AIR T, INC.

Air T, Inc. (AIRT) is a micro cap company providing air courier and air freight services on a contract basis to express
delivery services throughout the United States and the Caribbean. For FYE 03/31/2009, the company reported net
income of $4.4 million on $90.7 million sales. The recent closing price on this company was $11.14.

Company Profile (From Reuters):

“Air T, Inc., incorporated in 1980, operates wholly owned subsidiaries in three industry segments:
the overnight air cargo segment, the ground equipment sales segment and the ground support
services segment. The overnight air cargo segment comprises Mountain Air Cargo, Inc. (MAC)
and CSA Air, Inc. (CSA) subsidiaries, operates in the air express delivery services industry. The
ground equipment sales segment comprises its Global Ground Support, LLC (GGS) subsidiary,
manufactures and provides mobile deicers and other specialized equipment products to
passenger and cargo airlines, airports, the military and industrial customers. The ground support
services segment, comprises its Global Aviation Services, LLC (GAS) subsidiary, provides
ground support equipment maintenance and facilities maintenance services to domestic airlines
and aviation service providers. During the fiscal year ended March 31, 2009 (fiscal 2009), the
Company’s air cargo segment accounted for approximately 47% of the Company’s consolidated
revenues, the ground equipment sales segment accounted for 44% of consolidated revenues and
the ground support services segment accounted for 9% of consolidated revenues. The
Company’s air cargo services are provided primarily to one customer, FedEx Corporation
(FedEx).

Overnight Air Cargo Services

MAC and CSA provide small package overnight airfreight delivery services on a contract basis
throughout the eastern half of the United States and the Caribbean. MAC and CSA's revenues
are derived principally pursuant to dry-lease service contracts with FedEx. Under the dry-lease
service contracts, FedEx leases its aircraft to MAC and CSA. Under these contracts, all direct
costs related to the operation of the aircraft (including fuel, outside maintenance, landing fees and
pilot costs) are passed through to FedEx without markup.

As of March 31, 2009, MAC and CSA had an aggregate of 82 aircraft under agreements with
FedEx. Separate agreements cover the three types of aircraft operated by MAC and CSA for
FedEx-Cessna Caravan, ATR-42 and ATR-72. Pursuant to such agreements, FedEx determines
the schedule of routes to be flown by MAC and CSA. In fiscal 2009, MAC’s routes were primarily
in the southeastern United States and the Caribbean and CSA’s routes were primarily in the
upper Midwest region of the United States.

Aircraft Deice and Other Specialized Industrial Equipment Products

GGS manufactures, sells and services aircraft ground support and other specialized equipment
sold to domestic and international passenger and cargo airlines, ground handling companies, the
United States Air Force and Navy, airports and industrial customers. In the fiscal 2009, sales of
deicing equipment accounted for approximately 85% of GGS’s revenues. In the manufacture of
its ground service equipment, GGS assembles components acquired from third party suppliers.
The primary components are the chassis (which is similar to the chassis of a medium to heavy
truck), fluid storage tanks, a boom system, fluid delivery system and heating equipment. GGS
manufactures five basic models of mobile deicing equipment with capacities ranging from 700 to
2,800 gallons. GGS also provides fixed-pedestal-mounted deicers. GGS also manufactures four
models of scissor-lift equipment, for catering, cabin service and maintenance service of aircraft,
 and has developed a line of decontamination equipment and other special purpose mobile
equipment.

Ground Support Equipment and Airport Facility Maintenance Services

GAS operates the ground support equipment and airport facility maintenance services business
of the Company. GAS has maintenance services contracts with domestic airlines, under which
GAS provides ground support equipment and airport facility maintenance services at a number of
locations. Under its existing arrangement with a domestic airline, GAS is providing ground
support equipment and airport facility maintenance services at a number of locations. As of March
31, 2008, GAS supports airport maintenance facilities at 13 domestic airports and supports 15
additional airports through traveling technicians. A majority of GAS’s revenue was derived from
services under a contract with Delta Airlines in the fiscal 2009.”

Analysis of the Balance Sheet

The schedule presented below shows the year-end balance sheets for the years between March 31, 2005 and
March 31, 1999 and for the twelve month period ending June 30, 2009. Cash and short term investments comprise
approximately 14% of current assets; accounts receivable and inventory comprise approximately 82% of current
assets.

Fixed assets include all of the company’s production machinery and equipment. As of June 30, 2009, they made up
approximately 39% of the business’s non-current assets. As the company’s revenues have risen, fixed assets have
decreased.

Overall, the businesses total assets have increased by approximately 18% during the period march 31, 2005 to June
30, 2009 whereas sales have increased by approximately 25% during the same period. The increase in total assets
has been due primarily to increases in inventory.

As the business’s earnings steadily increased, so did its equity. The company doubled its booked equity during the
five year period under consideration.
 Balance Sheet

TTM FYE FYE FYE FYE FYE

06/60/09 03/31/09 03/31/08 03/31/07 03/31/06 03/31/05
Assets
Cash 2.50 6.90 0.10 2.90 2.70 3.50
ST Investments 1.00 1.00 2.00 0.90 0.80 0.80
Accounts Receivable 9.40 6.70 12.30 7.70 8.90 8.00
Inventory 10.70 9.80 8.00 8.10 5.70 6.10
Other Current Assets 0.80 0.90 1.10 1.10 0.90 0.60
Total Current Assets 24.40 25.30 23.40 20.60 19.00 19.00
Net Property, Plant & Equip. 1.60 1.60 1.80 2.30 3.20 3.20
LT Investments 0.30 0.30 0.20 0.20 0.20 0.30
Goodwill/Intangibles 0.00 0.00 0.00 0.00 0.00 0.00
Other LT Assets 2.20 2.20 1.90 1.50 1.50 1.60
Total Assets 28.50 29.30 27.30 24.60 23.90 24.10

Liabilities
Accounts Payable 3.20 3.00 5.60 5.30 5.40 6.10
Short Term Debt 0.00 0.50 0.10 0.10 0.20 0.20
Other Current Liabilities 3.10 4.10 2.60 2.40 2.40 2.20
Total Current Liabilities 6.30 7.60 8.30 7.90 8.00 8.50
LT Debt 0.00 0.00 0.50 0.70 0.80 1.10
Other LT Liabilities 0.00 0.00 0.80 0.60 0.70 1.50
Total Liabilities 6.30 7.60 9.60 9.20 9.40 11.00
Preferred Stock 0.00 0.00 0.00 0.00 0.00 0.00
Common Stock Equity 22.20 21.80 17.70 15.40 14.50 13.10
Total Liabilities & Equity 28.50 29.40 27.30 24.60 23.90 24.10

Analysis of the Income Statements

As part of my analysis of the company, I have analyzed the business’s income statements for the years ended
March 31, 2005 through March 31, 2009 and the twelve month period ending June 30, 2009.

Revenues have increased steadily from $70.0 million to $90.7 million during the five year period under
consideration. The twelve month period ending June 2009 shows a slight drop in sales. During the five year period,
the gross profit percentage has remained remarkably stable, ranging from 16.9% to 21.0%. Even during the period
ending June 2009, gross margins held at 20.1%. Operating expenses have been approximately 89.5% of revenues
during the five year period.

Because the company has had basically the same cost structure throughout the five-year period, as revenues have
increased, so has pre-tax operating income. For the year ending March 31, 2005, pre-tax operating income was
$3.4 million on $70.0 million sales. We compare this with the year ending March 31, 2009, pre-tax operating
income was $7.0 million on $90.7 million sales.
 Income Statement

TTM FYE FYE FYE FYE FYE

06/60/09 03/31/09 03/31/08 03/31/07 03/31/06 03/31/05
Sales 87.20 90.70 78.40 67.30 79.50 70.00
Cost of Goods Sold 69.70 72.30 62.70 53.20 66.10 57.50
Gross Income 17.50 18.40 15.70 14.10 13.40 12.50
Depreciation & Amortization 0.40 0.40 0.50 0.70 0.70 0.60
Research/Development n/a n/a n/a n/a n/a n/a
Interest Expense n/a n/a n/a n/a n/a n/a
Unusual Expenses/(Income) 0.00 0.00 0.00 0.00 0.00 0.00
Total Operating Expenses 80.90 84.00 73.30 63.40 76.40 66.50
Operating Income 6.30 6.70 5.10 3.90 3.10 3.50
Interest Expense - Non-Op. 0.00 0.10 0.20 0.20 0.20 0.10
Other Expenses/(Income) -0.50 -0.40 -0.30 -0.20 -0.20 0.00
Pretax Income 6.70 7.00 5.20 3.90 3.10 3.40
Income Taxes 2.50 2.60 1.80 1.40 1.00 1.30
Income After Taxes 4.20 4.40 3.40 2.50 2.10 2.10
Adjustments to Income 0.00 0.00 0.00 0.00 0.00 0.00
Income for Primary EPS 4.20 4.40 3.40 2.50 2.10 2.10
Nonrecurring Items 0.00 0.00 0.00 0.00 0.00 0.00
Net Income 4.10 4.40 3.40 2.50 2.10 2.10

Industry Comparative Analysis

The following schedule presents a comparative ratio analysis of AIR T, Inc. and industry medians. Four categories of
ratios (profitability, liquidity, debt management and asset management) have been used to compare the operating
results of the subject company with that of the industry. The subject company has been compared to the industry
median ratio for the air courier industry.
The liquidity ratios give an indication of the company’s ability to meet its current obligations with the use of
current assets. As indicated by the comparative ratio analysis, AIRT’s liquidity ratios are better than those of the
industry. This indicates that the company has a better ability than the industry to meet its current obligations.

The debt management ratios indicate the extent to which the business’s assets are funded by debt. As shown in
the schedule, the subject company has invested significantly less of its net worth in fixed assets as the industry and
has no long term debt.

The profitability ratios measure management’s effectiveness in overseeing the business’s resources. Compared to
the industry median, the subject company is more effective than the industry in producing earnings from its assets
and about as effective as the industry in producing revenues.
 Industry Comparative Analysis

Industry Industry
PROFITABILITY Company Median LIQUIDITY Company Median
Gross Profit 20.10 25.50 Quick ratio 2.20 1.20
Operating Margin 7.20 7.20 Current Ratio 3.90 1.30
Net Profit Margin 4.70 0.50 Payout Ratio 19.20 19.20
Return on Equity 19.40 10.50 Times Interest Earned n/a 4.50
Return on Assets 14.10 0.40

Industry Industry
DEBT MANAGEMENT Company Median ASSET MANAGEMENT Company Median
Total Liab. / Total Assets 22.10 70.90 Receivables Turnover 9.70 9.30
LT Debt / Equity 0.00 62.40 Asset Turnover 3.00 1.40
LT Debt / Capital 0.00 30.50 Inventory Turnover 6.70 42.90

Value Conclusion

Based on my analysis of the common stock of AIR T, Inc. the fair market value of the common stock is $22.00.

Disclosure: Author is long AIRT.