-----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, FYjKe70KqkDceiGFQ7ElVbUo2MVj0WPzgOlcknW0mtfBKrtqd/jkgFNdoE662Lv4 HNrDjGWnxaexMrqRDQlrCQ== 0000353184-01-500006.txt : 20010330 0000353184-01-500006.hdr.sgml : 20010330 ACCESSION NUMBER: 0000353184-01-500006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIR T INC CENTRAL INDEX KEY: 0000353184 STANDARD INDUSTRIAL CLASSIFICATION: 4513 IRS NUMBER: 521206400 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11720 FILM NUMBER: 1534567 BUSINESS ADDRESS: STREET 1: 3524 AIRPORT RD CITY: MAIDEN STATE: NC ZIP: 28650 BUSINESS PHONE: 7043772109 MAIL ADDRESS: STREET 1: P O BOX 488 CITY: DENVER STATE: NC ZIP: 28037 FORMER COMPANY: FORMER CONFORMED NAME: AIR TRANSPORTATION HOLDING CO INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ATLANTA EXPRESS AIRLINE CORP DATE OF NAME CHANGE: 19840321 EX-10 1 bkloan.txt LOAN AGREEMENT Bank of America, N.A. LOAN AGREEMENT This Loan Agreement (the "Agreement") dated as of August 31, 2000, by and between Bank of America, N.A. a national banking association ("Bank") and the Borrower described below. [This Agreement contains some provisions preceded by boxes. A box which is not marked means that the provision beside it is not applicable to this transaction.] In consideration of the Loan or Loans described below and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Bank and Borrower agree as follows: 1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined herein, the following terms shall have the meaning set forth with respect thereto: A. Borrower: Air T, Inc. CSA Air, Inc Mountain Air Cargo, Inc. Mountain Aircraft Services, LLC Global Ground Support, LLC B. Borrower's Address: 3524 Airport Road, Maiden, North Carolina 28650 C. Current Assets. Current Assets means the aggregate amount of all of Borrower's assets which would, in accordance with GAAP, properly be defined as current assets. D. Current Liabilities. Current Liabilities means the aggregate amount of all current liabilities as determined in accordance with GAAP, but in any event shall include all liabilities except those having a maturity date which is more than one year from the date as of which such computation is being made. E. Hazardous Materials. Hazardous Materials include all materials defined as hazardous materials or substances under any local, state or federal environmental laws, rules or regulations, and petroleum, petroleum products, oil and asbestos. 16 F. Loan. Any loan described in Section 2 hereof and any subsequent loan which states that it is subject to this Loan Agreement. G. Loan Documents. Loan Documents means this Loan Agreement and any and all promissory notes executed by Borrower in favor of Bank and all other documents, instruments, guarantees, certificates and agreements executed and/or delivered by Borrower, any guarantor or third party in connection with any Loan. H. Tangible Net Worth. Tangible Net Worth means the amount by which total assets exceed total liabilities in accordance with GAAP. I. Accounting Terms. All accounting terms not specifically defined or specified herein shall have the meanings generally attributed to such terms under generally accepted accounting principles ("GAAP"), as in effect from time to time, consistently applied, with respect to the financial statements referenced in Section 3.H. hereof. 2. LOANS. A. Loan. Bank hereby agrees to make (or has made) one or more loans to Borrower in the aggregate principal face amount of $7,500,000.00. The obligation to repay the loans is evidenced by a promissory note or notes dated August 31, 2000, (the promissory note or notes together with any and all renewals, extensions or rearrangements thereof being hereafter collectively referred to as the "Note") having a maturity date, repayment terms and interest rate as set forth in the Note. i . [X] Revolving Credit Feature. The Loan provides for a revolving line of credit (the "Line") under which Borrower may from time to time, borrow, repay and re-borrow funds. ii. [] Clean-Up Period. Borrower shall maintain a zero balance on the Line for a period of at least ____ consecutive days during [] each fiscal year [] any consecutive twelve month period. iii. [] Borrowing Base. The Line is subject to the Borrowing Base Agreement attached hereto as Exhibit "A" and by reference made a part hereof. iv. [] Usage Fee. Borrower will pay hereafter on ________________, 19_____ and on the ______ day of each _________________ for the period from and including the date the Line was established to and including the maturity date of the Line, a usage fee at a rate per annum of _______% of the [] average daily unused portion of the Line during such period [] average daily used portion of the Line during such period [] committed amount of the Line. The Borrower may at any time upon written notice to the Bank permanently reduce the amount of the Line at which time the obligation of the Borrower to pay a usage fee shall thereupon correspondingly be reduced. 17 v. [X] Letter of Credit Subfeature. As a subfeature under the Line, Bank may from time to time up to and including August 31, 2001, issue letters of credit for the account of Borrower (each, a "Letter of Credit" and collectively, "Letters of Credit"); provided, however, that the form and substance of each Letter of Credit shall be subject to approval by Bank in its sole discretion; and provided further that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed $4,000,000. Each Letter of Credit shall be issued for a term designated by Borrower, provided, however, that no Letter of Credit shall have an expiration date subsequent to August 31, 2001. The undrawn amount of all Letters of Credit plus any and all amounts paid by Bank in connection with drawings under any Letter of Credit for which the Bank has not been reimbursed shall be reserved under the Line and shall not be available for advances thereunder. Each draft paid by Bank under a Letter of Credit shall be deemed an advance under the Line and shall be repaid in accordance with the terms of the Line; provided however, that if the Line is not available for any reason whatsoever, at the time any draft is paid by Bank, or if advances are not available under the Line in such amount due to any limitation of borrowing set forth herein, then the full amount of such drafts shall be immediately due and payable, together with interest thereon, from the date such amount is paid by Bank to the date such amount is fully repaid by Borrower, at that rate of interest applicable to advances under the Line. In such event, Borrower agrees that Bank, at Bank's sole discretion may debit Borrower's deposit account with Bank for the amount of such draft. 3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Bank as follows: A. Good Standing. Borrower is a corporation duly organized, validly existing and in good standing under the laws of Deleware and has the power and authority to own its property and to carry on its business in each jurisdiction in which Borrower does business. B. Authority and Compliance. Borrower has full power and authority to execute and deliver the Loan Documents and to incur and perform the obligations provided for therein, all of which have been duly authorized by all proper and necessary action of the appropriate governing body of Borrower. No consent or approval of any public authority or other third party is required as a condition to the validity of any Loan Document, and Borrower is in compliance with all laws and regulatory requirements to which it is subject. C. Binding Agreement. This Agreement and the other Loan Documents executed by Borrower constitute valid and legally binding obligations of Borrower, enforceable in accordance with their terms. D. Litigation. There is no proceeding involving Borrower pending or, to the knowledge of Borrower, threatened before any court or governmental authority, agency or arbitration authority, except as disclosed to Bank in writing and acknowledged by Bank prior to the date of this Agreement. 18 E. No Conflicting Agreements. There is no charter, bylaw, stock provision, partnership agreement or other document pertaining to the organization, power or authority of Borrower and no provision of any existing agreement, mortgage, indenture or contract binding on Borrower or affecting its property, which would conflict with or in any way prevent the execution, delivery or carrying out of the terms of this Agreement and the other Loan Documents. F. Ownership of Assets. Borrower has good title to its assets, and its assets are free and clear of liens, except those granted to Bank and as disclosed to Bank in writing prior to the date of this Agreement. G. Taxes. All taxes and assessments due and payable by Borrower have been paid or are being contested in good faith by appropriate proceedings and the Borrower has filed all tax returns which it is required to file. H. Financial Statements. The financial statements of Borrower heretofore delivered to Bank have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved and fairly present Borrower's financial condition as of the date or dates thereof, and there has been no material adverse change in Borrower's financial condition or operations since June 30, 1997. All factual information furnished by Borrower to Bank in connection with this Agreement and the other Loan Documents is and will be accurate and complete on the date as of which such information is delivered to Bank and is not and will not be incomplete by the omission of any material fact necessary to make such information not misleading. I. Place of Business. Borrower's chief executive office is located at 3524 Airport Road Maiden, NC 28650 J. Environmental. The conduct of Borrower's business operations and the condition of Borrower's property does not and will not violate any federal laws, rules or ordinances for environmental protection, regulations of the Environmental Protection Agency, any applicable local or state law, rule, regulation or rule of common law or any judicial interpretation thereof relating primarily to the environment or Hazardous Materials. K. Continuation of Representations and Warranties. All representations and warranties made under this Agreement shall be deemed to be made at and as of the date hereof and at and as of the date of any advance under any Loan. 4. AFFIRMATIVE COVENANTS. Until full payment and performance of all obligations of Borrower under the Loan Documents, Borrower will, unless Bank consents otherwise in writing (and without limiting any requirement of any other Loan Document): 19 A. Financial Condition. Maintain Borrower's financial condition as follows, determined in accordance with GAAP applied on a consistent basis throughout the period involved except to the extent modified by the following definitions: I. Maintain at all times a ratio of debt to tangible net worth of not greater than 1.0 to 1.0. II. Maintain on a rolling 4 quarter basis a ratio of Funded Debt to EBITDA of not greater than: Quarter Ending Ratio 9/30/00 and thereafter 3.0 to 1.0 B. Financial Statements and Other Information. Maintain a system of accounting satisfactory to Bank and in accordance with GAAP applied on a consistent basis throughout the period involved, permit Bank's officers or authorized representatives to visit and inspect Borrower's books of account and other records at such reasonable times and as often as Bank may desire, and pay the reasonable fees and disbursements of any accountants or other agents of Bank selected by Bank for the foregoing purposes. Unless written notice of another location is given to Bank, Borrower's books and records will be located at Borrower's chief executive office set forth above. All financial statements called for below shall be prepared in form and content acceptable to Bank and by independent certified public accountants acceptable to Bank. In addition, Borrower will: i. Furnish to Bank annual audited financial statements and 10K filings of Borrower for each fiscal year of Borrower, within 150 days after the close of each such fiscal year. ii. Furnish to Bank certified copies of 10Q filings and related financial statements including a balance sheet and income statement for each quarter of each fiscal year within 60 days after the close of each such period. iii. Furnish to Bank a compliance certificate for (and executed by an authorized representative of) Borrower concurrently with and dated as of the date of delivery of each of the financial statements as required in paragraphs i and ii above, containing (a) a certification that the financial statements of even date are true and correct and that the Borrower is not in default under the terms of this Agreement, and (b) computations and conclusions, in such detail as Bank may request, with respect to compliance with this Agreement, and the other Loan Documents, including computations of all quantitative covenants. vii. Furnish to Bank promptly such additional information, reports and statements respecting the business operations and financial condition of Borrower from time to time, as Bank may reasonably request. 20 C. Insurance. Maintain insurance with responsible insurance companies on such of its properties, in such amounts and against such risks as is customarily maintained by similar businesses operating in the same vicinity, specifically to include fire and extended coverage insurance covering all assets, business interruption insurance, workers compensation insurance and liability insurance, all to be with such companies and in such amounts as are satisfactory to Bank and providing for at least 30 days prior notice to Bank of any cancellation thereof. Satisfactory evidence of such insurance will be supplied to Bank prior to funding under the Loan(s) and 30 days prior to each policy renewal. D. Existence and Compliance. Maintain its existence, good standing and qualification to do business, where required and comply with all laws, regulations and governmental requirements including, without limitation, environmental laws applicable to it or to any of its property, business operations and transactions. E. Adverse Conditions or Events. Promptly advise Bank in writing of (i) any condition, event or act which comes to its attention that would or might materially adversely affect Borrower's financial condition or operations or Bank's rights under the Loan Documents, (ii) any litigation filed by or against Borrower, (iii) any event that has occurred that would constitute an event of default under any Loan Documents and (iv) any uninsured or partially uninsured loss through fire, theft, liability or property damage in excess of an aggregate of $500,000. F. Taxes and Other Obligations. Pay all of its taxes, assessments and other obligations, including, but not limited to taxes, costs or other expenses arising out of this transaction, as the same become due and payable, except to the extent the same are being contested in good faith by appropriate proceedings in a diligent manner. G. Maintenance. Maintain all of its tangible property in good condition and repair and make all necessary replacements thereof, and preserve and maintain all licenses, trademarks, privileges, permits, franchises, certificates and the like necessary for the operation of its business. H. Environmental. Immediately advise Bank in writing of (i) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed or threatened pursuant to any applicable federal, state, or local laws, ordinances or regulations relating to any Hazardous Materials affecting Borrower's business operations; and (ii) all claims made or threatened by any third party against Borrower relating to damages, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials. Borrower shall immediately notify Bank of any remedial action taken by Borrower with respect to Borrower's business operations. Borrower will not use or permit any other party to use any Hazardous Materials at any of Borrower's places of business or at any other property owned by Borrower except such materials as are incidental to Borrower's normal course of business, maintenance and repairs and which are handled in compliance with all applicable environmental laws. Borrower agrees to permit Bank, its agents, 21 contractors and employees to enter and inspect any of Borrower's places of business or any other property of Borrower at any reasonable times upon three (3) days prior notice for the purposes of conducting an environmental investigation and audit (including taking physical samples) to insure that Borrower is complying with this covenant and Borrower shall reimburse Bank on demand for the costs of any such environmental investigation and audit. Borrower shall provide Bank, its agents, contractors, employees and representatives with access to and copies of any and all data and documents relating to or dealing with any Hazardous Materials used, generated, manufactured, stored or disposed of by Borrower's business operations within five (5) days of the request therefore. 5. NEGATIVE COVENANTS. Until full payment and performance of all obligations of Borrower under the Loan Documents, Borrower will not, without the prior written consent of Bank (and without limiting any requirement of any other Loan Documents): [] A. Capital Expenditures. Make capital expenditures during each fiscal year (including capitalized leases) exceeding in the aggregate the lesser of $__________. [] B. Lease Expenditures. Incur new obligations for the lease or hire of real or personal property requiring payments in any fiscal year in excess of an aggregate of $__________. [] C. Compensation. Pay by way of salary, bonus, distribution, dividend, lease payment or otherwise, aggregate annual compensation to ______________________, and __________________________ in excess of: $________________ during fiscal year 19_____ $________________ during fiscal year 19_____ $________________ during fiscal year 19_____ $________________ during fiscal year 19_____ D. Transfer of Assets or Control. Sell, lease, assign or otherwise dispose of or transfer any assets, except in the normal course of its business, or enter into any merger or consolidation, or transfer control or ownership of the Borrower or form or acquire any subsidiary. E. Liens. Grant, suffer or permit any contractual or noncontractual lien on or security interest in its assets, except in favor of Bank, or fail to promptly pay when due all lawful claims, whether for labor, materials or otherwise. F. Extensions of Credit. Make or permit any subsidiary to make, any loan or advance to any person or entity, or purchase or otherwise acquire, or permit any subsidiary to purchase or otherwise acquire, any capital stock, assets, obligations, or other securities of, make any capital contribution to, or otherwise invest in or acquire any interest in any entity, or participate as a partner or joint venturer with any person or entity, except for the purchase of direct obligations of the United States or any agency thereof with maturities of less than one year. 22 G. Borrowings. Create, incur, assume or become liable in any manner for any indebtedness (for borrowed money, deferred payment for the purchase of assets, lease payments, as surety or guarantor for the debt for another, or otherwise) other than to Bank, except for normal trade debts incurred in the ordinary course of Borrower's business, and except for existing indebtedness disclosed to Bank in writing and acknowledged by Bank prior to the date of this Agreement. [] H. Dividends and Distributions. Make any distribution (other than dividends payable in capital stock of Borrower) on any shares of any class of its capital stock or, if Borrower is a partnership, make any distribution to any partner, or apply any of its property or assets to the purchase, redemption or other retirement of any shares of any class of capital stock of or any partnership interest in Borrower exceeding in the aggregate [] $_______________ per fiscal year, [] _____% of net profit per fiscal year, or in any way amend its capital structure. I. Character of Business. Change the general character of business as conducted at the date hereof, or engage in any type of business not reasonably related to its business as presently conducted. [] J. Management Change. Make any substantial change in its present executive or management personnel. 6. DEFAULT. Borrower shall be in default under this Agreement and under each of the other Loan Documents if it shall default in the payment of any amounts due and owing under the Loan or should it fail to timely and properly observe, keep or perform any term, covenant, agreement or condition in any Loan Document or in any other loan agreement, promissory note, security agreement, deed of trust, deed to secure debt, mortgage, assignment or other contract securing or evidencing payment of any indebtedness of Borrower to Bank or any affiliate or subsidiary of Bank of America Corporation. 7. REMEDIES UPON DEFAULT. If an event of default shall occur, Bank shall have all rights, powers and remedies available under each of the Loan Documents as well as all rights and remedies available at law or in equity. 8. NOTICES. All notices, requests or demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to the other party at the following address: Borrower: Air T, Inc. 3524 Airport Road Maiden, NC 28650 23 Bank: Bank of America, NA P. O. Box 8 Monroe, NC 28111 or to such other address as any party may designate by written notice to the other party. Each such notice, request and demand shall be deemed given or made as follows: A. If sent by mail, upon the earlier of the date of receipt or five (5) days after deposit in the U.S. Mail, first class postage prepaid; B. If sent by any other means , upon delivery. 9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank immediately upon demand the full amount of all costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel if permitted by applicable law), incurred by Bank in connection with (a) negotiation and preparation of this Agreement and each of the Loan Documents, and (b) all other costs and attorneys' fees incurred by Bank for which Borrower is obligated to reimburse Bank in accordance with the Terms of the Loan Documents. 10. MISCELLANEOUS. Borrower and Bank further covenant and agree as follows, without limiting any requirement of any other Loan Document: A. Cumulative Rights and No Waiver. Each and every right granted to Bank under any Loan Document, or allowed it by law or equity shall be cumulative of each other and may be exercised in addition to any and all other rights of Bank, and no delay in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise by Bank of any right preclude any other or future exercise thereof or the exercise of any other right. Borrower expressly waives any presentment, demand, protest or other notice of any kind, including but not limited to notice of intent to accelerate and notice of acceleration. No notice to or demand on Borrower in any case shall, of itself, entitle Borrower to any other or future notice or demand in similar or other circumstances. B. Applicable Law. This Loan Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of D.C. and applicable United States federal law. C. Amendment. No modification, consent, amendment or waiver of any provision of this Loan Agreement, nor consent to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by an officer of Bank, and then shall be effective only in the specified instance and for the purpose for which given. This Loan Agreement is binding upon Borrower, its successors and assigns, and inures to the benefit of Bank, its successors and assigns; however, no assignment or other transfer of Borrower's rights or obligations hereunder shall be made or be effective without Bank's prior written consent, nor shall it relieve Borrower of any obligations hereunder. There is no third party beneficiary of this Loan Agreement. 24 D. Documents. All documents, certificates and other items required under this Loan Agreement to be executed and/or delivered to Bank shall be in form and content satisfactory to Bank and its counsel. E. Partial Invalidity. The unenforceability or invalidity of any provision of this Loan Agreement shall not affect the enforceability or validity of any other provision herein and the invalidity or unenforceability of any provision of any Loan Document to any person or circumstance shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. F. Indemnification. Notwithstanding anything to the contrary contained in Section 10(G), Borrower shall indemnify, defend and hold Bank and its successors and assigns harmless from and against any and all claims, demands, suits, losses, damages, assessments, fines, penalties, costs or other expenses (including reasonable attorneys' fees and court costs) arising from or in any way related to any of the transactions contemplated hereby, including but not limited to actual or threatened damage to the environment, agency costs of investigation, personal injury or death, or property damage, due to a release or alleged release of Hazardous Materials, arising from Borrower's business operations, any other property owned by Borrower or in the surface or ground water arising from Borrower's business operations, or gaseous emissions arising from Borrower's business operations or any other condition existing or arising from Borrower's business operations resulting from the use or existence of Hazardous Materials, whether such claim proves to be true or false. Borrower further agrees that its indemnity obligations shall include, but are not limited to, liability for damages resulting from the personal injury or death of an employee of the Borrower, regardless of whether the Borrower has paid the employee under the workmen' s compensation laws of any state or other similar federal or state legislation for the protection of employees. The term "property damage" as used in this paragraph includes, but is not limited to, damage to any real or personal property of the Borrower, the Bank, and of any third parties. The Borrower's obligations under this paragraph shall survive the repayment of the Loan and any deed in lieu of foreclosure or foreclosure of any Deed to Secure Debt, Deed of Trust, Security Agreement or Mortgage securing the Loan. G. Survivability. All covenants, agreements, representations and warranties made herein or in the other Loan Documents shall survive the making of the Loan and shall continue in full force and effect so long as the Loan is outstanding or the obligation of the Bank to make any advances under the Line shall not have expired. 25 [] H. Updated Appraisals and Maintenance of Collateral Value. Bank may at its option obtain at Borrower's expense, once every _____________ (or as otherwise requested by Bank) an appraisal of any real property securing payment of the Loan (the "Real Property") prepared in accordance with applicable bank regulatory agency regulations and the written instructions from Bank by a third party appraiser engaged directly by Bank. The costs of each such appraisal shall be payable by Borrower to Bank on demand. If such appraisal shows the market value of the Real Property has declined, Borrower agrees that upon demand of Bank it will immediately either pledge additional collateral in form and substance satisfactory to Bank or make such payments as shall be necessary to reduce the principal balance outstanding under the Loan, so that in either case the principal amount outstanding under the Loan shall not exceed ______% of the market value of the Real Property and any additional collateral. 11. ADDITIONAL PROVISIONS: [] The Borrower shall comply with those additional provisions set forth on Exhibit "__" attached hereto and by reference made a part hereof. 12. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS, INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. 26 B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS ARBITRATION PROVISION; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. 13. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized representatives as of the date first above written. BORROWER: BANK: Air T, Inc. Bank of America, NA By: ________________________ (Seal) By: ______________________________ (Seal) Name:______________________ Name: Donald G. Brown Title: _______________________ Title: Senior Vice President [Corporate Seal] Attest:________________________ (Seal) Name:____________________________ Title:_____________________________ 27 BORROWER: BORROWER: CSA Air, Inc. Mountain Air Cargo, Inc. By: ________________________ (Seal) By: ______________________________ (Seal) Name:______________________ Name: ____________________________ Title: _______________________ Title: _____________________________ [Corporate Seal] [Corporate Seal] Attest:________________________ (Seal) Attest:________________________ (Seal) Name:____________________________ Name:____________________________ Title:_____________________________ Title:_____________________________ BORROWER: BORROWER: Mountain Aircraft Services, LLC Global Ground Support, LLC By: ________________________ (Seal) By: ______________________________ (Seal) Name:______________________ Name: ____________________________ Title: _______________________ Title: _____________________________ [Corporate Seal] [Corporate Seal] Attest:________________________ (Seal) Attest:________________________ (Seal) Name:____________________________ Name:____________________________ Title:_____________________________ Title:_____________________________ 28 10-Q 2 dec.txt AIRT DECEMBER 31, 2000 10Q 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, 2000 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. 2,705,453 Common Shares, par value of $.25 per share were outstanding as of February 9, 2001. This filing contains 26 pages. The exhibit index is on page 16. AIRT, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Earnings (Loss) for the three and nine-month periods ended December 31, 2000 and 1999 (Unaudited) 3 Condensed Consolidated Balance Sheets at December 31, 2000 (Unaudited) and March 31, 2000 4 Condensed Consolidated Statements of Cash Flows for the nine-month periods ended December 31, 2000 and 1999 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Item 3. Quantitative and Qualitative Disclosure About Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 6. Exhibits and Reports on Form 8-K 14-15 Exhibit Index 16 Exhibits 17-26 2 AIRT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED) Three Months Ended Nine months Ended December 31, December 31, 2000 1999 2000 1999 Operating Revenues: Cargo $5,092,020 $4,762,519 $14,071,350 $13,733,496 Maintenance 2,288,298 2,842,958 7,129,545 9,777,530 Ground equipment 11,133,140 5,573,038 23,369,693 10,227,571 Aircraft services and other 2,068,899 2,400,631 5,533,680 6,536,989 20,582,357 15,579,146 50,104,268 40,275,586 Operating Expenses: Flight operations 3,691,669 3,340,241 10,018,156 9,901,360 Maintenance and brokerage 3,969,676 4,680,162 11,505,174 14,854,505 Ground equipment 9,375,995 4,696,544 19,867,998 9,075,590 General and administrative 2,279,638 1,864,927 6,136,572 5,490,636 Depreciation and amortization 214,573 236,108 661,244 700,510 19,531,551 14,817,982 48,189,144 40,022,601 Operating Income 1,050,806 761,164 1,915,124 252,985 Non-operating Expense (Income): Interest 197,549 165,199 556,658 467,531 Deferred retirement expense 6,249 6,249 18,747 19,003 Investment income (13,967) (38,579) (84,576) (129,620) Loss on asset sale 39,438 26,108 41,047 26,108 229,269 158,977 531,876 383,022 Earnings (Loss) Before Income Taxes 821,537 602,187 1,383,248 (130,037) Income Tax Provision (Benefit) 323,537 228,000 552,996 (50,000) Net Earnings (Loss) $ 498,000 $ 374,187 $ 830,252 $ (80,037) Net Earnings (Loss) Per Share: Basic $ 0.18 $ 0.14 $ 0.30 $ (0.03) Diluted $ 0.18 $ 0.13 $ 0.30 $ (0.03) Average Shares Outstanding: Basic 2,731,220 2,759,153 2,742,853 2,762,820 Diluted 2,780,372 2,831,312 2,774,472 2,762,820 See notes to condensed consolidated financial statements. 3 AIRT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 MARCH 31, 2000 ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 85,539 $ 144,513 Marketable securities 794,594 1,295,678 Accounts receivable, net 11,544,509 7,960,978 Costs and estimated earnings in excess of billings on uncompleted contracts 270,781 210,178 Inventories 12,298,207 9,741,675 Deferred tax asset, net 437,097 321,097 Prepaid expenses and other 129,075 228,757 Total Current Assets 25,559,802 19,902,876 Property and Equipment 6,921,182 6,461,984 Less accumulated depreciation (4,475,679) (3,867,778) 2,445,503 2,594,206 Deferred Tax Asset 419,554 438,554 Intangible Pension Asset 520,778 430,778 Other Assets 506,873 570,033 Total Assets $29,452,510 $ 23,936,447 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable to bank $ 7,539,194 $ 3,988,191 Accounts payable 8,644,140 7,517,640 Accrued expenses 1,426,735 1,090,838 Income taxes payable 452,025 470,247 Current portion of long-term obligations 64,833 64,833 Total Current Liabilities 18,126,927 13,131,749 Capital Lease Obligation (less current Portion) 37,527 36,440 Deferred Retirement Obligation (less current Portion) 1,632,872 1,512,377 Stockholders' Equity: Preferred stock, $1 par value, authorized 10,000,000 shares, none issued - - Common stock, par value $.25; authorized 4,000,000 shares; 2,705,453 and 2,740,353 shares issued 676,363 684,416 Additional paid in capital 6,825,981 6,976,795 Accumulated other comprehensive loss (595,118) (597,904) Retained earnings 2,747,958 2,192,574 9,655,184 9,255,881 Total Liabilities and Stockholders' Equity $29,452,510 $ 23,936,447 See notes to condensed consolidated financial statements. 4 AIRT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended December 31, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 830,252 $ (80,037) Adjustments to reconcile net earnings (loss) to net cash used in operations: Depreciation and amortization 661,244 700,510 Loss (Gain) on sale of asset 41,047 (26,108) Change in assets and liabilities: Accounts receivable (3,583,531) (388,072) Cost and estimated earnings in excess of billings on uncompleted contracts (60,603) - Inventories (2,556,532) (3,013,654) Prepaid expenses and other 72,842 (321,476) Deferred tax asset (97,000) - Accounts payable 1,126,500 1,644,519 Accrued expenses 335,897 (226,500) Retirement obligation 120,495 4,605 Income taxes payable (18,222) 150,444 Total adjustments (3,957,863) (1,475,732) Net cash used in operating activities (3,127,611) (1,555,769) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (618,795) (430,551) Purchase of marketable securities - (100,000) Sale of marketable securities 570,164 674,998 Net cash (used in) provided by investing activities (48,631) 144,447 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit , net 3,551,003 1,512,566 Payment of cash dividend (274,858) (220,278) Repurchase of common stock (189,377) (53,107) Proceeds from exercise of stock options 30,500 - Net cash provided by financing activities 3,117,268 1,239,181 NET DECREASE IN CASH & CASH EQUIVALENTS (58,974) (172,141) CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 144,513 263,362 CASH & CASH EQUIVALENTS AT END OF PERIOD $ 85,539 $ 91,221 SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES: Other comprehensive gain (loss) $ 2,776 $ (282,777) Equipment capital lease 19,894 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 526,320 $ 454,618 Income/Franchise taxes 669,192 50,746 See notes to condensed consolidated financial statements. 5 AIRT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. Financial Statements The Condensed Consolidated Balance Sheet as of December 31, 2000, the Condensed Consolidated Statements of Earnings (Loss) for the three and nine- month periods ended December 31, 2000 and 1999 and the Condensed Consolidated Statements of Cash Flows for the nine-month periods ended December 31, 2000 and 1999 have been prepared by AirT, Inc. (the Company) without audit. 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, 2000, 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, 2000. 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 assets in the accompanying December 31, 2000 and March 31, 2000 consolidated balance sheets. The income tax provisions for the nine-months ended December 31, 2000 and 1999 differ from the federal statutory rate primarily as a result of state income taxes and permanent 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 unless their effect on basic earnings (loss) per share was considered anti- dilutive. 6 The computation of basic and diluted earnings (loss) per common share is as follows: Three Months Ended Nine months Ended December 31, December 31, 2000 1999 2000 1999 Net earnings (loss) $ 498,000 $ 374,187 $ 830,252 $ (80,037) Weighted average common shares: Shares outstanding - basic 2,731,220 2,759,153 2,742,853 2,762,820 Dilutive stock options 49,152 72,159 31,620 - Shares outstanding - diluted 2,780,372 2,831,312 2,774,473 2,762,820 Net earnings (loss) per common share: Basic $ 0.18 $ 0.14 $ 0.30 $ (0.03) Diluted $ 0.18 $ 0.13 $ 0.30 $ (0.03) D New Accounting Standard On April 1, 2001, the Company is required to adopt Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This statement established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for other hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. The Company is currently assessing the impact, if any, that the adoption of SFAS 133 will have on the Company's financial statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview 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. Year to date, the Company's most significant components of revenue were generated through Global Ground Support, LLC (Global) (47%), its deice manufacturing subsidiary, and Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA) (42%), its air cargo subsidiaries. MAC and CSA 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. Global manufactures, services and supports aircraft deicers and other aircraft ground support equipment on a worldwide basis. Global contributed approximately $23,370,000 and $10,228,000 to revenue for the nine-month periods ended December 31, 2000 and 1999, respectively. 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 December 31, 2000) are owned by and dry-leased from a major air express company (Customer), and Short Brothers SD3-30 aircraft (two aircraft at December 31, 2000) 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. 8 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. MAC and CSA contributed approximately $21,257,000 and $23,601,000 to revenue for the nine-month periods ended December 31, 2000 and 1999, respectively. The Company's Mountain Aircraft Services, LLC (MAS) subsidiary, which offers aircraft component repair and parts brokerage services, contributed $5,460,000 and $6,429,000 to the Company's revenues for the nine-month periods ended December 31, 2000 and 1999, respectively. Seasonality Global's business has historically been highly seasonal. In general, the bulk of Global's revenues and earnings have 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 is currently reducing Global's seasonal fluctuation in revenues and earnings by broadening its product line and customer base to increase revenues and earnings in the first and fourth fiscal quarters. The Company expended exceptional effort in fiscal 1999 and 2000 to design and produce prototype equipment to expand its product line to include additional deicer models and two models of scissor-lift equipment for catering and cabin service of aircraft. These costs were expensed as incurred. In June 1999, the Company was awarded a four-year contract to supply deicing equipment to the United States Air Force (USAF) for a total amount of approximately $25 million. Although the first shipments under this contract did not commence until the quarter ended March 31, 2000, revenue from this contract will contribute to management's plan to reduce Global's seasonal fluctuation in revenues. Revenue from the USAF contract contributed 46% and 17%, respectively, for the nine and three-month periods ended December 31, 2000. The remainder of the Company's business is not materially seasonal. Results of Operations Consolidated revenue increased $9,829,000 (24.4%) to $50,104,000 and increased $5,003,000 (32.1%) to $20,582,000, respectively, for the nine and three-month periods ended December 31, 2000 compared to their equivalent 1999 periods. The nine and three-month current period net increase in revenue primarily resulted from increased Air Force contract revenue at Global. Decreases in maintenance and component repair services were primarily due to the timing of scheduled major overhauls at MAC in fiscal 2000 compared to the current period and the expiration of an overhaul contract at MAS in place during fiscal 2000. 9 Results of Operations (Cont'd) Operating expenses increased $8,167,000 (20.4%) to $48,189,000 for the nine-month period ended December 31, 2000 and $4,714,000 (31.8%) to $19,532,000 for the three-month period ended December 31, 2000 compared to their equivalent 1999 periods. The change in operating expenses for the nine-month period consisted of the following: cost of flight operations increased $117,000 (1.2%), primarily as a result of increases in costs associated with airport fees and fuel costs, partially offset by decreased pilot travel costs; maintenance and brokerage expense decreased $3,349,000 (22.6%), primarily as a result of decreases associated with cost of parts, labor and outside maintenance related to the overhaul and repair operations of MAC and MAS; ground equipment increased $10,792,000 (118.9%), as a result of cost of parts and labor associated with increased Global sales; depreciation and amortization decreased $39,000 (5.6%) primarily as a result of decreased depreciation related to the completion of certain assets' depreciable lives; general and administrative expense increased $646,000 (11.8%) primarily as a result of increased wages, performance based bonuses and benefits, particularly related to the increased earnings of Global, partially offset by decreased professional fees and telephone expense. The change in operating expenses for the three-month period consisted of the following: cost of flight operations increased a net of $351,000 (10.5%), primarily as a result of increased personnel, travel cost, airport fees and fuel cost; maintenance and brokerage expense decreased $710,000 (15.2%), primarily as a result of decreases associated with cost of parts, labor and outside maintenance related to the overhaul and repair operations of MAC and MAS; ground equipment increased $4,679,000 (99.6%), as a result of cost of parts and labor associated with Global increased sales; depreciation and amortization decreased $22,000 (9.1%) as a result of decreased depreciation related to the completion of certain assets' depreciable lives related to the expansion of MAS and Global; general and administrative expense increased $415,000 (22.2%) primarily as a result of increased wages, performance based bonuses and benefits, particularly related to the increased earnings of Global, partially offset by decreased advertising and telephone expense. Non-operating expense increased $149,000 and $70,000, respectively, for the nine and three-month periods ended December 31, 2000 and September 30, 1999. The increases were principally due to increased credit-line interest expense and decreased investment income. 10 Results of Operations (Cont'd) Pretax earnings increased $1,513,000 and $219,000, respectively, for the nine and three-month periods ended December 31, 2000, compared to their respective December 31, 1999 periods. The nine-month increase was principally due to a $1,918,000 increase in profitability at Global and increased earnings at MAC, partially offset by a decrease in AIRT and MAS earnings. For the three-month period ended December 31, 2000 compared to 1999 Global's earnings increased $783,000, Global's increase was supported by increased earnings at MAC and partially offset by decreased profitability at MAS and AIRT. The substantial increase in Global's current period profit was primarily due to increased revenue. The provision for income taxes increased $603,000 and $96,000 for the nine and three-month periods ended December 31, 2000, respectively compared to their respective 1999 periods due to increased taxable income. Liquidity and Capital Resources As of December 31, 2000 the Company's working capital amounted to $7,433,000, an increase of $662,000 compared to March 31, 2000. A separate, unsecured, line of credit was set up in November 2000 to fund the purchase of rotable aircraft parts. The Company's unsecured lines of credit, which increased by $1,145,000 during the current third quarter, matures on August 31, 2001, provide credit up to $8,645,000. Amounts advanced under the line of credit bear interest at the 30-day "LIBOR" rate plus 137 basis points. Under the terms of the lines of credit the Company must maintain certain financial ratios and may not encumber certain real or personal property. At December 31, 2000, the Company was in compliance with these covenants. At December 31, 2000 the Company was in a net borrowing position against its credit lines of $7,539,000. 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. The respective nine-month periods ended December 31, 2000 and 1999 resulted in the following changes in cash flow: operating activities used $3,128,000 and $1,556,000, investing activities used $49,000 and provided $144,000 and financing activities provided $3,117,000 and $1,239,000. Net cash decreased $59,000 and $172,000 for the respective nine-month periods ended December 31, 2000 and 1999. 11 Liquidity and Capital Resources (Cont'd) Cash used in operating activities was $1,572,000 more for the nine- months ended December 31, 2000 compared to the similar 1999 period, principally due to increased accounts receivable and decreased accounts payable, partially offset by increased profitability, accrued expenses, and inventory. During the current nine-month period ended December 31, 2000 the Company repurchased 60,900 shares of its common stock at a total cost of $189,377. In December 2000 the Company's Board of Directors authorized the repurchase of an additional $200,000 of Company stock. As of December 2000 $187,000 remains available for repurchase of common stock. Cash used in investing activities for the nine-months ended December 31, 2000 was approximately $193,000 more than the comparable period in, 1999, principally due to increased capital expenditures. Cash provided by financing activities for the nine-months ended December 31, 2000 was approximately $1,878,000 more than the comparable 1999 period, principally due to an increase in borrowings under the line of credit in 2000. 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 $0.10 per share cash dividend in June 2000. 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 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 $75,000. 13 PART II -- OTHER INFORMATION Item 1. Legal Proceedings The Company's subsidiary, Global Ground Support, LLC, is a party to a lawsuit against FMC Corporation pending in United States District Court for the Western District of North Carolina. Global commenced the lawsuit against FMC on May 8, 2000 as a declaratory judgment proceeding to confirm that aspects of Global's de-icing equipment did not infringe a patent held by FMC and to have FMC's patent declared unenforceable. On August 21, 2000, FMC filed an answer and counterclaim against both Global and the Company alleging that aspects of Global's de-icing equipment infringe a patent held by FMC seeking injunctive relief and unquantified damages. Discovery has not yet commenced. The Company and Global are vigorously defending the counterclaim. 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 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 Loan agreement among Bank of America, the Company and its subsidiaries, dated August 31, 2000. 10.2 Loan agreement among Bank of America, the Company and its subsidiaries, dated November 21, 2000. 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 period ended September 30, 1997 27.1 Financial Data Schedule (For SEC use only) _______________________ 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, 2001. 14 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. AIRT, INC. (Registrant) Date: February 9, 2001 /s/ Walter Clark Walter Clark, Chief Executive Officer Date: February 9, 2001 /s/ John Gioffre John J. Gioffre, Chief Financial Officer 15 AIRT, INC. EXHIBIT INDEX EXHIBIT PAGE 10.2 Loan Agreement among Bank of America, the Company and its subsidiaries, dated November 21, 2000. 17-28 16 -----END PRIVACY-ENHANCED MESSAGE-----