1106483 3470264 3983252 8586757 11539101 15043585 3506136 3990486 4190451 2038033 2141027 2291057 10277461 13943713 17505585 1748172 4772019 7441375 0 0 0 0 0 0 0 0 0 662855 661991 661991 0 0 0 10277461 13943713 17505585 8159080 18911396 35373935 8159080 18911396 35373935 0 0 0 7694276 17831780 32920869 340576 268879 230146 0 0 0 0 0 0 124228 810737 2222920 29731 297600 817267 94497 513137 1405653 0 0 0 0 0 0 0 0 0 94497 513137 1405653 .03 .15 .34 .03 .15 .32
EX-27 4
5 As required by Accounting Standards FASB128, AIRT hereby submits restated Financial Data Schedules for its 1997 fiscal year SEC form 10K and 10Q. Filings are as follows; form 10Q for qtr ended 6/96, 9/96 and 12/96 and form 10K for year ended 3/31/97. These schedules contain summary financial information extracted from the above SEC forms as filed, adjusted for FASB128. 3-MOS 6-MOS 9-MOS 12-MOS MAR-31-1997 MAR-31-1997 MAR-31-1997 MAR-31-1997 JUN-30-1996 SEP-30-1996 DEC-31-1996 MAR-31-1997 576392 1344776 1467956 2377898 2818267 2545412 3055412 2229708 2628633 2773088 2639319 3310810 0 0 0 0 699480 916901 953503 1069206 7195492 7943715 8468423 9452430 3296919 3092024 3185702 3398636 1764778 1768767 1852448 1943020 8863757 9358687 9905128 11188411 1504292 1872307 2155949 2864207 0 0 0 0 0 0 0 0 0 0 0 0 653608 653603 651103 662858 0 0 0 0 8863757 9358687 9905128 11188411 8123607 16872334 25410390 35103272 8123607 16872334 25410390 35103272 0 0 0 0 7514557 16116887 24208949 33462191 (1643) (182359) (182359) (518123) 0 0 0 0 0 0 0 0 610693 937806 1383800 2159204 205334 403956 545370 836000 405359 533850 838430 1323204 0 0 0 0 0 0 0 0 0 0 0 0 405359 533850 838430 1323204 0.15 0.05 0.12 0.19 0.14 0.05 0.11 0.17
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