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What changed in AIR T INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AIR T INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+151 added−157 removedSource: 10-K (2024-06-26) vs 10-K (2023-06-27)

Top changes in AIR T INC's 2024 10-K

151 paragraphs added · 157 removed · 101 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

32 edited+5 added−9 removed49 unchanged
Biggest changeUnder the Aviation and Transportation Security Act of 2001, as amended, the Transportation Security Administration (“TSA”), an agency within the Department of Homeland Security, has responsibility for aviation security. The TSA requires MAC and CSA to comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements.
Biggest changeThe TSA requires MAC and CSA to comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements. These requirements are not static but change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations.
The inspection intervals range from 100 to 200 hours. The current engine overhaul period on the Cessna aircraft is 8,000 hours. 5 The ATR-42 and ATR-72 aircraft are maintained under a FAA Part 121 continuous airworthiness maintenance program. The program consists of A and C service checks as well as calendar checks ranging from weekly to 12 years in duration.
The inspection intervals range from 100 to 200 hours. The current engine overhaul period on the Cessna aircraft is 8,000 hours. The ATR-42 and ATR-72 aircraft are maintained under a FAA Part 121 continuous airworthiness maintenance program. The program consists of A and C service checks as well as calendar checks ranging from weekly to 12 years in duration.
GGS’s mobile deicing equipment business has historically been seasonal, with revenues typically being lower in the fourth and first fiscal quarters as commercial deicers are typically delivered prior to the winter season. The Company has continued its 6 efforts to reduce GGS’s seasonal fluctuation in revenues and earnings by broadening its international and domestic customer base and its product line.
GGS’s mobile deicing equipment business has historically been seasonal, with revenues typically being lower in the fourth and first fiscal quarters as commercial deicers are typically delivered prior to the winter season. The Company has continued its efforts to reduce GGS’s seasonal fluctuation in revenues and earnings by broadening its international and domestic customer base and its product line.
The scope of these audits typically extends beyond simple validation of invoice data against the third-party supporting documentation. The audit teams generally investigate the operator’s processes and internal control procedures. The Company believes satisfactory audit results are critical to maintaining its relationship with FedEx.
The scope of these audits typically extends 5 beyond simple validation of invoice data against the third-party supporting documentation. The audit teams generally investigate the operator’s processes and internal control procedures. The Company believes satisfactory audit results are critical to maintaining its relationship with FedEx.
MAC and CSA are two of nine carriers that operate within the United States as FedEx feeder carriers. MAC and CSA are benchmarked against the other five FedEx feeders based on safety, reliability, compliance with federal, state and applicable foreign regulations, price and other service-related measurements.
MAC and CSA are two of nine carriers that operate within the United States as FedEx feeder carriers. MAC and CSA are benchmarked against the other nine FedEx feeders based on safety, reliability, compliance with federal, state and applicable foreign regulations, price and other service-related measurements.
The information on our website is available for information purposes only and is not incorporated by reference in this Annual Report on Form 10-K. 4 Overnight Air Cargo. The Company’s Overnight Air Cargo segment comprises the operations of MAC, CSA and WASI.
The information on our website is available for information purposes only and is not incorporated by reference in this Annual Report on Form 10-K. Overnight Air Cargo. The Company’s Overnight Air Cargo segment comprises the operations of MAC, CSA and WASI.
The dry-lease agreements may be terminated by FedEx or MAC and CSA, respectively, at any time upon 90 days’ written notice and FedEx may at any time terminate the lease of any particular aircraft thereunder upon 10 days’ written notice.
The dry-lease agreements may be terminated by FedEx or MAC and 4 CSA, respectively, at any time upon 90 days’ written notice and FedEx may at any time terminate the lease of any particular aircraft thereunder upon 10 days’ written notice.
The principal place of business of Landing Gear Support Services, Inc. and Landing Gear Support Services PTE Limited (collectively, "LGSS") is Singapore, Singapore. The principal place of business of WASI is Springfield, Missouri. We maintain an Internet website at http://www.airt.net and our SEC filings may be accessed through links on our website.
The principal place of business of Landing Gear Support Services, Inc. and Landing Gear Support Services PTE Limited (collectively, "LGSS") is Singapore, Singapore. The principal place of business of Worldwide Aircraft Services, Inc. ("WASI") is Springfield, Missouri. We maintain an Internet website at http://www.airt.net and our SEC filings may be accessed through links on our website.
On January 31, 2023, the Company acquired WASI, an aircraft repair station that began operating in 1986. WASI is a certified FAA/EASA part 145 repair station (no. OWRF547L) and specializes in medium passenger regional jets, regional/commuter turboprops, cargo and special mission operators. It maintains a fully equipped engine shop with tooling and engine run stands.
On January 31, 2023, the Company acquired WASI, an aircraft repair station that began operating in 1986. WASI is a certified FAA/EASA part 145 repair station (no. OWRF547L) and specializes in medium passenger regional jets, regional/commuter turboprops, cargo and other operators. It maintains a fully equipped engine shop with tooling and engine run stands.
Improvements have included the development of single operator mobile deicing units to replace units requiring two operators, a patented premium deicing blend system and a more efficient forced-air deicing system. GGS manufactures five basic models of mobile deicing equipment with capacities ranging from 700 to 2,800 gallons. GGS also offers fixed-pedestal-mounted deicers.
Improvements have included the development of single operator mobile deicing units to replace units requiring two operators, a patented premium deicing blend system and a more efficient forced-air deicing system. GGS manufactures five basic models of mobile deicing equipment with capacities ranging from 1,200 to 2,800 gallons. GGS also offers fixed-pedestal-mounted deicers.
In addition, the Company maintains product liability insurance with respect to injuries and loss arising from use of products sold and services provided. In March 2014, the Company formed SAIC, a captive insurance company licensed in Utah.
In addition, the Company maintains product liability insurance with respect to injuries and loss arising from use of products sold and services provided. In March 2014, the Company formed Space Age Insurance Company ("SAIC") , a captive insurance company licensed in Utah.
GGS’s product line includes aircraft deicers, scissor-type lifts, military and civilian decontamination units, flight-line tow tractors, glycol recovery vehicles and other specialized equipment. In the fiscal year ended March 31, 2023, sales of deicing equipment accounted for approximately 85% of GGS’s revenues, compared to 88% in the prior fiscal year. GGS designs and engineers its products.
GGS’s product line includes aircraft deicers, scissor-type lifts, military and civilian decontamination units, flight-line tow tractors, glycol recovery vehicles and other specialized equipment. In the fiscal year ended March 31, 2024, sales of deicing equipment accounted for approximately 74% of GGS’s revenues, compared to 85% in the prior fiscal year. GGS designs and engineers its products.
Contrail and Jet Yard (acquired during fiscal year 2017), AirCo (formed in May 2017), Worthington (acquired in May 2018), Jet Yard Solutions (formed in January 2021), Air'Zona (acquired in March 2021), LGSS (formed March 2022), and Crestone Air Partners ("Crestone", formed April 2022) comprises the commercial jet engines and parts segment of the Company’s operations.
Commercial Jet Engines and Parts. 6 Contrail and Jet Yard (acquired during fiscal year 2017), AirCo (formed in May 2017), Worthington (acquired in May 2018), Jet Yard Solutions (formed in January 2021), Air'Zona (acquired in March 2021), LGSS (formed March 2022), and Crestone Air Partners ("Crestone", formed April 2022) comprise the commercial jet engines and parts segment of the Company’s operations.
GGS sold a total of 14 and 7 deicers under the current contract with the USAF including both GL 1800 and ER 2875 models during fiscal years ended March 31, 2023 and March 31, 2022, respectively and all the units were accepted by the USAF.
GGS sold a total of 9 and 14 deicers under the current contract with the USAF including both GL 1800 and ER 2875 models during fiscal years ended March 31, 2024 and March 31, 2023, respectively and all the units were accepted by the USAF.
MAC and CSA, together, operated the following FedEx-owned cargo aircraft as of March 31, 2023: Type of Aircraft Model Year Form of Ownership Number of Aircraft Cessna Caravan 208B (single turbo prop) 1985-1996 Dry lease 61 Cessna SkyCourier 408 (twin turbo prop) 2022-2023 Dry lease 4 ATR-42 (twin turbo prop) 1992 Dry lease 9 ATR-72 (twin turbo prop) 1992 Dry lease 10 ATR-72-600 (twin turbo prop) 2022-2023 Dry lease 1 85 The Cessna Caravan 208B aircraft are maintained under an FAA Approved Aircraft Inspection Program (“AAIP”).
MAC and CSA, together, operated the following FedEx-owned cargo aircraft as of March 31, 2024: Type of Aircraft Model Year Form of Ownership Number of Aircraft Cessna Caravan 208B (single turbo prop) 1985-1996 Dry lease 71 Cessna SkyCourier 408 (twin turbo prop) 2022-2023 Dry lease 11 ATR-42 (twin turbo prop) 1992 Dry lease 9 ATR-72 (twin turbo prop) 1992 Dry lease 10 ATR-72-600 (twin turbo prop) 2022-2023 Dry lease 4 105 The Cessna Caravan 208B aircraft are maintained under an FAA Approved Aircraft Inspection Program (“AAIP”).
Item 1. Business Air T, Inc. (the “Company,” “Air T,” “we” or “us” or “our”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically diversify Air T’s earnings power and compound the growth in its free cash flow per share over time.
Item 1. Business Air T, Inc. (the “Company,” “Air T,” “we” or “us” or “our”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically grow Air T’s earnings power, compounding its free-cash-flow per share over time.
SAIC insures risks of the Company and its subsidiaries that were not previously insured by the various Company insurance programs (including the risk of loss of key customers and contacts, administrative actions and regulatory changes); and may from time to time underwrite third-party risk through certain reinsurance arrangements. SAIC is included within the Company's Corporate and other segment.
SAIC insures risks of the Company and its subsidiaries that were not previously insured by the various Company insurance programs (including the risk of loss of key customers and contacts, administrative actions and regulatory changes); and may from time to time underwrite third-party risk through certain reinsurance arrangements.
At March 31, 2023, GGS’s backlog of orders was $13.6 million, all of which GGS expects to be filled in the fiscal year ending March 31, 2024. At March 31, 2022, GGS’s backlog of orders was $14.0 million. Backlog is not meaningful for the Company’s other business segments.
At March 31, 2024, GGS’s backlog of orders was $12.6 million, all of which GGS expects to be filled in the fiscal year ending March 31, 2025. At March 31, 2023, GGS’s backlog of orders was $13.6 million. Backlog is not meaningful for the Company’s other business segments. Governmental Regulation.
As of March 31, 2023, MAC and CSA had an aggregate of 85 aircraft under its dry-lease agreements with FedEx. Included within the 85 aircraft, 2 Cessna Caravan aircraft are considered soft-parked. Soft-parked aircraft remain covered under our agreements with FedEx although at a reduced administrative fee compared to aircraft that are in operation.
As of March 31, 2024, MAC and CSA had an aggregate of 105 aircraft under its dry-lease agreements with FedEx. Included within the 105 aircraft, 6 Cessna Caravan and 7 Sky Courier aircraft are considered soft-parked. Soft-parked aircraft remain covered under our agreements with FedEx although at a reduced administrative fee compared to aircraft that are in operation.
The current dry-lease agreement was most recently renewed on June 1, 2021 and is set to expire on August 31, 2026.
The current dry-lease agreements were most recently renewed on June 1, 2021 and are set to expire on August 31, 2026.
Air T was incorporated under the laws of the State of Delaware in 1980. The principal place of business of Air T is 11020 David Taylor Drive, Suite 305, Charlotte NC, 28262 and Mountain Air Cargo, Inc. (“MAC”) is 5930 Balsom Ridge Road, Denver, North Carolina. The principal place of business of CSA Air, Inc. (“CSA”) is Iron Mountain, Michigan.
The principal place of business of Air T is 11020 David Taylor Drive, Suite 305, Charlotte NC, 28262. The principal place of business of Mountain Air Cargo, Inc. (“MAC”) is Denver, North Carolina. The principal place of business of CSA Air, Inc. (“CSA”) is Iron Mountain, Michigan.
Unconsolidated Investments The Company has ownership interest in Contrail Asset Management, LLC (“CAM”). The operations of CAM are not consolidated into the operations of the Company. See Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. The Company also has ownership interests in Insignia Systems, Inc. ("Insignia") and Cadillac Casting, Inc. ("CCI").
See Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. The Company also has ownership interests in Lendway Inc. - NASDAQ: LDWY ("Lendway"), formerly known as Insignia Systems, Inc. ("Insignia"), and Cadillac Casting, Inc. ("CCI"). The operations of these companies are not consolidated into the operations of the Company.
GGS has already received confirmed orders of 6 deicers for fiscal 2024’s delivery order and currently expects the delivery of both GL 1800 and ER 2875 models to begin in the second quarter of fiscal year 2024. Commercial Jet Engines and Parts.
GGS has already received confirmed orders of 14 deicers for fiscal 2025’s delivery order and currently expects the delivery of both GL 1800 and ER 2875 models in the first quarter of fiscal year 2025.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. As it relates to our employees: Oversight and Management 8 Our executive officers are tasked with leading our organization in managing employment-related matters, including recruiting and hiring, onboarding and training, compensation planning, talent management and development.
As it relates to our employees: Oversight and Management Our executive officers are tasked with leading our organization in managing employment-related matters, including recruiting and hiring, onboarding and training, compensation planning, talent management and development. We are committed to providing team members with the training and resources necessary to continually strengthen their skills.
Management periodically reports to the Board regarding our human capital measures and results that guide how we attract, retain and develop a workforce to enable our business strategies.
Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as 8 our management development and succession planning practices. Management periodically reports to the Board regarding our human capital measures and results that guide how we attract, retain and develop a workforce to enable our business strategies.
MAC and CSA operate under separate aviation certifications. MAC is certified to operate under Part 121, Part 135 and Part 145 of the regulations of the FAA.
MAC and CSA are not contractually precluded from providing services to other parties and MAC occasionally provides third-party maintenance services to other airline customers. MAC and CSA operate under separate aviation certifications. MAC is certified to operate under Part 121, Part 135 and Part 145 of the regulations of the FAA.
We evaluate the performance of our business segments based on operating income (loss) and Adjusted EBITDA. Certain financial data with respect to the Company’s geographic areas and segments is set forth in Notes 21 and 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.
Certain financial data with respect to the Company’s geographic areas and segments is set forth in Notes 19 and 20 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. Air T was incorporated under the laws of the State of Delaware in 1980.
Governmental Regulation. 7 The Company and its subsidiaries are subject to regulation by various governmental agencies. The Department of Transportation (“DOT”) has the authority to regulate air service. The DOT has authority to investigate and institute proceedings to enforce its economic regulations, and may, in certain circumstances, assess civil penalties, revoke operating authority and seek criminal sanctions.
The Company and its subsidiaries are subject to regulation by various governmental agencies. The Department of Transportation (“DOT”) has the authority to regulate air service.
Employees and Human Capital Resources. As of March 31, 2023, the Company and its subsidiaries had 584 full-time and full-time-equivalent employees. None of the employees of the Company or any of its consolidated subsidiaries are represented by labor unions. The Company believes its relations with its employees are good. We consider our relationship with our employees to be good.
None of the employees of the Company or any of its consolidated subsidiaries are represented by labor unions. The Company believes its relations with its employees are good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.
These requirements are not static but change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations. It is reasonably possible that these rules or other future security requirements could impose material costs on us.
It is reasonably possible that these rules or other future security requirements could impose material costs on us.
The revenues of Air'Zona, LGSS, and Crestone are not material to the Company's consolidated financial statements. The Company’s commercial jet engines and parts operations are not materially seasonal. Backlog. GGS’s backlog consists of “firm” orders supported by customer purchase orders for the equipment sold by GGS.
The revenues of Air'Zona, LGSS, and Crestone are not material to the Company's consolidated financial statements. The Company’s commercial jet engines and parts operations are not materially seasonal. Unconsolidated Investments The Company has ownership interest in Contrail Asset Management, LLC (“CAM”). The operations of CAM are not consolidated into the operations of the Company.
MAC and CSA continue to perform maintenance on soft-parked aircraft, but they are not crewed and do not operate on scheduled routes. Revenues from MAC and CSA’s contracts with FedEx accounted for approximately 36% and 41% of the Company’s consolidated revenue for the fiscal years ended March 31, 2023 and 2022, respectively.
Revenues from MAC and CSA’s contracts with FedEx accounted for approximately 36% of the Company’s consolidated revenue for the fiscal years ended March 31, 2024 and 2023. The loss of FedEx as a customer would have a material adverse effect on the Company. FedEx has been a customer of the Company since 1980.
Removed
Further, Corporate and other is also comprised of insignificant businesses that do not pertain to other reportable segments. Acquisitions On January 31, 2023, the Company acquired Worldwide Aircraft Services, Inc.
Added
Further, Corporate and other also comprises insignificant businesses and business interests. Each business segment has separate management teams and infrastructures that offer different products and services. We evaluate the performance of our business segments based on operating income (loss) and Adjusted EBITDA.
Removed
("WASI"), a Kansas corporation that services the aircraft industry across the United States and internationally through the operation of a repair station which is located in Springfield, Missouri at the Branson National Airport.
Added
MAC and CSA continue to perform maintenance on soft-parked aircraft, but they are not crewed and do not operate on scheduled routes. In addition, 3 Cessna Caravan were considered hard-parked. Hard-parked aircraft are covered under the agreements with FedEx, do not receive an administrative fee, and do not operate scheduled routes but do receive a nominal storage fee.
Removed
The acquisition was was funded with cash and the loans described in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. WASI is included within the Overnight Air Cargo segment. See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.
Added
See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. Backlog. GGS’s backlog consists of “firm” orders supported by customer purchase orders for the equipment sold by GGS.
Removed
The operations of these companies are not consolidated into the operations of the Company. See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. Each business segment has separate management teams and infrastructures that offer different products and services.
Added
The DOT has authority to investigate and institute proceedings to enforce its economic regulations, and may, in certain circumstances, assess civil penalties, revoke operating authority and seek criminal sanctions. 7 Under the Aviation and Transportation Security Act of 2001, as amended, the Transportation Security Administration (“TSA”), an agency within the Department of Homeland Security, has responsibility for aviation security.
Removed
The loss of FedEx as a customer would have a material adverse effect on the Company. FedEx has been a customer of the Company since 1980. MAC and CSA are not contractually precluded from providing services to other parties and MAC occasionally provides third-party maintenance services to other airline customers and the U.S. military.
Added
As of December 26, 2023, SAIC was considered a dormant captive insurance company with the State of Utah, in which it was registered. SAIC is included within the Company's Corporate and other segment. Employees and Human Capital Resources. As of March 31, 2024, the Company and its subsidiaries had 624 full-time and full-time-equivalent employees.
Removed
We are committed to providing team members with the training and resources necessary to continually strengthen their skills. Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices.
Removed
Importantly during fiscal years 2020 through 2022, our focus on providing a positive work environment on workplace safety have enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19 pandemic.
Removed
We took immediate action at the onset of the COVID-19 pandemic to enact rigorous safety protocols in our facilities by improving sanitation measures, implementing mandatory social distancing, use of facing coverings, reducing on-site workforce through staggered shifts and schedules, remote working where possible, and restricting visitor access to our locations.
Removed
We believe these actions helped minimize the impact of COVID-19 on our workforce.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeGGS leases an 112,500 square feet production facility in Olathe, Kansas. The facility is leased from a third party under a lease agreement, which expires in August 2024. 21 As of March 31, 2023, the Company leased hangar, maintenance and office space from third parties at a variety of other locations, at prevailing market terms.
Biggest changeAs of March 31, 2024, the Company leased hangar, maintenance and office space from third parties at a variety of other locations, at prevailing market terms. Contrail leases a 21,000 square foot facility in Verona, Wisconsin. This is a lease from a related party.
Starting in fiscal 2021, Jet Yard subleased the aforementioned lease along with the ground hardening improvements to Jet Yard Solutions. DSI leases 12,206 square feet of space in a building located in Mississauga, Canada. The lease expires on July 31, 2028. Worthington and AirCo lease a 41,280 square-feet facility in Eagan, Minnesota.
Starting in fiscal 2021, Jet Yard subleased the aforementioned lease along with the ground hardening improvements to Jet Yard Solutions. DSI leases 12,206 square feet of space in a building located in Mississauga, Canada. The lease expires on July 31, 2028. Worthington and AirCo lease a 41,280 square foot facility in Eagan, Minnesota.
WASI also leases an additional 2,000 square feet hangar space that expires on January 30, 2025 with no option to renew.
WASI also leases an additional 2,000 square feet of hangar space that expires on January 30, 2025 with no option to renew.
On April 13, 2023, the Company signed a lease agreement to move the operations of Air T to Charlotte, North Carolina. The lease is for 4,900 square feet of office space, will commence on July 1, 2023 and expire on November 30, 2028 with the option to extend the lease for one additional three year term.
On April 13, 2023, the Company signed a lease agreement to move the operations of Air T to Charlotte, North Carolina. The lease is for 4,900 square feet of office space that commenced on July 1, 2023 and will expire on November 30, 2028 with the option to extend the lease for one additional three year term.
Item 2. Properties. The Company owns approximately 4.626 acres in Denver, North Carolina, which houses the operations of Air T and MAC and a 55,000 square feet office building in St. Louis Park, Minnesota that is partially leased to tenants and is the location of the Company's Minnesota executive office.
Item 2. Properties. The Company owns approximately 4.626 acres and a 13,000 square foot office building in Denver, North Carolina, which houses the operations of Air T and MAC and a 55,000 square foot office building in St. Louis Park, Minnesota that is partially leased to tenants and is the location of the Company's Minnesota executive office.
The lease is a 60 month lease that extends through June 2026. As part of the formation of Crestone and transition of certain Contrail's employees to Crestone, Contrail terminated this lease prior to its expiration in 2026. Crestone entered into a lease agreement of a 1,663 square feet office space in Glendale, Colorado on September 1, 2022.
As part of the formation of Crestone and transition of certain Contrail's employees to Crestone, Contrail terminated this lease prior to its expiration in 2026. Crestone entered into a lease agreement of a 1,663 square foot office space in Glendale, Colorado on September 1, 2022.
Contrail leases a 21,000 square feet facility in Verona, Wisconsin. This is a lease from a related party. See Note 15 “Related Party Matters” of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. This lease expires on July 17, 2026. Contrail also leased a 1,453 square feet office space in Denver, Colorado.
See Note 1 4 “Related Party Matters” of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. This lease expires on July 17, 2026. Contrail also leases a 1,453 square foot office space in Denver, Colorado. The lease was a 60 month lease that extended through June 2026.
The lease is a 24 month lease that extends through August 2024 with no option to renew. Jet Yard leases approximately 48.5 acres of land from Pinal County at the Pinal Air Park in Marana, Arizona.
On January 1, 2024, Crestone entered into an amended lease agreement which terminated the 1,663 square foot office space and leased new premises of 3,698 square feet of office space located in Glendale, Colorado. The amended lease expires in August 2027. Jet Yard leases approximately 48.5 acres of land from Pinal County at the Pinal Air Park in Marana, Arizona.
Added
GGS leases a 112,500 square foot production facility in Olathe, Kansas. The facility is leased from a third party under a lease agreement, which expires in August 2024. On June 6th, 2024, GGS entered into an agreement to extend the current lease for an additional five years through August 31, 2029.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe record a liability when a loss is considered probable, and the amount can be reasonably estimated. 22 Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeWe record a liability when a loss is considered probable, and the amount can be reasonably estimated. 26 Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of shares of common stock during the fourth quarter are described below: Dates of Shares Purchased Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs Jan 1 - Jan 31, 2023 2,336 $ 25.04 2,336 872,999 Feb 1 - Feb 28, 2023 214 $ 22.60 214 872,785 March 1 - March 31, 2023 1,072 $ 21.85 1,072 871,713 As of March 31, 2023, the Company did not sell any securities within the past three years that were not registered under the Securities Act.
Biggest changePurchases of shares of common stock during the fourth quarter are described below: Dates of Shares Purchased Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs Jan 1 - Jan 31, 2024 9,063 $ 15.87 9,063 862,030 Feb 1 - Feb 29, 2024 15,783 $ 17.03 15,783 846,247 Mar 1 - Mar 31, 2024 23,263 $ 18.90 23,263 822,984 As of March 31, 2024, the Company did not sell any securities within the past three years that were not registered under the Securities Act.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s common stock is publicly traded on the NASDAQ Global Market under the symbol “AIRT.” As of March 31, 2023, the approximate number of holders of record of the Company’s Common Stock was 154.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s common stock is publicly traded on the NASDAQ Capital Market under the symbol “AIRT.” As of March 31, 2024, the approximate number of holders of record of the Company’s Common Stock was 153.
The Company purchased 51,794 shares pursuant to this authorization during the fiscal year ended March 31, 2023.
The Company purchased 48,729 shares pursuant to this authorization during the fiscal year ended March 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe table below provides a reconciliation of operating income (loss) from continuing operations to Adjusted EBITDA for the fiscal year ended March 31, 2023 and 2022 (in thousands): Twelve Months Ended March 31, 2023 March 31, 2022 Operating (loss) income from continuing operations $ (4,407) $ 8,755 Depreciation and amortization (excluding leased engines depreciation) 2,525 1,589 Asset impairment, restructuring or impairment charges 1 7,840 805 Loss on sale of property and equipment 8 5 Securities expenses 63 252 Adjusted EBITDA $ 6,029 $ 11,406 The table below provides Adjusted EBITDA by segment for the fiscal year ended March 31, 2023 and 2022 (in thousands): Twelve Months Ended March 31, 2023 March 31, 2022 Overnight Air Cargo $ 4,505 $ 2,854 Ground Equipment Sales 3,314 3,455 Commercial Jet Engines and Parts 7,105 5,200 Corporate and Other (8,895) (103) Adjusted EBITDA $ 6,029 $ 11,406 1 Included in the asset impairment, restructuring or impairment charges for the fiscal year ended March 31, 2023 was a write-down of $7.3 million on the commercial jet engines and parts segment's inventory, of which, $5.4 million was due to a management decision to monetize three engines by sale to a third party, in which the net carrying values exceeded the estimated proceeds.
Biggest changeThe table below provides a reconciliation of operating income (loss) from continuing operations to Adjusted EBITDA for the fiscal years ended March 31, 2024 and 2023 (in thousands): Twelve Months Ended March 31, 2024 March 31, 2023 Operating income (loss) from continuing operations $ 1,264 $ (4,407) Depreciation and amortization (excluding leased engines depreciation) 2,798 2,525 Asset impairment, restructuring or impairment charges 1 1,195 7,840 Loss on sale of property and equipment 18 8 TruPs issuance expenses 347 63 Adjusted EBITDA $ 5,622 $ 6,029 The table below provides Adjusted EBITDA by segment for the fiscal years ended March 31, 2024 and 2023 (in thousands): Twelve Months Ended March 31, 2024 March 31, 2023 Overnight Air Cargo $ 7,142 $ 4,505 Ground Equipment Sales (1,409) 3,314 Commercial Jet Engines and Parts 6,119 7,105 Corporate and Other (6,230) (8,895) Adjusted EBITDA $ 5,622 $ 6,029 1 Included in the asset impairment, restructuring or impairment charges for the fiscal year ended March 31, 2024 was a write-down of $1.2 million on the commercial jet engines and parts segment's inventory attributable to our evaluation of the carrying value of inventory as of March 31, 2024, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory. 35 Issuer and guarantor subsidiary summarized information Air T Funding is a statutory business trust formed under Delaware law in September 2018.
Contrail's discounted cash flow analysis requires significant management judgment with respect to forecasts of revenue, operating margins, capital expenditures, and the selection and use of an appropriate discount rate. Contrail’s market approach requires management to make significant assumptions related to market multiples of earnings derived from comparable publicly-traded companies with similar operating characteristics as Contrail.
Contrail's discounted cash flow analysis requires significant management judgment with respect to forecasts of revenue, operating margins, capital expenditures, and the selection and use of an appropriate discount rate. Contrail’s market approach requires management to make significant assumptions related to market multiples of earnings derived from comparable publicly-traded companies with similar operating characteristics as Contrail. 38
The Air T Acquisition 22.1's term loans with ING (the Air T Acquisition 22.1 debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) include several covenants that are measured once a year at December 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.10 and a senior net leverage ratio of 2.10 at December 31, 2022 and 1.50 at subsequent years.
The Air T Acquisition 22.1's term loans with ING (the Air T Acquisition 22.1 debt in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) include several covenants that are measured once a year at December 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.10 and a senior net leverage ratio of 2.10 at December 31, 2022 and 1.50 at subsequent years.
The Company’s Credit Agreement with Minnesota Bank & Trust, a Minnesota state banking corporation (“MBT”) (the Air T debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) includes several covenants that are measured twice a year at September 30 and March 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.25.
The Company’s Credit Agreement with Minnesota Bank & Trust, a Minnesota state banking corporation (“MBT”) (the Air T debt in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) includes several covenants that are measured twice a year at September 30 and March 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.25.
The Contrail Credit Agreement (the Contrail debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.
The Contrail Credit Agreement (the Contrail debt in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.
We are currently seeking to refinance the Contrail revolver prior to its maturity date; however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.
We are currently seeking to refinance the Revolver - MBT prior to its maturity date; however, there is no assurance that we will be able to execute this refinancing or, if we are able to refinance this obligation, that the terms of such refinancing would be as favorable as the terms of our existing credit facility.
Other segments are typically not susceptible to material seasonal trends. 33 Critical Accounting Policies and Estimates. The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.
Other segments are typically not susceptible to material seasonal trends. 37 Critical Accounting Policies and Estimates The Company’s significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.
As mentioned in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, the Company has ownership interest in Contrail Asset Management, LLC (“CAM”). The operations of CAM are not consolidated into the operations of the Company.
As mentioned in Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, the Company has ownership interest in Contrail Asset Management, LLC (“CAM”). The operations of CAM are not consolidated into the operations of the Company.
Actual results may differ materially from those contemplated by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as: • Economic and industry conditions in the Company’s markets; • The risk that contracts with FedEx could be terminated or adversely modified; • The risk that the number of aircraft operated for FedEx will be reduced; • The risk that GGS customers will defer or reduce significant orders for deicing equipment; • The impact of any terrorist activities on United States soil or abroad; • The Company’s ability to manage its cost structure for operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production volume levels; • The Company's ability to meet debt service covenants and to refinance existing debt obligations; • The risk of injury or other damage arising from accidents involving the Company’s overnight air cargo operations, equipment or parts sold and/or services provided; • Market acceptance of the Company’s commercial and military equipment and services; • Competition from other providers of similar equipment and services; • Changes in government regulation and technology; • Changes in the value of marketable securities held as investments; • Mild winter weather conditions reducing the demand for deicing equipment; • Market acceptance and operational success of the Company’s relatively new aircraft asset management business and related aircraft capital joint venture; and • Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.
Actual results may differ materially from those contemplated by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as: • An inability to finance our operations through bank or other financing or through the sale or issuance of debt or equity securities; • Economic and industry conditions in the Company’s markets; • The risk that contracts with FedEx Corporation (“FedEx”) could be terminated or adversely modified; • The risk that the number of aircraft operated for FedEx will be reduced; • The risk that GGS customers will defer or reduce significant orders for deicing equipment; • The impact of any terrorist activities or armed conflict on United States soil or abroad; • The Company’s ability to manage its cost structure for operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production volume levels; • The Company's ability to meet debt service covenants and to refinance existing debt obligations; • The risk of injury or other damage arising from accidents involving the Company’s overnight air cargo operations, equipment or parts sold and/or services provided; • Market acceptance of the Company’s commercial and military equipment and services; • Competition from other providers of similar equipment and services; • Changes in government regulation and technology; • Changes in the value of marketable securities held as investments; • Mild winter weather conditions reducing the demand for deicing equipment; • Market acceptance and operational success of the Company’s relatively new aircraft asset management business and related aircraft capital joint venture; and • Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.
For its Investment Function (as defined in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report), CAM’s initial commitment to CJVII was approximately $51.0 million. The Company and MRC have commitments to CAM in the respective amounts of $7.0 million and $44.0 million.
For its Investment Function (as defined in Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report), CAM’s initial commitment to CJVII was approximately $51.0 million. The Company and Mill Road Capital ("MRC") have commitments to CAM in the respective amounts of $7.0 million and $44.0 million.
The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum tangible net worth ("TNW") of $12 million. As of March 31, 2023, the Company, AirCo 1, Air T Acquisition 22.1 and Contrail were in compliance with all financial covenants.
The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.0 and a minimum tangible net worth ("TNW") of $15.0 million. As of March 31, 2024, AirCo 1, Air T Acquisition 22.1 and Contrail were all in compliance with their respective covenants.
The AirCo 1 Credit Agreement (the AirCo 1 debt in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report) contains an affirmative covenant relating to collateral valuation.
The AirCo 1 Credit Agreement (the AirCo 1 debt in Note 13 of Notes to Consol idated Financial Statements included under Part II, Item 8 of this report) contains an affirmative covenant relating to collateral valuation.
During the year ended March 31, 2023, the Company recorded $0.4 million of income tax expense, which yielded an effective rate of -3.8%.
During the fiscal year ended March 31, 2023, the Company recorded $0.4 million of income tax expense at an effective tax rate of -3.8%.
Pass-through costs under the dry-lease agreements with FedEx totaled $29.2 million and $23.0 million for the years ended March 31, 2023 and 2022, respectively.
Pass-through costs under the dry-lease agreements with FedEx totaled $36.4 million and $29.2 million for the years ended March 31, 2024 and 2023, respectively.
The current fiscal year's cash usage was primarily driven by cash used for the acquisition of WASI of $2.5 million and investment in unconsolidated entities of $3.1 million.
The prior fiscal year's cash usage was primarily driven by cash used for the acquisition of WASI of $2.5 million and investment in unconsolidated entities of $3.1 million, offset by distributions from unconsolidated entities of $0.7 million.
The fluidity of this situation precludes any prediction as to the ultimate adverse impact these issues on economic and market conditions and our businesses in particular, and, as a result, present material uncertainty and risk with respect to us and our results of operations. 27 Liquidity and Capital Resources As of March 31, 2023, the Company held approximately $7.1 million in total cash, cash equivalents and restricted cash, of which, $0.8 million related to cash collateral for three Opportunity Zone fund investments.
The fluidity of this situation precludes any prediction as to the ultimate adverse impact these issues on economic and market conditions and our businesses in particular, and, as a result, present material uncertainty and risk with respect to us and our results of operations. 31 Liquidity and Capital Resources As of March 31, 2024, the Company held approximately $7.8 million in total cash, cash equivalents and restricted cash, of which, $0.4 million related to cash reserved for payments of SAIC's insurance claims.
We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. 25 Results of Operations Fiscal 2023 vs. 2022 Consolidated revenue increased by $70.2 million (40%) to $247.3 million for the fiscal year ended March 31, 2023 compared to the prior fiscal year.
We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. 29 Results of Operations Fiscal 2024 vs. 2023 Consolidated revenue increased by $39.5 million (16%) to $286.8 million for the fiscal year ended March 31, 2024 compared to the prior fiscal year.
In response to this condition, Contrail entered into an amendment to the Credit Agreement with ONB whereby, among other things, in exchange for a $20 million principal prepayment of Term Note G, Contrail obtained a waiver of the debt service coverage ratio covenant. $6.7 million of the $20.0 million prepayment was paid on March 30, 2023 and the remaining $13.3 million payment is currently expected to be paid in September 2023.
On March 22, 2023, Contrail entered into the First Amendment to Second Amendment to Master Loan Agreement and Third Amendment to Master Loan Agreement ("the Amendment") with ONB whereby, among other things, in exchange for a $20 million principal prepayment of Term Note G, Contrail obtained a waiver of the debt service coverage ratio covenant. $6.7 million of the $20.0 million prepayment was paid on March 30, 2023 and the remaining $13.3 million payment was paid in September 2023.
As a result, management believes it is probable that the cash on hand and current financings, net cash provided by operations from its remaining operating segments, together with amounts available under our current revolving lines of credit, as amended, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. 29 Cash Flows Following is a table of changes in cash flow from continuing operations for the respective years ended March 31, 2023 and 2022 (in thousands): Year Ended March 31, Change 2023 2022 Net Cash Provided by (Used in) Operating Activities $ 16,909 $ (33,084) $ 49,993 Net Cash Used in Investing Activities (6,168) (33,388) 27,220 Net Cash (Used in) Provided by Financing Activities (12,380) 59,254 (71,634) Effect of foreign currency exchange rates 361 (341) 702 Net Decrease in Cash and Cash Equivalents and Restricted Cash $ (1,278) $ (7,559) $ 6,281 Cash provided by operating activities was $16.9 million in fiscal year 2023 compared to cash used in operating activities of $33.1 million in fiscal year 2022.
As a result, management believes it is probable that the cash on hand and current financings, net cash provided by operations from its remaining operating segments, together with amounts available under our current revolving lines of credit, as amended, will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. 32 Cash Flows Following is a table of changes in cash flow from continuing operations for the respective years ended March 31, 2024 and 2023 (in thousands): Year Ended March 31, Change 2024 2023 Net Cash Provided by Operating Activities $ 17,178 $ 16,909 $ 269 Net Cash Used in Investing Activities (2,499) (6,168) 3,669 Net Cash Used in Financing Activities (13,910) (12,380) (1,530) Effect of foreign currency exchange rates (16) 361 (377) Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash $ 753 $ (1,278) $ 2,031 Cash provided by operating activities in fiscal year 2024 was relatively flat compared to fiscal year 2023.
Cash used in financing activities for fiscal year 2023 was $12.4 million compared to cash provided by financing activities for the prior fiscal year of $59.3 million.
Cash used in financing activities for fiscal year 2024 was $13.9 million compared to cash used by financing activities for the prior fiscal year of $12.4 million.
Lastly, the change was also due to the fact that there was no proceeds received from issuance of TruPs in the current fiscal year compared to $11.3 million in the prior fiscal year. 30 Off-Balance Sheet Arrangements The Company defines an off-balance sheet arrangement as any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a Company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or that engages in leasing, hedging, or research and development arrangements with the Company.
This was primarily due to decreased net proceeds from lines of credit of $15.0 million and increased payments to lines of credit of $9.0 million, offset by proceeds from term loans of $14.2 million in addition to the issuance of TruPs of $8.8 million in the current fiscal year. 33 Off-Balance Sheet Arrangements The Company defines an off-balance sheet arrangement as any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a Company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity, or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or that engages in leasing, hedging, or research and development arrangements with the Company.
The table below provides Adjusted EBITDA by segment for the fiscal year ended March 31, 2023 and 2022 (in thousands): Twelve Months Ended Change March 31, 2023 March 31, 2022 Overnight Air Cargo $ 4,505 $ 2,854 $ 1,651 Ground Equipment Sales 3,314 3,455 (141) Commercial Jet Engines and Parts 7,105 5,200 1,905 Corporate and Other (8,895) (103) (8,792) Adjusted EBITDA $ 6,029 $ 11,406 $ (5,377) Consolidated Adjusted EBITDA for the fiscal year ended March 31, 2023 was $6.0 million, a decrease of $5.4 million compared to the prior fiscal year.
The table below provides Adjusted EBITDA by segment for the fiscal year ended March 31, 2024 and 2023 (in thousands): Twelve Months Ended Change March 31, 2024 March 31, 2023 Overnight Air Cargo $ 7,142 $ 4,505 $ 2,637 Ground Equipment Sales (1,409) 3,314 (4,723) Commercial Jet Engines and Parts 6,119 7,105 (986) Corporate and Other (6,230) (8,895) 2,665 Total $ 5,622 $ 6,029 $ (407) Consolidated Adjusted EBITDA for the fiscal year ended March 31, 2024 was $5.6 million, a decrease of $0.4 million compared to the prior fiscal year.
When calculating Adjusted EBITDA, the Company does not add back depreciation expense for aircraft engines that are on lease, as the Company believes this expense matches with the corresponding revenue earned on engine leases. Depreciation expense for leased engines totaled $1.6 million and $0.3 million for the fiscal year ended March 31, 2023 and 2022.
When calculating Adjusted EBITDA, the Company does not add back depreciation expense for aircraft engines that are on lease, as the Company believes this expense matches with the corresponding revenue earned on engine leases. There was no depreciation expense for leased engines in the current fiscal year, whereas there was $1.6 million in the prior fiscal year.
Following is a table detailing operating (loss) income by segment, net of intercompany during Fiscal 2023 and Fiscal 2022 (in thousands): Year ended March 31, Change 2023 2022 Overnight Air Cargo $ 4,047 $ 2,794 $ 1,253 Ground Equipment Sales 3,141 3,220 (79) Commercial Jet Engines and Parts (957) 3,619 (4,576) Corporate and Other $ (10,638) (878) (9,760) Total $ (4,407) $ 8,755 $ (13,162) Consolidated operating loss for the fiscal year ended March 31, 2023 was $4.4 million compared to consolidated operating income of $8.8 million in the prior fiscal year.
Following is a table detailing operating income (loss) by segment, net of intercompany during Fiscal 2024 and Fiscal 2023 (in thousands): Year Ended March 31, Change 2024 2023 Overnight Air Cargo $ 6,765 $ 4,047 $ 2,718 Ground Equipment Sales (1,553) 3,141 (4,694) Commercial Jet Engines and Parts 4,169 (957) 5,126 Corporate and Other (8,117) (10,638) 2,521 Total $ 1,264 $ (4,407) $ 5,671 Consolidated operating income for the fiscal year ended March 31, 2024 was $1.3 million compared to consolidated operating loss of $4.4 million in the prior fiscal year.
Unconsolidated Investments The Company has an ownership interest in Contrail Asset Management, LLC (“CAM”). The operations of CAM are not consolidated into the operations of the Company. See Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. The Company also has ownership interests in Insignia and CCI.
The operations of CAM are not consolidated into the operations of the Company. See Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. The Company also has ownership interests in Lendway and CCI. The operations of these companies are not consolidated into the operations of the Company.
Adjusted EBITDA for the air cargo segment increased by $1.7 million in the current fiscal year, due primarily to having higher segment operating income as described above. The current fiscal year's ground equipment sales segment Adjusted EBITDA was relatively flat compared to the prior fiscal year's.
Adjusted EBITDA for the overnight air cargo segment increased by $2.6 million in the current fiscal year, due primarily to higher segment operating income as described above. Adjusted EBITDA for the ground equipment sales segment decreased by $4.7 million in the current fiscal year, primarily due to lower sales as described above.
Following is a table detailing consolidated non-operating income (expense), net of intercompany during fiscal 2023 and fiscal 2022 (in thousands): Year Ended March 31, Change 2023 2022 Interest expense, net $ (7,935) $ (4,948) $ (2,987) Gain on forgiveness of Paycheck Protection Program ("PPP") — 8,331 (8,331) Income from equity method investments 1,460 37 1,423 Other (471) 1,221 (1,692) Total $ (6,946) $ 4,641 $ (11,587) The Company had net non-operating loss of $6.9 million for the fiscal year ended March 31, 2023 compared to a non-operating income of $4.6 million in the prior fiscal year.
Following is a table detailing consolidated non-operating income (expense), net of intercompany during fiscal 2024 and fiscal 2023 (in thousands): Year Ended March 31, Change 2024 2023 Interest expense, net $ (6,916) $ (7,935) $ 1,019 Income from equity method investments 1,689 1,460 229 Other 8 (471) 479 Total $ (5,219) $ (6,946) $ 1,727 The Company had a net non-operating loss of $5.2 million for the fiscal year ended March 31, 2024 compared to a net non-operating loss of $6.9 million in the prior fiscal year.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview Air T, Inc. (the “Company,” “Air T,” “we” or “us” or “our”) is a holding company with a portfolio of operating businesses and financial assets.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview Air T, Inc. (the “Company,” “Air T,” “we” or “us” or “our”) is a holding company with a portfolio of operating businesses and financial assets. Our goal is to prudently and strategically grow Air T's earnings power, compounding its free-cash-flow per share over time.
We evaluate the performance of our business segments based on operating income (loss) and Adjusted EBITDA. 24 Forward Looking Statements Certain statements in this Report, including those contained in “Overview,” are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the Company’s financial condition, results of operations, plans, objectives, future performance and business.
See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. 28 Forward Looking Statements Certain statements in this Report, including those contained in “Overview,” are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the Company’s financial condition, results of operations, plans, objectives, future performance and business.
As of the date of this report, the Company and MBT entered into amendments to the MBT revolving credit agreement and related promissory note to extend the maturity date of the credit facility to August 31, 2024 and include the following changes: 1. A $2.0 million seasonal increase in the maximum amount available under the facility.
The amendments extended the maturity date of the credit facility to August 31, 2024 and included the following changes: 1. A $2.0 million seasonal increase in the maximum amount available under the facility.
The change in the valuation allowance is primarily due to unrealized losses on investments and the generation of foreign tax credits through the NOL carryback claim that the Company expects to expire before they are fully utilized, and attribute reduction incurred by Delphax related to dissolution of its French subsidiary. 26 Market Outlook Future economic developments such as inflation and increased interest rates as well as further business issues such as supply chain issues present uncertainty and risk with respect to our financial condition and results of operations.
The change in the Company’s valuation allowance is primarily due to the realizability of the domestic deferred tax assets, the unrealized losses on investments, the foreign tax credits generated by the operations in the Company’s Puerto Rico branch that is expected to expire before being fully utilized, and the change in full valuation allowances associated with the Delphax entities. 30 Market Outlook Future economic developments such as inflation and increased interest rates as well as further business issues such as supply chain issues present uncertainty and risk with respect to our financial condition and results of operations.
As of December 31, 2022, this note has been repaid. As mentioned in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on November 8, 2022, Contrail entered into the Second Amendment to Master Loan Agreement (the “Amendment”) with ONB.
As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on September 5, 2023, Contrail entered into the Sixth Amendment to Supplement #2 to Master Loan Agreement and the Fifth Amended and Restated Promissory Note with ONB.
The ground equipment sales segment contributed approximately $48.5 million and $42.2 million to the Company’s revenues for the fiscal years ended March 31, 2023 and 2022, respectively, representing a $6.2 million (15%) increase in the current year. The increase was primarily driven by a higher volume of truck sales to the USAF and commercial customers in the current fiscal year.
The ground equipment sales segment contributed approximately $37.2 million and $48.5 million to the Company’s revenues for the fiscal years ended March 31, 2024 and 2023, respectively, representing a $11.3 million (23%) decrease in the current fiscal year.
Adjusted EBITDA of the commercial jet engines and parts segment was $7.1 million, an increase of $1.9 million from the prior fiscal year. The increase was primarily driven by higher component sales explained above. The corporate and other segment Adjusted EBITDA loss increased by $8.8 million from fiscal 2022 to fiscal 2023.
Adjusted EBITDA of the commercial jet engines and parts segment was $6.1 million, a decrease of $1.0 million from the prior fiscal year. The decrease was primarily driven by lower profit margins on sales as described above. The corporate and other segment Adjusted EBITDA loss decreased by $2.7 million from fiscal 2023 to fiscal 2024.
Operating loss of the commercial jet engines and parts segment was $1.0 million compared to operating income of $3.6 million in the prior year. The change was primarily attributable to the increase in inventory write-down of $6.6 million in the current fiscal year compared to the prior fiscal year, offset by the increase in sales explained above.
Operating loss for the ground equipment sales segment was $1.6 million compared to operating income of $3.1 million in the prior fiscal year, a decrease of $4.7 million attributable to lower sales as described above. Operating income of the commercial jet engines and parts segment was $4.2 million compared to operating loss of $1.0 million in the prior year.
The Company’s estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from estimates. The Company believes that the following are its most critical accounting policies: Business Combinations . The Company accounts for business combinations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations.
The Company’s estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from estimates. The Company believes that the following are its most critical accounting policies: Inventories – Inventories are carried at the lower of cost or net realizable value.
At March 31, 2023, the ground equipment sales segment’s order backlog was $13.6 million compared to $14.0 million at March 31, 2022. The commercial jet engines and parts segment contributed $101.7 million of revenues in fiscal year ended March 31, 2023 compared to $57.7 million in the prior fiscal year which is an increase of $44.0 million (76%).
The commercial jet engines and parts segment contributed $125.5 million of revenues in fiscal year ended March 31, 2024 compared to $101.7 million in the prior fiscal year which is an increase of $23.8 million (23%).
Following is a table detailing revenue (after elimination of intercompany transactions), in thousands: Year ended March 31, Change 2023 2022 Overnight Air Cargo $ 90,543 $ 74,409 $ 16,134 22 % Ground Equipment Sales 48,485 42,239 6,246 15 % Commercial Jet Engines and Parts 101,737 57,689 44,048 76 % Corporate and Other 6,558 2,740 3,818 139 % Total $ 247,323 $ 177,077 $ 70,246 40 % Revenues from the air cargo segment increased by $16.1 million (22%) compared to the prior fiscal year, principally attributable to higher labor revenues, higher admin fees and higher FedEx pass through revenues due to increased fleet (72 aircraft in the prior year compared to 85 in the current year).
Following is a table detailing revenue by segment (after elimination of intercompany transactions), in thousands: Year Ended March 31, Change 2024 2023 Overnight Air Cargo $ 115,546 $ 90,543 $ 25,003 28 % Ground Equipment Sales 37,168 48,485 (11,317) (23) % Commercial Jet Engines and Parts 125,535 101,737 23,798 23 % Corporate and Other 8,585 6,558 2,027 31 % Total $ 286,834 $ 247,323 $ 39,511 16 % Revenues from the overnight air cargo segment increased by $25.0 million (28%) compared to the prior fiscal year, principally attributable to higher labor revenues, higher admin fees and higher FedEx pass through revenues due to increased fleet (85 aircraft in the prior year compared to 105 in the current fiscal year), and the WASI acquisition mentioned in Note 2 of the Notes to Consolidated Financial Statements of this report, contributed a full year's revenues of $7.5 million in the current fiscal year compared to $0.9 million in the prior fiscal year.
These estimates could vary significantly from actual amounts based upon future economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made. Valuation of Assets on Lease or Held for Lease - Engine assets on lease or held for lease are stated at cost, less accumulated depreciation.
Any slow moving, obsolete or damaged inventory and inventory with costs exceeding net realizable value are evaluated for write-downs. These estimates could vary significantly from actual amounts based upon future economic conditions, customer inventory levels, or competitive factors that were not foreseen or did not exist when the estimated write-downs were made. Accounting for Redeemable Non-Controlling Interest .
As mentioned in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on June 9, 2022, the Company, Jet Yard and MBT entered into Amendment No. 1 to Third Amended and Restated Credit Agreement (“Amendment”) and a related Overline Note (“Overline Note”) in the original principal amount of $5.0 million.
As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on June 23, 2023, the Company and MBT entered into amendments to the Credit Agreement with MBT and related promissory note.
Contrail executed a Collateral Assignment of two Aircraft engines in connection with the Amendment. 28 As mentioned in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on March 22, 2023, Contrail entered into the First Amendment to Second Amendment to Master Loan Agreement and Third Amendment to Master Loan Agreement ("the Amendment") with ONB.
As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on March 28, 2024, Contrail entered into Supplement #10 to the Master Loan Agreement with Old National Bank dated June 24, 2019 and Term Loan I.
Operating income for the air cargo segment increased by $1.3 million in the current fiscal year, due primarily to having higher segment revenues as described above, offset by higher pilot salaries and aircraft lease costs. The current fiscal year's ground equipment sales segment operating income was relatively flat compared to the prior fiscal year.
Operating income for the overnight air cargo segment increased by $2.7 million in the current fiscal year, due primarily to higher segment revenues as described above.
In these evaluations, the Company is required to make estimates regarding the net realizable value, which includes the consideration of sales patterns and expected future demand. Any slow moving, obsolete or damaged inventory and inventory with costs exceeding net realizable value are evaluated for write-downs.
Changes in economic and operating conditions could impact the assumptions and result in future losses to our inventory. The Company periodically evaluates the carrying value of inventory. In these evaluations, the Company is required to make estimates regarding the net realizable value, which includes the consideration of sales patterns and expected future demand.
The prior fiscal year's cash usage was primarily driven by cash used for the acquisitions of Wolfe Lake assets of $13.4 million, Shanwick's acquisition of $12.8 million, and investment in unconsolidated entities of $6.8 million.
Cash used in investing activities for fiscal year 2024 was $2.5 million compared to cash used in investing activities for the prior fiscal year of $6.2 million. The current fiscal year's cash usage was primarily driven by investment in unconsolidated entities of $4.6 million offset by distributions from unconsolidated entities of $3.2 million.
The Put/Call Option permits the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail commencing on July 18, 2021 ("Contrail RNCI"). As of the date of this filing, neither the Seller nor Air T has indicated an intent to exercise the put and call options.
(the "Seller") providing for the put and call options with regard to the 21% non-controlling interest retained by the Seller. The Seller is the founder of Contrail and its current Chief Executive Officer. The Put/Call Option permits the Seller to require Contrail to purchase all of the Seller’s equity membership interests in Contrail commencing on July 18, 2021 ("Contrail RNCI").
The remainder of the write-down was attributable to our evaluation of the carrying value of inventory as of March 31, 2023, where we compared its cost to its net realizable value and considered factors such as physical condition, sales patterns and expected future demand to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory. 32 Seasonality The ground equipment sales segment business has historically been seasonal, with the revenues and operating income typically being higher in the second and third fiscal quarters as commercial deicers are typically delivered prior to the winter season.
Seasonality The ground equipment sales segment business has historically been seasonal, with the revenues and operating income typically being higher in the second and third fiscal quarters as commercial deicers are typically delivered prior to the winter season.
Many of our businesses may continue to generate reduced operating cash flows and could operate at a loss from time to time beyond fiscal 2023. We expect that issues caused by the pandemic and other economic and business issue will continue to some extent.
We expect that issues caused by the pandemic and other economic and business issues will continue to some extent.
The primary factors contributing to the difference between the federal statutory rate of 21% and the Company’s effective tax rate for the fiscal year ended March 31, 2022 were the estimated benefit for the exclusion of income for the Company’s captive insurance company subsidiary under §831(b), the exclusion of the minority owned portion of pretax income of Contrail, state income tax expense, the exclusion of PPP loan forgiveness proceeds from taxable income, and changes in the valuation allowance.
The primary factors contributing to the difference between the federal statutory rate of 21% and the Company’s effective tax rate for the fiscal year ended March 31, 2024 were the foreign rate differentials and changes in valuation allowance. The net change in the valuation allowance was $2.0 million for the year ended March 31, 2024.
Significant increases in inflation rates could, however, have a material impact on future revenue and operating income. 31 Non-GAAP Financial Measures The Company uses adjusted earnings before taxes, interest, and depreciation and amortization ("Adjusted EBITDA"), a non-GAAP financial measure as defined by the SEC, to evaluate the Company's financial performance.
The fluidity of this situation precludes any prediction as to the ultimate adverse impact of these issues on economic and market conditions and our businesses in particular, and, as a result, presents material uncertainty and risk with respect to us and our results of operations. 34 Non-GAAP Financial Measures The Company uses adjusted earnings before taxes, interest, and depreciation and amortization ("Adjusted EBITDA"), a non-GAAP financial measure as defined by the SEC, to evaluate the Company's financial performance.
The Company also held $2.2 million in restricted investments held as statutory reserve of SAIC.
The Company also held $1.4 million in restricted investments held as statutory reserve of SAIC. As of March 31, 2024, the Company’s working capital amounted to $56.0 million, an increase of $3.8 million compared to March 31, 2023.
Each of our businesses implemented measures to attempt to limit the impact of COVID-19 and economic and business issues but we still experienced disruptions, and we experienced a reduction in demand for commercial aircraft, jet engines and parts compared to historical periods.
Although we have largely emerged from the COVID-19 pandemic, our results of operations in fiscal 2024 reflected some of the COVID-19 pandemic's lingering impact. Despite the aforementioned, we experienced improved demand for commercial aircraft, jet engines and parts compared to historical periods.
As mentioned in Note 2 and Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on January 31, 2022 the Company funded the WASI acquisition through (i) a promissory note to Worldwide Aviation, LLC, (ii) cash, and (iii) an additional secured loan from MBT.
As of March 31, 2023, the Company fulfilled its capital commitments to CAM. As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, the Revolver - MBT has no outstanding balance as of March 31, 2024 and matures on August 31, 2024.
As mentioned in Note 24 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, Contrail entered into an Operating Agreement with the Seller providing for the put and call options with regard to the 21% non-controlling interest retained by the Seller. The Seller is the founder of Contrail and its current Chief Executive Officer.
The loan was fully drawn at closing and the funds were used to prepay the principal balance on Contrail’s existing Main Street Loan (Term Loan G) by $10.0 million. As mentioned in Note 22 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, Contrail entered into an Operating Agreement with OCAS, Inc.
During the fiscal year ended March 31, 2022, the Company recorded $1.2 million of income tax expense at an effective tax rate of 8.7%.
The decrease in non-operating loss was primarily driven by a $1.0 million decrease in interest expense and a $0.4 million fluctuation in foreign currency exchange rates. During the year ended March 31, 2024, the Company recorded $0.7 million of income tax expense, which yielded an effective rate of -18.5%.
Operating loss of the corporate and other segment increased by $9.8 million in the current fiscal year, primarily driven by the $9.1 million offset to general and administrative expenses in the prior fiscal year as a result of the Employee Retention Credit ("ERC") that did not recur in the current fiscal year.
Operating loss of the corporate and other segment decreased by $2.5 million in the current fiscal year, primarily driven by higher corporate allocations to other segments related to executive salaries, bonuses and audit fees compared to the prior fiscal year and increased revenue as described above.
Removed
Our goal is to prudently and strategically diversify Air T’s earnings power and compound the growth in its free cash flow per share over time.
Added
Further, Corporate and other also comprises insignificant businesses and business interests. Each business segment has separate management teams and infrastructures that offer different products and services. We evaluate the performance of our business segments based on operating income (loss) and Adjusted EBITDA. Unconsolidated Investments The Company has an ownership interest in Contrail Asset Management, LLC (“CAM”).
Removed
Further, Corporate and other is also comprised of insignificant businesses that do not pertain to other reportable segments. Acquisitions On January 31, 2023, the Company acquired WASI, a Kansas corporation that services the aircraft industry across the United States and internationally through the operation of a repair station which is located in Springfield, Missouri at the Branson National Airport.
Added
The decrease was primarily driven by the lower number of deicing trucks sold in the current fiscal year compared to the prior fiscal year. At March 31, 2024, the ground equipment sales segment’s order backlog was $12.6 million compared to $13.6 million at March 31, 2023.
Removed
The acquisition was funded with cash and the loans described in Note 14 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. WASI is included within the Overnight air cargo segment. See Note 2 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report.
Added
The increase was primarily driven by Contrail's higher component part sales and higher pass-through revenue at Worthington in transactions that Worthington acted as the principal of the consignment agreements in the current fiscal year compared to the prior fiscal year.
Removed
The operations of these companies are not consolidated into the operations of the Company. See Note 10 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report. Each business segment has separate management teams and infrastructures that offer different products and services.
Added
In addition, Contrail also sold three engines at zero profit margin in the current year as they had previously written these assets down to the sales price in the prior year. Revenues from the corporate and other segment increased by $2.0 million (31%) compared to the prior fiscal year, principally attributed to $1.2 million of increased software subscriptions at Shanwick.
Removed
The increase is primarily attributable to the fact that all the companies within this segment had higher component sales as the aviation industry started to see more activity in the current year as COVID-19 related restrictions continued to loosen.
Added
The increase was primarily attributable to lower inventory write-down of $1.2 million in the current fiscal year compared to $7.3 million in the prior fiscal year, offset by a lower profit margin on component sales in the current year compared to the prior fiscal year.
Removed
Revenues from the corporate and other segment increased by $3.8 million (139%) compared to the prior fiscal year, principally attributable to having a full year of Shanwick's revenues in fiscal 2023 compared to having only 2 months of revenues in fiscal 2022.
Added
The decrease was primarily driven by $2.4 million higher corporate allocations to other segments related to executive salaries, bonuses and audit fees compared to the prior fiscal year.
Removed
The increase was driven by the $9.1 million offset to general and administrative expenses in the prior fiscal year as a result of the ERC credit that did not recur in the current fiscal year.
Added
In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance.
Removed
The change was primarily attributable to the $8.3 million gain on the SBA's forgiveness of the Company's PPP loan recognized in the prior fiscal year, in addition to the $3.0 million increase in contractual interest expense driven by an increase in Contrail's revolver usage in the current fiscal year.
Added
On June 24, 2024, we obtained a waiver letter from MBT ("Letter") that waives two outstanding events of default.
Removed
As of March 31, 2023, the Company’s working capital amounted to $52.3 million, a decrease of $45.1 million compared to March 31, 2022, primarily driven by an increase of $32.3 million in the current portion of long-term debt and a decrease of $8.2 million in the ERC receivable as refunds were received during fiscal 2023.
Added
This Letter provides a one-time waiver for defaults resulting from our inability to meet the debt service coverage ratio as of March 31, 2024 and our failure to submit unaudited financial statements within 45 days following the quarter ending on that date. Based on the Letter, we are no longer in default of the Company's Credit Agreement with MBT.
Removed
As of December 31, 2022, Contrail management forecasted that Contrail would be in violation of the debt service coverage ratio covenant contained in the ONB financing agreements during the twelve-month period subsequent to the filing date of the Form 10-Q for the quarterly period ended December 31, 2022, primarily because the first principal payment of its Term Note G (“Term Note G – ONB”) was to become due in November 2023.
Added
The principal purpose of the amended documents was to extend the maturity date of the revolving $25.0 million facility to November 24, 2025 or such earlier date on which the revolving note becomes due and payable pursuant to the supplement or the master loan agreement.
Removed
Non-compliance with a debt covenant that is not subsequently cured allows Old National Bank (“ONB”) the right to accelerate the maturity of the Contrail Credit Agreement and declare the entire amount of Contrail’s outstanding debt at the time of non-compliance immediately due and payable and exercise its remedies with respect to the collateral that secures the debt.
Added
As mentioned in Note 13 of Notes to Consolidated Financial Statements included under Part II, Item 8 of this report, on February 22, 2024 the Company, along with its wholly owned subsidiary AAM 24-1, LLC, a Minnesota limited liability company ("AAM 24-1"), entered into a Note Purchase Agreement with Honeywell Common Investment Fund and Honeywell International Inc.
Removed
In the event of acceleration of maturity of the Contrail Credit Agreement, the Company would not have sufficient cash on hand or available liquidity to repay the outstanding debt.
Added
Master Retirement Trust (collectively, "Honeywell") pursuant to which AAM 24-1 agreed to issue and sell 8.5% senior secured notes in the aggregate principal amount of $15.0 million for an aggregate purchase price of $14.9 million.
Removed
These payments will eliminate the need for Contrail to make any future scheduled principal payments on Term Note G until the final maturity of (on) November 24, 2025. At this time, Contrail management believes it is highly probable that it will have sufficient liquidity to make the $13.3 million prepayment in September 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk. The Company is subject to the risk of fluctuating interest rates in the normal course of business, primarily as a result of its variable rate borrowing. The Company has entered into variable to fixed rate interest-rate swap agreements to effectively reduce its exposure to interest rate fluctuations.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk. The Company is subject to the risk of fluctuating interest rates in the normal course of business, primarily as a result of its variable rate borrowing. The Company has entered into variable to fixed rate interest-rate swap agreements on certain obligations to effectively reduce its exposure to interest rate fluctuations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and the Notes to Consolidated Financial Statements for a description of our accounting policies and other information related to these financial instruments. 35
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and the Notes to Consolidated Financial Statements for a description of our accounting policies and other information related to these financial instruments. 39

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