FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended December 31, 1999 Commission File Number 0-11720 Air T, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1206400 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Post Office Box 488, Denver, North Carolina 28037 (Address of principal executive offices) (704) 377-2109 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 2,748,153 Common Shares, par value of $.25 per share were outstanding as of February 11, 2000 This filing contains 20 pages. The exhibit index is on page 18. </page>
AIR T, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Earnings (Loss) for the three and nine-month periods ended December 31, 1999 and 1998 (Unaudited) 3 Consolidated Balance Sheets at December 31, 1999 (Unaudited) and March 31, 1999 4 Consolidated Statements of Cash Flows for the nine-month periods ended December 31, 1999 and 1998 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 15-17 Exhibit Index 18 Exhibits 19-20 2 </page>
<TABLE> AIR T, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED) <CAPTION> Three Months Ended Nine Months Ended December 31, December 31, 1999 1998 1999 1998 <S> <C> <C> <C> <C> Operating Revenues: Cargo $ 4,762,519 $ 4,925,340 $13,733,496 $14,496,799 Maintenance 2,842,958 2,982,195 9,777,530 9,743,912 Ground equipment 5,573,038 2,997,077 10,227,571 9,690,672 Aircraft services and other 2,400,631 1,560,400 6,536,989 3,959,814 15,579,146 12,465,012 40,275,586 37,891,197 Operating Expenses: Flight operations 3,340,241 3,402,323 9,901,360 10,142,043 Maintenance and services 4,680,162 4,468,634 14,854,505 12,673,717 Ground equipment 4,696,544 2,746,920 9,075,590 8,233,800 General and administrative 1,864,927 1,561,109 5,490,636 5,232,802 Depreciation & amortization 236,108 186,414 700,510 538,177 14,817,982 12,365,400 40,022,601 36,820,539 Operating Income 761,164 99,612 252,985 1,070,658 Non-operating Expense (Income): Interest 165,199 101,124 467,531 225,810 Deferred retirement expense 6,249 6,249 19,003 18,747 Loss on asset sale 26,108 - 26,108 - Investment income (38,579) (32,532) (129,620) (135,954) 158,977 74,841 383,022 108,603 Earnings (Loss) Before Income Taxes 602,187 24,771 (130,037) 962,055 Income Taxes Expense (Benefit) Provision 228,000 9,137 (50,000) 400,590 Net Earnings (Loss) $ 374,187 $ 15,634 $ (80,037) $ 561,465 Net Earnings (Loss) Per Share: Basic $ 0.14 $ 0.01 $ (0.03) $ 0.21 Diluted $ 0.13 $ 0.01 $ (0.03) $ 0.20 Average Shares Outstanding: Basic 2,759,153 2,688,653 2,762,820 2,698,875 Diluted 2,831,312 2,783,974 2,762,820 2,795,496 <FN> See notes to consolidated financial statements. </TABLE> 3</page>
<TABLE> AIR T, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <CAPTION> December 31, 1999 March 31,1999 (Unaudited) <S> <C> <C> ASSETS Current Assets: Cash and cash equivalents $ 91,221 $ 263,362 Marketable securities 1,228,484 2,086,259 Accounts receivable, net 7,397,059 7,008,987 Inventories 9,939,200 6,925,545 Deferred tax asset, net 424,980 424,980 Prepaid expenses and other 307,100 174,450 Total Current Assets 19,388,044 16,883,583 Property and Equipment 6,250,647 5,856,182 Less accumulated depreciation (3,630,873) (2,992,556) 2,619,774 2,863,626 Deferred Tax Asset 233,625 233,625 Intangible Pension Asset 570,119 498,119 Other Assets 489,516 372,691 Total Assets $ 23,301,078 $ 20,851,644 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable to bank $ 5,406,068 $ 3,893,502 Accounts payable 5,912,409 4,267,890 Accrued expenses 1,458,791 1,690,036 Income taxes payable 150,444 - Current portion of long-term obligations 55,241 57,853 Total Current Liabilities 12,982,953 9,909,281 Capital Lease Obligation (less current Portion) 31,276 23,920 Deferred Retirement Obligation (less current Portion) 1,287,150 1,282,545 Stockholders' Equity: Preferred stock, $1 par value, authorized 10,000,000 shares, none issued - - Common stock, par value $.25; authorized 4,000,000 shares; 2,764,653 and 2,748,153 shares issued 686,366 690,491 Additional paid in capital 7,000,175 7,049,157 Accumulated other comprehensive loss (437,522) (154,745) Retained earnings 1,750,680 2,050,995 8,999,699 9,635,898 Total Liabilities and Stockholders' Equity $ 23,301,078 $ 20,851,644 <FN> See notes to consolidated financial statements. </TABLE> 4</page>
<TABLE> AIR T, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) <CAPTION> Nine Months Ended December 31, 1999 1998 <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) earnings $ (80,037) $ 561,465 Adjustments to reconcile net (loss) earnings to net cash used in operations: Depreciation and amortization 700,510 538,177 Change in deferred tax asset - (242,625) Loss on sale of assets (26,108) - Change in retirement obligation 4,605 52,773 Change assets and liabilities: Accounts receivable (388,072) 1,017,203 Inventories (3,013,654) (1,572,131) Prepaid expenses and other (321,476) (85,021) Accounts payable 1,644,519 (981,422) Accrued expenses (226,500) (422,067) Income taxes payable 150,444 (648,880) Total adjustments (1,475,732) (2,343,993) Net cash used in operating activities (1,555,769) (1,782,528) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (430,551) (553,552) Purchase of marketable securities (100,000) (189,250) Sale of marketable securities 674,998 450,283 Net cash provided by (used in) investing activities 144,447 (292,519) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit, net 1,512,566 2,455,222 Payment of cash dividend (220,278) (377,687) Repurchase of common stock ( 53,107) (149,500) Net cash provided by financing activities 1,239,181 1,928,035 NET DECREASE IN CASH & CASH EQUIVALENTS (172,141) (147,012) CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 263,362 193,918 CASH & CASH EQUIVALENTS AT END OF PERIOD $ 91,221 $ 46,906 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: Unrealized loss on available-for-sale securities $ 282,777 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 454,618 $ 194,586 Income/Franchise taxes 50,746 1,439,144 <FN> See notes to consolidated financial statements. </TABLE> 5</page>
AIR T, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. Financial Statements The Consolidated Balance Sheet as of December 31, 1999, the Consolidated Statements of Earnings (Loss) for the three and nine-month periods ended December 31, 1999 and 1998 and the Consolidated Statements of Cash Flows for the nine-month periods ended December 31, 1999 and 1998 have been prepared by Air T, Inc. (formerly Air Transportation Holding Company, Inc.) (the Company) without audit. On August 13, 1999, Air Transportation Holding Company, Inc. stockholders approved a name change to Air T, Inc.; Air T, Inc. common shares will continue to be traded on NASDAQ under the symbol AIRT. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of December 31, 1999, and for prior periods presented, have been made. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 1999. The results of operations for the period ended December 31 are not necessarily indicative of the operating results for the full year. B. Income Taxes The tax effect of temporary differences, primarily asset reserves and accrued liabilities, gave rise to the Company's deferred tax asset in the accompanying December 31, 1999 and March 31, 1999 consolidated balance sheets. The income tax provisions for the nine-months ended December 31, 1999 and 1998 differ from the federal statutory rate primarily as a result of state income taxes and timing differences. C. Net Earnings (Loss) Per Share Basic earnings (loss) per share has been calculated by dividing net earnings (loss) 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. For the nine-months ended December 31, 1999, shares issuable under employee stock options were excluded from the diluted loss per share calculation due to their anti-dilutive effect. 6</page>
The computation of basic and diluted earnings (loss) per common share is as follows: Three Months Ended Nine Months Ended December 31, December 31, 1999 1998 1999 1998 Net earnings (loss) $ 374,187 $ 15,634 $ (80,037)$ 561,465 Weighted average common shares: Shares outstanding - basic 2,759,153 2,688,653 2,762,820 2,698,875 Dilutive stock options 72,159 95,321 - 96,621 Shares outstanding - diluted 2,831,312 2,783,974 2,762,820 2,795,496 Net earnings (loss) per common share: Basic $ 0.14 $ 0.01 $ (0.03)$ 0.21 Diluted $ 0.13 $ 0.01 $ (0.03)$ 0.20 7</page>
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview On August 13, 1999, Air Transportation Holding Company, Inc. stockholder's approved a name change to AIRT, Inc.; AIRT Inc. common shares will continue to be traded on NASDAQ under the symbol AIRT. Statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" or made by management of the Company which contain more than historical information may be considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) which are subject to risks and uncertainties. Actual results may differ materially from those expressed in the forward-looking statements because of important risks and uncertainties, including but not limited to the effects of economic, competitive and market conditions in the aviation industry. 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 four types of aircraft operated by MAC and CSA-Cessna Caravan, Fokker F-27, Short Brothers SD3-60, and Short Brothers SD3-30. Cessna Caravan, Fokker F-27 and Shorts SD3-60 aircraft (a total of 95 aircraft at December 31, 1999) are owned by and dry-leased from a major air express company (Customer), and Short Brothers SD3-30 aircraft (two aircraft at December 31, 1999) are owned by the Company and periodically 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. 8</page>
MAC and CSA's revenue contributed $23,601,000 and $24,481,000 to consolidated revenue for the nine-month periods ended December 31, 1999 and 1998, respectively. In May 1997, to expand its revenue base, the Company's Mountain Aircraft Services, LLC (MAS) subsidiary expanded its offering of aircraft component repair services. MAS's revenue contributed $6,429,000 and $3,695,000 to the Company's revenues for the nine-month periods ended December 31, 1999 and 1998, 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 aviation ground support equipment on a worldwide basis. Global, operated as a subsidiary of MAS, contributed revenues of approximately $10,228,000 and $9,691,000 for the nine-month periods ended December 31, 1999 and 1998, respectively. In June 1999, Global was awarded a four-year, $25,000,000 contract to supply deicing equipment to the United States Air Force. The Company was subsequently made aware that a competing bidder had filed a protest opposing the awarding of the contract to Global. In September 1999 the General Accounting Office finalized the denial of the protest and upheld the awarding of the Air Force contract to Global. As a result of the delays created by this protest, revenue originally anticipated to commence during the quarter ending December 31, 1999, is currently projected to be delayed until the quarter ending March 31, 2000. Additionally, the protest and its resulting delay caused Global to incur substantial legal fees and additional overhead costs per direct labor hour due to reallocation of fixed production costs to other product lines during the nine-month period ended December 31, 1999. Seasonality Global's business has historically been highly seasonal. In general, the bulk of Global's revenues and earnings have typically occurred during the second and third fiscal quarters, and comparatively little has occurred during the first and fourth fiscal quarters due to the nature of its product line. The Company's award of the $25,000,000 de-icing equipment contract contributes to management's plans to reduce Global's seasonal fluctuation in revenues and earnings by broadening its product line to increase revenues in the first and fourth fiscal quarters. The remainder of the Company's business is not materially seasonal. Results of Operations Consolidated revenue increased $2,384,000 (6.3%) to $40,276,000 and $3,114,000 (25.0%) to $15,579,000, respectively, for the nine and three-month periods ended December 31, 1999 compared to their equivalent 1998 periods. The nine and three-month current periods' net increase in revenue primarily resulted from increased sales by Global and MAS, partially offset by decreased revenue at MAC. 9</page>
Results of Operations (Cont'd) Operating expenses increased $3,202,000 (8.7%) to $40,023,000 for the nine-month period ended December 31, 1999 and $2,453,000 (19.8%) to $14,818,000 for the three-month period ended December 31, 1999 compared to their equivalent 1998 periods. The change in operating expenses for the nine-month period consisted of the following: cost of flight operations decreased $241,000 (2.4%), primarily as a result of decreases in pilot and flight personnel costs and costs associated with pilot travel, offset by a $88,000 MAC retroactive insurance adjustment; maintenance and services expense increased $2,181,000 (17.2%), primarily as a result of increases associated with personnel and cost of parts and labor related to the expansion of MAS's repair shop, and increased personnel cost and a $72,000 prior period insurance adjustment at MAC; ground equipment increased $842,000 (10.2%), as a result of increased Global cost of sales and higher than normal production costs associated with the introduction of new products and unused plant capacity related to the Air Force contract protest and resulting delays; depreciation and amortization increased $162,000 (30.2%) as a result of increased depreciation related to the expansion of MAS and Global; general and administrative expense increased $258,000 (4.9%) primarily as a result of increased wages and benefits, legal fees, rent, and staff travel expense partially offset by decreased accrued profit sharing. The change in operating expenses for the three-month period consisted of the following: cost of flight operations decreased a net of $62,000 (1.8%), primarily as a result of decreased personnel and travel cost; maintenance and brokerage expense increased $212,000 (4.7%), primarily as a result of increases associated with personnel and cost of parts and labor related to the expansion of MAS's repair shop; ground equipment increased $1,950,000 (71.0%), as a result of increased Global sales and higher than normal production costs associated with the introduction of new products and unused plant capacity related to the Air Force contract protest and resulting delays; depreciation and amortization increased $50,000 (26.7%) as a result of increased depreciation related to the expansion of MAS and Global; general and administrative expense increased $304,000 (19.5%) primarily as a result of increased benefits costs, rent and staffing associated with the expansion of Global and MAS. Non-operating expense increased $274,000 and $84,000, respectively, for the nine and three-month periods ended December 31, 1999 and December 31, 1998. The increases were principally due to increased credit line interest associated with higher levels of borrowing. 10</page>
Results of Operations (Cont'd) Pretax earnings decreased $1,092,000 and increased $577,000, respectively, for the nine and three-month periods ended December 31, 1999, compared to their respective December 31, 1998 periods. The nine- month decrease was principally due to a $613,000 increase in the loss at Global and decreased earnings at MAC, partially offset by an increase in MAS earnings. The pretax earnings increase for the three- month period ended December 31, 1999 compared to 1998 was primarily due to a $607,000 decrease in the loss at Global, increased profitability at MAS, partially offset by decreased earnings at MAC. The substantial increase in Global's nine-month current period loss was primarily due to lost revenue, unused productive capacity and legal cost associated with the protest and delay in finalizing the Air Force contract, higher than normal production, engineering and design cost associated with the introduction of new products and higher levels of interest expense to fund its operations. Global was able to return to profitability during the third quarter due to increased sales and the substantial completion of development costs incurred during the current period's first and second quarter. MAC's decreased earnings are primarily related to retroactive insurance adjustments, decreased wet lease cargo and maintenance revenue and increased operating costs. The provision for income taxes decreased $451,000 and increased $219,000, respectively, for the nine and three-month periods ended December 31, 1999 compared to their respective 1998 periods due to decreased taxable income in the nine-month period and increased taxable income in the current three-month period ended December 31, 1999. Liquidity and Capital Resources As of December 31, 1999 the Company's working capital amounted to $6,405,000, a decrease of $569,000 compared to March 31, 1999. In August 1999, the Company renewed its $7,000,000 unsecured line of credit to August 2000. In December 1999, the Company temporarily increased its unsecured line of credit to $7,500,000 for a ninety-day period to end March 31, 2000. The line, which matures August 31, 2000, is expected to be renewed before its expiration date. Amounts advanced under the line of credit bear interest at the 30-day "LIBOR" rate plus 137 basis points. Under the terms of the line of credit the Company must maintain certain financial ratios and may not encumber certain real or personal property. At December 31, 1999 the Company was in a net borrowing position against its credit line of $5,388,000. Management believes that funds anticipated from operations and the continuation of existing credit facilities will provide adequate cash flow to meet the Company's future financial needs. 11</page>
Liquidity and Capital Resources (Cont'd) The respective nine-month periods ended December 31, 1999 and 1998 resulted in the following changes in cash flow: operating activities used $1,556,000 and $1,783,000, investing activities provided $144,000 and used $293,000 and financing activities provided $1,239,000 and $1,928,000. Net cash decreased $172,000 and $147,000 for the respective nine-month periods ended December 31, 1999 and 1998. Cash used in operating activities was $227,000 less for the nine- months ended December 31, 1999 compared to the similar 1998 period, principally due to decreased earnings and increased inventory and accounts receivable partially offset by increases in accounts payable and taxes payable. Cash used in investing activities for the nine-months ended December 31, 1999 was approximately $437,000 less than the comparable period in 1998, principally due to lower capital expenditures and higher net proceeds from marketable securities transactions in 1999. Cash provided by financing activities for the nine-months ended December 31, 1999 was approximately $689,000 less than the comparable 1998 period, principally due to decreases in borrowings under the line of credit, cash dividend and repurchase of common stock in 1999. There are currently no commitments for significant capital expenditures. The Company's Board of Directors, on August 7, 1998, adopted the policy to pay an annual cash dividend in the first quarter of each fiscal year, in an amount to be determined by the board. The Company paid a $0.08 per share cash dividend in June 1999. Deferred Retirement Obligation The Company's former Chairman and Chief Executive Officer passed away on April 18, 1997. In addition to amounts previously expensed, under the terms of his supplemental retirement agreement, death benefits with a present value of approximately $420,000 were expensed in the first quarter 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 because increased costs due to inflation could be passed on to its customers, 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. 12</page>
Year 2000 Issue - Overview and Results to Current Period In 1998 the Company initiated a comprehensive review of its operations and computer systems to identify the extent to which it 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. The Company broke down its review to assess its information technology systems (IT Systems), the aspects of its operations that rely on devices that may contain embedded microchips (Non-IT Systems) and its relationships and reliance on vendors, suppliers, customers and others with whom the Company deals whose operations may be affected by the year 2000 issue. As detailed below, this review was conducted and completed by the end of the Company's current period second quarter by the Company's Year 2000 compliance committee, authorized to assess the Company's risks and develop a comprehensive plan to address the year 2000 issue. State of Readiness IT Systems. As a result of such review the Company catalogued all IT Systems utilized directly by the Company. The Company revised, and tested, certain customized IT Systems to enable such systems to work properly following the year 2000 and verified that recently acquired IT Systems from third-party vendors are "year 2000 compliant". Non-IT Systems. The Company utilizes a number of devices that include embedded microchips that may be affected by the year 2000 issue, including aircraft operated under lease agreements with its major customer. The Company completed the testing and replacing of any noncompliant devices. Material Third Parties. The Company made concerted efforts to understand the year 2000 compliance readiness of third parties (including, among others, domestic and international government agencies and air traffic control systems material to the Company's operations, vendors, suppliers and major customers) whose year 2000 non- compliance could either have a material adverse effect on the Company's business, financial condition or results of operations or involve a safety risk to employees or customers. The Company actively encouraged year 2000 compliance on the part of third parties and developed contingency plans in the event of their year 2000 non-compliance. The Company contacted, in writing and by telephone, each "mission critical" vendor and supplier, requesting completion of a questionnaire to assess such third party's year 2000 compliance. The Company's vendors and suppliers were under no contractual obligation to provide such information to the Company. The Company met with its major air cargo customer on numerous occasions, to discuss and co-ordinate year 2000 readiness and contingency planning. In addition, the Company reviewed public filings of its major customer to assess the customer's state of year 2000 compliance. 13</page>
In conjunction with the Company's major air cargo customer and industry trade associations, the Company was involved in an industry- wide effort to understand the year 2000 compliance status of airports, air traffic systems, and other U.S. and international government agencies that may have affected the Company's air cargo operations. The Company provided this customer with detailed plans and the time schedule for completion of its year 2000 compliance program, which the Company verified fits within the customer's planned schedule. In addition, the bulk of the Company's aircraft fleet is leased from such customer and is dedicated for use in flying routes designated by the customer. Costs The Company estimates the cost incurred for year 2000 compliance is approximately $90,000. No material future costs are expected to be incurred. Contingency Plans The Company developed contingency plans for year 2000 non-compliance, including the pre-arranging of alternative operating methods and locations, the stockpiling of critical inventory and supplies and implementing back-up systems and procedures, including manual systems to perform mission-critical functions while IT systems can be brought back on line. Contingency plans also called for alternative Company- wide communications systems and complete on-site staffing of key executive and management personnel during the transition through to January 3, 2000. Results of Year 2000 Compliance Effort The Company did not experience any disruptions to its business or the services it provides customers as a result of any Year 2000 issues. Additionally, the Company has not been notified by any customers of any Year 2000 related problems related to products or services provided by the Company. Although the Company has not yet experienced or been made aware of any Year 2000 problems to date, there can be no assurance that there will not be any Year 2000 related issues in the future. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company does not hold or issue derivative financial instruments for trading or other purposes. The Company is exposed to changes in interest rates on its line of credit, which bears interest based on the 30-day LIBOR rate plus 137 basis points. If the LIBOR interest rate had been increased by one percentage point, based on the quarter-end balance of the line of credit, annual interest expense would have increased by approximately $54,000. 14</page>
PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) 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 Amendment to Certificate of Incorporation dated August 11, 1999 3.3 By-laws of the Company, 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 Bank of America, the Company and its subsidiaries, dated August 31, 1999, incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999 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 options 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 J. Hugh Bingham 30,000 30,000 John J. Gioffre 20,000 20,000 William H. Simpson 40,000 40,000 incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993 15</page>
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* 10.9 Employment Agreement dated January 1, 1996 between Company, Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and J. Hugh Bingham, incorporated by reference to Exhibit 10.10 to the Company's Annual Report Form 10-K for the fiscal year end March 31, 1996.* 10.10 Employment Agreement dated September 30, 1997 between Mountain Aircraft Services, LLC and J. Leonard Martin, incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report Form 10-Q for the quarter ended December 31, 1997.* 10.11 Omibus Securities Award Plan, incorporated by reference to Exhibit 10.11 for the Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.* 10.12 Commercial and Industrial Lease Agreement dated August 25, 1998 between William F. Bieber and Global Ground Support, LLC, incorporated by reference to Exhibit 10.12 of the Company's Quarterly Report on Form 10Q for the quarter ended September 30, 1998. 10.13 Amendment, dated February 1, 1999, to 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 of the Company's Quarterly Report on Form 10Q for the quarter ended December 31, 1998. 21.1 List of subsidiaries of the Company, incorporated by reference to Exhibit 21.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 27.1 Financial Data Schedule (For SEC use only ______________________ * 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 first nine months of the fiscal year ending March 31, 2000. 16</page>
SIGNATURES Pursuant to the requirements 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 T, Inc. (Registrant) Date: February 11, 2000 /s/ Walter Clark Walter Clark, Chief Executive Officer Date: February 11, 2000 /s/ John Gioffre John J. Gioffre, Chief Financial Officer 17</page>
AIR T, INC. EXHIBIT INDEX EXHIBIT PAGE 3.2 Amendment to Certificate of Incorporation dated August 11, 1999. 19-20 18</page>