-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I+2zG8dnrwCTXM6X8d3tgT0u96uBVg+KCSRCBTvf4e4lHC5uKd1tn8rdY5GBWpN7 3gGogEbQlPJtWnRXfR1zgw== 0000950134-97-003901.txt : 19970515 0000950134-97-003901.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950134-97-003901 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KITTY HAWK INC CENTRAL INDEX KEY: 0000932110 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 752564006 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25202 FILM NUMBER: 97605201 BUSINESS ADDRESS: STREET 1: 1515 WEST 20TH ST STREET 2: SECOND FLOOR CITY: DALLAS/FORT WORTH IN STATE: TX ZIP: 75240 BUSINESS PHONE: 9724562200 MAIL ADDRESS: STREET 1: P O BOX 612787 CITY: DALLAS/FORT WORTH IN STATE: TX ZIP: 75261 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-25202 KITTY HAWK, INC. (Exact name of registrant as specified in its charter) Delaware 75-2564006 (State of Incorporation) (I.R.S. Employer Identification No.) 1515 West 20th Street P.O. Box 612787 Dallas/Fort Worth International Airport, Texas 75261 (972) 456-2200 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Number of shares outstanding of the registrant's common stock, $0.01 par value, as of May 14, 1997: 10,451,807. 2 KITTY HAWK, INC. AND SUBSIDIARIES
Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets March 31, 1997 and December 31, 1996 (Audited) .......... 3 Condensed Consolidated Statements of Income Three months ended March 31, 1997 and 1996 .............. 4 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1997 and 1996 .............. 5 Condensed Consolidated Statements of Stockholders' Equity Three months ended March 31, 1997 ....................... 6 Notes to Condensed Consolidated Financial Statements ........ 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 9 - 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings ....................................... 15 Item 2. Changes in Securities ................................... 15 Item 3. Defaults upon Senior Securities ......................... 15 Item 4. Submission of Matters to a Vote of Security Holders ..... 15 Item 5. Other Information ....................................... 15 Item 6. Reports on Form 8-K and Exhibits ........................ 15 - 16 Signatures ....................................................... 17
2 3 PART I. FINANCIAL INFORMATION KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, ASSETS 1997 1996 ------------- ------------- (unaudited) Current assets Cash and cash equivalents ................................... $ 11,454,925 $ 27,320,402 Trade accounts receivable ................................... 19,590,973 37,828,018 Deferred income taxes ....................................... 107,564 107,564 Inventory and aircraft supplies ............................. 3,551,788 2,789,982 Prepaid expenses and other assets ........................... 1,359,028 1,143,989 Deposits on aircraft ........................................ 4,230,410 5,438,628 ------------- ------------- Total current assets .................................... 40,294,688 74,628,583 ------------- ------------- Property and equipment Aircraft .................................................... 65,415,329 53,140,853 Aircraft work-in-progress ................................... 8,772,069 6,732,878 Machinery and equipment ..................................... 2,953,353 2,680,692 Leasehold improvements ...................................... 2,394,141 778,879 Building .................................................... 1,770,000 -- Furniture and fixtures ...................................... 166,056 166,057 Transportation equipment .................................... 294,451 289,499 ------------- ------------- 81,765,399 63,788,858 Less: accumulated depreciation and amortization ............ (17,629,464) (15,390,015) ------------- ------------- Net property and equipment .............................. 64,135,935 48,398,843 ------------- ------------- Total assets ..................................................... $ 104,430,623 $ 123,027,426 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable ............................................ $ 5,871,189 $ 8,853,292 Accrued expenses ............................................ 6,064,324 23,668,609 Income taxes payable ........................................ 648,975 2,526,737 Accrued maintenance reserves ................................ 2,404,417 2,373,157 Current maturities of long-term debt ........................ 3,824,700 3,687,888 ------------- ------------- Total current liabilities ............................... 18,813,605 41,109,683 Long-term debt ................................................... 23,382,539 21,080,452 Deferred income taxes ............................................ 2,544,900 2,544,900 Commitments and contingencies Stockholders' equity Preferred stock, $1 par value: Authorized shares --1,000,000, none issued ................................. -- -- Common stock, $.01 par value: Authorized shares --25,000,000; issued and outstanding --10,669,517 ............................................. 106,695 106,695 Additional paid-in capital .................................. 33,951,947 33,968,700 Retained earnings ........................................... 27,707,239 26,293,298 Less common stock in treasury, 217,710 shares at March 31, 1997 and December 31, 1996 ... (2,076,302) (2,076,302) ------------- ------------- Total stockholders' equity .............................. 59,689,579 58,292,391 ------------- ------------- Total liabilities and stockholders' equity ....................... $ 104,430,623 $ 123,027,426 ============= =============
See accompanying notes. 3 4 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
THREE MONTHS ENDED MARCH 31, 1997 1996 ------------ ------------ Revenues: Air freight carrier ......................... $ 14,887,806 $ 10,058,857 Air logistics ............................... 13,214,661 10,195,016 ------------ ------------ Total revenues .......................... 28,102,467 20,253,873 ------------ ------------ Costs of revenues: Air freight carrier ......................... 10,872,952 8,255,552 Air logistics ............................... 11,874,751 9,155,169 ------------ ------------ Total costs of revenues ................. 22,747,703 17,410,721 ------------ ------------ Gross profit ..................................... 5,354,764 2,843,152 General and administrative expenses .............. 2,512,563 2,271,406 Non-qualified employee profit sharing expense .... 271,186 (90,972) ------------ ------------ Operating income ................................. 2,571,015 662,718 Other income (expense): Interest expense ............................ (481,325) (519,745) Other, net .................................. 266,878 102,147 ------------ ------------ Income before income taxes ....................... 2,356,568 245,120 Income taxes ..................................... 942,627 95,637 ------------ ------------ Net income ....................................... $ 1,413,941 $ 149,483 ============ ============ Net income per share ............................. $ 0.14 $ 0.02 ============ ============ Weighted average common and common equivalent shares outstanding ............... 10,451,807 7,967,710 ============ ============
See accompanying notes. 4 5 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
THREE MONTHS ENDED MARCH 31, 1997 1996 ------------ ------------ Operating activities: Net income .............................................. $ 1,413,941 $ 149,483 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ......................... 2,239,449 1,515,157 Changes in operating assets and liabilities: Trade accounts receivable ........................... 18,237,045 31,030,045 Inventory and aircraft supplies ..................... (761,806) 290,949 Prepaid expenses and other .......................... (215,039) 6,009,163 Deposits on aircraft ................................ 1,208,218 -- Accounts payable and accrued expenses ............... (20,586,388) (25,942,774) Accrued maintenance reserves ........................ 31,260 69,121 Income taxes payable ................................ (1,877,762) 124,139 ------------ ------------ Net cash provided by (used in) operating activities ................................ (311,082) 13,245,283 Investing activities: Capital expenditures .................................... (17,976,541) (13,161,918) ------------ ------------ Financing activities: Proceeds from issuance of long-term debt ................ 3,349,578 5,500,000 Repayments of long-term debt ............................ (910,679) (1,026,911) Additional costs relating to initial public offering .... (16,753) -- ------------ ------------ Net cash provided by financing activities .............................................. 2,422,146 4,473,089 ------------ ------------ Net increase (decrease) in cash and cash equivalents ............................................. (15,865,477) 4,556,454 Cash and cash equivalents at beginning of period .................................................. 27,320,402 3,355,293 ------------ ------------ Cash and cash equivalents at end of period ................. $ 11,454,925 $ 7,911,747 ============ ============
See accompanying notes. 5 6 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL NUMBER OF COMMON PAID-IN RETAINED TREASURY SHARES STOCK CAPITAL EARNINGS STOCK TOTAL ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1996 ........... 10,669,517 $ 106,695 $ 33,968,700 $ 26,293,298 $ (2,076,302) $ 58,292,391 Additional costs relating to initial ... -- -- (16,753) -- -- (16,753) public offering Net income ............................. -- -- -- 1,413,941 -- 1,413,941 ------------ ------------ ------------ ------------ ------------ ------------ Balance at March 31, 1997 .............. 10,669,517 $ 106,695 $ 33,951,947 $ 27,707,239 $ (2,076,302) $ 59,689,579 ============ ============ ============ ============ ============ ============
See accompanying notes. 6 7 KITTY HAWK, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements, which should be read in conjunction with the consolidated financial statements and footnotes included in the Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 7, 1997, are unaudited (except for the December 31, 1996 condensed consolidated balance sheet which was derived from the Company's audited consolidated balance sheet included in the aforementioned Form 10-K/A), but have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. Net income per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period. The effect of options to purchase 390,707 and 153,567 shares of the Company's common stock at $0.01 granted to certain executives in December 1995 and June 1996, respectively, have been included in the calculation of weighted average common and common equivalent shares for the three month period ended March 31, 1996. 2. REGISTRATION OF STOCK OFFERING In October 1996, the Company sold in an initial public offering 2,700,000 shares of Common Stock. 3. LITIGATION The Company filed suit against Express One International, Inc. ("Express One") in July 1992 in Dallas County, Texas, claiming that Express One breached an aircraft charter agreement and seeking actual damages of approximately $60,000. Express One counterclaimed, asserting that the Company wrongfully repudiated the lease agreement and seeking damages of $356,718 for services performed, $1,140,000 for additional fees it would have received under the contract, punitive damages and its attorney's fees and costs. In February 1995, a jury awarded the Company $25,000 in damages plus its attorneys' fees and denied Express One's counterclaims. The court entered judgment in favor of the Company for $25,000 in damages, for $148,115 in attorneys fees through trial and for additional attorneys fees if Express One appeals. Before expiration of the time for appeal, Express One filed a petition under Chapter 11 of the U.S. Bankruptcy Code. There is a dispute about whether Express One has preserved a right to appeal and whether the judgment has become final. Therefore, the judgment awarded to the Company has not been recorded in the financial statements. The Company does not expect the outcome to have a material adverse effect upon the Company's financial condition or results of operations. The U.S. Postal Service ("USPS") selected the Company's air freight carrier in September 1992 as the successful bidder on a contract for a multi-city network of air transportation services supporting the USPS Express Mail system. Two unsuccessful bidders sued the USPS to enjoin the award. The Company intervened. This litigation (the "ANET Litigation") was settled in April 1993 by agreements under which the USPS 7 8 terminated the Company's contract for convenience and awarded the contract to the incumbent contractor, Emery Worldwide Airlines, Inc. ("Emery"). In March 1995, the Company was served with a complaint in a qui tam lawsuit filed on behalf of the U.S. Government by a third-party plaintiff seeking to share a recovery under the Federal False Claims Act (the "Act"). The suit, filed in May 1994, was filed under seal in accordance with the Act, to enable the U.S. Government to review the claim before its disclosure to the defendants. The U.S. Government declined to pursue the claim, but the third-party plaintiff chose to continue. The suit claimed that the Company and another defendant fraudulently failed to disclose to the USPS, both in the Company's successful bid and in the settlement of the ANET litigation, that certain of the aircraft the Company proposed to purchase and use to perform the contract were aging aircraft with high use, and claimed that the Company and Emery similarly fraudulently conspired in connection with the settlement of the ANET litigation. The suit sought to recover treble the $10 million settlement payment made by the USPS in settling the ANET litigation, plus the third party plaintiff's costs and fees. In May 1996, the court dismissed the suit and awarded the Company its attorneys' fees and costs. The plaintiff has asked the court to reconsider its ruling. The Company does not expect the outcome of this matter to have a material adverse effect upon the Company's financial condition or results of operations. 4. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. Because of the shares considered outstanding related to SAB No. 83, the Company has not yet determined what the impact of statement 128 will be on the calculation of fully diluted earnings per share. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Revenues. The Company's revenues are derived from two related businesses: (i) air freight carrier and (ii) air logistics. Air freight carrier revenues are derived substantially from aircraft, crew, maintenance, and insurance ("ACMI") contract and on-demand charters flown with Company aircraft. Air logistics revenues are derived substantially from on-demand air freight charters arranged by Kitty Hawk for its customers utilizing the flight services of third-party air freight carriers. For those on-demand charters that are arranged by the Company and flown by its air freight carrier, charges to the customer for air transportation are accounted for as air freight carrier revenues and charges for ground handling and transportation are accounted for as air logistics revenues. General Motors Corporation ("GM"), the USPS and Burlington Air Express, Inc. have each accounted for more than 10% of the Company's revenues for the last fiscal year. Costs of Revenues. The principal components of the costs of revenues attributable to the air freight carrier consist of the costs for the maintenance and operation of aircraft, including the salaries of pilots and maintenance personnel, charges for fuel, insurance and maintenance, and depreciation of engines and airframes. Generally, charges for fuel are only applicable for the on-demand charters flown by the air freight carrier because fuel for the ACMI contract charters is generally provided by the customer or billed to them on a direct pass-through basis. The principal components of the costs of revenues attributable to air logistics consist of sub-charter costs paid to third-party air freight carriers and costs paid for ground handling and transportation. With respect to on-demand charters that are flown by the air freight carrier, all related air transportation expenses are allocated to the air freight carrier and all related cargo ground handling and transportation expenses are allocated to air logistics. 9 10 RESULTS OF OPERATIONS The following table sets forth, on a comparative basis for the periods indicated, the components of the Company's gross profit (in thousands) and the gross profit margin by revenue type:
Three months ended March 31, 1997 1996 ----------------- ----------------- Air freight carrier: Revenues ............ $14,888 100.0% $10,059 100.0% Costs of revenues ... 10,873 73.0 8,256 82.1 ======= ======= ======= ===== Gross profit ........ $ 4,015 27.0% $ 1,803 17.9% ======= ======= ======= ===== Air logistics: Revenues ............ $13,215 100.0% $10,195 100.0% Costs of revenues ... 11,875 89.9 9,155 89.8 ======= ======= ======= ===== Gross profit ........ $ 1,340 10.1% $ 1,040 10.2% ======= ======= ======= =====
The following table presents, for the periods indicated, condensed consolidated income statement data expressed as a percentage of total revenues:
Three months ended March 31, 1997 1996 ----- ----- Revenues: Air freight carrier ............................. 53.0% 49.7% Air logistics ................................... 47.0 50.3 ----- ----- Total revenues .............................. 100.0 100.0 Total costs of revenues .............................. 80.9 86.0 ----- ----- Gross profit ......................................... 19.1 14.0 General and administrative expenses ............. 8.9 11.2 Non-qualified employee profit sharing expense ... 1.0 (0.5) ----- ----- Operating income ..................................... 9.2 3.3 Interest expense ................................ (1.7) (2.6) Other income .................................... 0.9 0.5 ----- ----- Income before income taxes ........................... 8.4 1.2 Income taxes ......................................... 3.4 .5 ===== ===== Net income ........................................... 5.0% .7% ===== =====
10 11 QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996 Revenues -- Air Freight Carrier. Air freight carrier on-demand and ACMI contract charter revenues were $2.8 million and $11.5 million, or 18.9% and 77.6%, respectively, of total air freight carrier revenues for the quarter ended March 31, 1997, as compared to $3.0 million and $6.6 million, or 30.0% and 66.0%, respectively, for the quarter ended March 31, 1996. ACMI contract charter revenues for the quarter ended March 31, 1997 increased 73.9% over quarter ended March 31, 1996, primarily as the result of additional Boeing 727-200 ACMI contract charters. Revenues from on-demand charters flown by Company aircraft for the quarter ended March 31, 1997 decreased 6.8% from the comparable prior year period due to aircraft being shifted from on-demand to ACMI contract charters. For the quarter ended March 31, 1997, as compared to the quarter ended March 31, 1996, prices for the Company's on-demand and ACMI contract charters remained relatively constant. Revenues -- Air Logistics. Air logistics revenues increased $3.0 million, or 29.6%, to $13.2 million in the quarter ended March 31, 1997, from $10.2 million in the quarter ended March 31, 1996. This increase was primarily due to increased demand for on-demand charters generally and specifically for charters which require larger aircraft generating greater revenues. For the quarter ended March 31, 1997, as compared to the quarter ended March 31, 1996, prices for the Company's air logistics services remained relatively constant. Costs of Revenues -- Air Freight Carrier. Air freight carrier costs of revenues increased $2.6 million or 31.7% to $10.9 million in the quarter ended March 31, 1997, from $8.3 million in the quarter ended March 31, 1996, reflecting increased costs associated with increased fleet size and ACMI contract charters. The gross profit margin from the air freight carrier increased to 27.0% in the quarter ended March 31, 1997, from 17.9% in the quarter ended March 31, 1996. The increase was primarily the result of reduced maintenance costs and air freight carrier operating costs decreasing as a percentage of air freight carrier revenues. As reported to the FAA, overall aircraft utilization increased to 5,832 flight hours for the quarter ended March 31, 1997, from 4,275 in the quarter ended March 31, 1996, a 36.4% increase. This increase was primarily due to increased hours flown for ACMI contract charters. Costs of Revenues -- Air Logistics. Air logistics costs of revenues increased $2.7 million, or 29.7%, to $11.9 million in the quarter ended March 31, 1997, from $9.2 million in the quarter ended March 31, 1996, reflecting an increased volume of business. The gross profit margin from air logistics remained relatively constant at 10.1% in the quarter ended March 31, 1997, as compared to the quarter ended March 31, 1996. General and Administrative Expenses. General and administrative expenses increased $241,000, or 10.6%, to $2.5 million in the quarter ended March 31, 1997, from 2.3 million in the quarter ended March 31, 1996. This increase was primarily due to an increase in support functions and administrative costs associated with the growth in the aircraft fleet and the increased volume of business of the air freight carrier in the quarter ended March 31, 1997. As a percentage of total revenues, general and administrative expenses decreased to 8.9% in the quarter ended March 31, 1997, from 11.2% in the quarter ended March 31, 1996. Non-qualified Employee Profit Sharing Expense. Employee profit sharing expense increased $362,000, to $271,000 in the quarter ended March 31, 1997, from ($91,000) in the quarter ended March 31, 1996, reflecting the increase of net income before taxes in the quarter ended March 31, 1997. Operating Income. As a result of the above, operating income increased $1.9 million, or 288%, to $2.6 million in the quarter ended March 31, 1997, from $663,000 in the quarter ended March 31, 1996. Operating income margin increased to 9.2% in the quarter ended March 31, 1997, from 3.3% in the quarter ended March 31, 1996. 11 12 Interest Expense. Interest expense decreased to $481,000 for the quarter ended March 31, 1997, from $520,000 for the quarter ended March 31, 1996, a 7.4% decrease. The decrease was primarily the result of the reduction of outstanding long-term debt balances used to finance aircraft acquisitions. Other Income (Expense). Other income increased to $267,000 in the quarter ended March 31, 1997, from $102,000 in the comparable prior year period. The increase was primarily due to increased interest income in the quarter ended March 31, 1997, from the investment of proceeds from the Company's initial public offering. Income Taxes. Income taxes as a percentage of income before income taxes increased to 40% for the quarter ended March 31, 1997, from 39% for the comparable prior year period. The increase was primarily due to increased state income taxes. Net Income. As a result of the above, net income increased to $1.4 million in the quarter ended March 31, 1997, compared to $149,000 in the quarter ended March 31, 1996. Net income as a percentage of total revenues increased to 5.0% in the quarter ended March 31, 1997, from 0.7% in the comparable prior year period. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily for the acquisition and modification of aircraft and working capital. In addition, the Company has, and will continue to have, capital requirements for the requisite periodic and major overhaul maintenance checks for its air freight carrier fleet. The Company's funding of its capital requirements historically has been primarily from a combination of internally generated funds and bank borrowings. In addition, the Company has leased aircraft and entered into a sale leaseback for acquisition and may do so in the future. Cash used by operating activities was $311,000 and cash provided by operating activities was $13.2 million in the quarters ended March 31, 1997 and 1996, respectively. At the end of the quarters ended March 31, 1997 and 1996, the Company had working capital of $21.5 million and $4.9 million, respectively. On August 14, 1996, Kitty Hawk entered into a Credit Agreement with Wells Fargo Bank (Texas), National Association ("WFB"), and Bank One, Texas, N.A. ("BOT") for a $15 million Revolving Credit Loans Facility (the "Revolving Credit Facility"), an approximately $12.7 million Term Loans A Facility (the "Term Loans A"), an approximately $11.2 million Term Loans B Facility (the "Term Loans B"), and a $10 million Term Loans C Facility (the "Term Loans C") (collectively, the "Commitments"). As of May 14, 1997, approximately $3.5 million was outstanding under the Revolving Credit Facility, approximately $11.2 million was outstanding under Term Loans A, approximately $10.3 million was outstanding under Term Loans B, and $3.2 was outstanding under the Term Loans C. Borrowings under these Commitments bear interest at WFB's prime rate or, at Kitty Hawk's option, a Eurodollar rate plus 1.5% to 2.0% based upon a debt-to-cash flow ratio of Kitty Hawk. Under the Credit Agreement, $10 million of proceeds of the Revolving Credit Facility are restricted to use from time to time for interim financing of up to $6.5 million per aircraft for aircraft acquisitions by the Company; the remaining $5 million of the Revolving Credit Facility may be used for general corporate purposes, including interim financing for acquired aircraft that exceeds the limits that apply to the restricted portion. Term Loans C must be used to finance the purchase of one DC9-15F hushkit and up to seven major maintenance checks for jet aircraft. The Revolving Credit Facility expires on December 31, 1998. Any advance under the portion of the Revolving Credit Facility that is restricted to interim financing for aircraft acquisition must repaid in full within 150 days of first advance for the acquired aircraft. All advances under the Commitment for Term Loans C must be made by April 29, 1998. The Term Loans A mature on March 31, 2002 and the Term Loans B and C mature on March 31, 2003. The Commitments are cross-collateralized and are secured by certain aircraft owned by the Company, all aircraft acquired with advances under the restricted portion of the Revolving Credit Facility while those advances are outstanding, certain leases of aircraft and engines, accounts, chattel paper, general intangibles and other personal property. 12 13 In addition, the Company has a loan with 1st Source Bank. As of May 14, 1997, the outstanding balance of this loan was approximately $900,000. The loan bears interest at 9.75%, is secured by a DC9-15F and matures in May 2000. The 1st Source loan contains certain aircraft maintenance covenants and provides that a change in the Company's business is an event of default upon which 1st Source may declare all or any part of the remaining unpaid principal due and payable. In November 1996, in connection with the Company's recent acquisition of a one-third undivided interest in four Falcon 20 jet aircraft, the Company and the two other co-owners of such aircraft entered into a five year, $4.3 million term loan. The loan bears interest at a floating prime rate, is secured by the four Falcon 20 jet aircraft and requires monthly payments of principal and interest. The Company's liability under such loan is limited to $2.0 million. Capital expenditures were $18.0 million and $13.2 million for the quarters ended March 31, 1997 and 1996, respectively. Capital expenditures for the quarter ended March 31, 1997 were primarily for the purchase of: (i) two Boeing 727-200 aircraft, (ii) cargo and noise abatement modifications for one Boeing 727-200 aircraft, (iii) noise abatement equipment with respect to one DC9-15F aircraft, (iv) two used JT8D-7 jet engines, (v) leasehold improvements to Boeing 727-200 aircraft, (vi) the lease of its 40,000 square foot headquarters facility, and (vii) major maintenance checks. Capital expenditures for the quarter ended March 31, 1996 were primarily for the purchase of: (i) two Boeing 727-200 aircraft and (ii) cargo and noise abatement modifications for two Boeing 727-200 aircraft. In October 1996, the Company sold in an initial public offering 2,700,000 shares of Common Stock, raising net proceeds of approximately $29.4 million to purchase and modify to cargo configuration five Boeing 727-200 aircraft. As of May 14, 1997, the Company has purchased (i) one Boeing 727-200 freighter aircraft for $4.4 million, (ii) one Boeing 727-200 aircraft for $2.3 million which is being modified to cargo configuration for an additional cost of approximately $3.1 million (including approximately $1.8 million for noise abatement equipment), (iii) one Boeing 727-200 aircraft for $3.5 million which is being modified to cargo configuration for an additional cost of approximately $5.0 million (including noise abatement equipment for approximately $2.5 million), and (iv) one Boeing 727-200 aircraft for $3.5 million which is expected to be placed into revenue service as a leased passenger aircraft until its next major maintenance check (approximately 3,000 flight hours) at which time the Company currently anticipates modifying the aircraft to cargo configuration for an additional cost of approximately $5.0 million (including $2.5 million for noise abatement equipment). As of May 14, 1997, the Company has used approximately $20.9 million of the net proceeds of the initial public offering to fund these expenses. In December 1996, the Company amended its agreement with the supplier of noise abatement equipment to increase the number of hushkits it has firmly committed to purchase and to establish fixed prices. In connection with this new agreement, the Company paid the vendor an additional $350,000 in deposits on seven (7) future, firm orders valued between $13 and 17.5 million, depending on type selected. In fiscal year 1997, the Company anticipates an aggregate capital expenditure of $4.3 million for noise abatement modifications, which the Company believes represents the total capital expenditures that would currently be necessary to comply with the requirements of existing applicable environmental regulations for such fiscal year. In fiscal year 1998, the Company anticipates an aggregate capital expenditure ranging from $9.0 million to $11.0 million for noise abatement modifications to aircraft currently owned or proposed to be purchased. In the event the Company acquires more aircraft than currently proposed, the Company's anticipated aggregate capital expenditures for noise abatement modifications in fiscal year 1998 could materially increase. The Company's revenue fleet is comprised of 24 owned and 3 leased aircraft, which includes 15 Boeing 727-200 aircraft manufactured between 1969 and 1978, 5 Douglas DC9-15F aircraft manufactured during 1967 and 1968, and 7 turbo-prop Convairs manufactured between 1948 and 1957. Of the Company's revenue fleet of 27 aircraft, the Company operates 24 aircraft in active revenue service, is in the process of converting two Boeing 727-200 aircraft to cargo configuration, and anticipates converting an additional Boeing 727-200 aircraft to cargo configuration in 1998. These aircraft do not include the Company's undivided one-third interest in four Falcon 20 jet aircraft leased to a third-party operator. Manufacturers' Service Bulletins ("Service Bulletins") and FAA Airworthiness Directives ("Directives") issued under the FAA's "Aging Aircraft" program or issued on an ad hoc basis cause certain of these aircraft to be subject to extensive aircraft examinations and require certain of these aircraft to undergo structural inspections and modifications to address problems of corrosion and structural fatigue at specified times. It is possible that additional Service Bulletins or Directives applicable to the types of aircraft included in the Company's fleet could be issued in the 13 14 future. The cost of compliance with such Directives and Service Bulletins cannot currently be estimated, but could be substantial. The Company has been advised by the FAA that it is reexamining the supplemental type certificates previously issued to certain companies approving main deck cargo door and interior modifications to Boeing 727-200 passenger category aircraft of the type operated by the Company. The Company's Boeing 727-200 aircraft all have been modified in reliance upon the FAA's prior approval of these cargo-related modifications. As a result of the reexamination, the FAA will likely require structural changes to the previously installed modifications which may be costly to perform and require significant aircraft down time. Before such changes can be completed, the FAA will likely impose operating limitations on the Boeing 727-200 aircraft which will reduce the effective payload of the Company's Boeing 727-200 aircraft which could have a material adverse effect on Kitty Hawk and its operations. The Company historically has followed, and currently intends to follow, a policy of retiring Convairs at the time of their next scheduled major overhaul maintenance checks rather than expending the amounts necessary for such checks. Two Convairs have been retired since December 31, 1996. The Company believes that the net proceeds from its initial public offering, together with available funds, bank borrowings, and cash flows expected to be generated by operations, will be sufficient to meet its anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Thereafter, if cash generated by operations is insufficient to satisfy the Company's liquidity requirements, the Company may sell additional equity or debt securities or obtain additional credit facilities. 14 15 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Information pertaining to this item is incorporated from Part I. Financial Information (Note 3 - Litigation). ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Recently, the Company became aware of strikes by auto workers at certain GM assembly plants. While the Company is unable currently to predict the effects of such strikes on the Company, they could reduce production at or shut down certain GM assembly plants for unpredictable periods of time, which could have a material adverse effect on the Company's revenues and profitability. ITEM 6. REPORTS ON FORM 8-K AND EXHIBITS (a) The Company did not file any reports on Form 8-K during the three months ended March 31, 1997. (b) Exhibits: The following exhibits are filed herewith or are incorporated by reference from previous filings with the Securities and Exchange Commission. 15 16 INDEX TO EXHIBITS
Exhibit No. Description ----------- ----------- 3.1 -- Certificate of Incorporation of the Company.(2) 3.2 -- Bylaws of the Company.(2) 3.3 -- Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 3.4 -- Amendment No. 1 to the Bylaws of the Company.(2) 4.1 -- Specimen Common Stock Certificate.(3) 11.1 -- Statement of Computation of Net Income per Share.(1) 21.1 -- Subsidiaries of the Registrant.(3) 27.1 -- Financial Data Schedule.(1)
- ----------- (1) Filed herewith. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of December 1994, and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 333-8307) dated as of October 1996, and incorporated herein by reference. 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 14th day of May, 1997. KITTY HAWK, INC. By: /s/ RICHARD R. WADSWORTH -------------------------------------- Richard R. Wadsworth Senior Vice President -- Finance, Chief Financial Officer, and Secretary 17 18 INDEX TO EXHIBITS
Exhibit No. Description ----------- ----------- 3.1 -- Certificate of Incorporation of the Company.(2) 3.2 -- Bylaws of the Company.(2) 3.3 -- Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 3.4 -- Amendment No. 1 to the Bylaws of the Company.(2) 4.1 -- Specimen Common Stock Certificate.(3) 11.1 -- Statement of Computation of Net Income per Share.(1) 21.1 -- Subsidiaries of the Registrant.(3) 27.1 -- Financial Data Schedule.(1)
- ----------- (1) Filed herewith. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of December 1994, and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 333-8307) dated as of October 1996, and incorporated herein by reference. EX-11.1 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 KITTY HAWK, INC. AND SUBSIDIARIES STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
QUARTER ENDED MARCH 31, 1997 1996 ----------- ----------- Primary net income per share (1): Weighted average number of common shares outstanding ................................... 10,451,807 7,423,436 Common shares related to SAB No. 83 (2) ............ -- 544,274 ----------- ----------- Weighted average common and common equivalent shares outstanding ............................ 10,451,807 7,967,710 =========== =========== Net income ......................................... $ 1,413,941 $ 149,483 =========== =========== Net income per share ............................... $ 0.14 $ 0.02 =========== =========== Fully diluted net income per share: Weighted average number of common shares outstanding .................................... 10,451,807 7,423,436 Common shares related to SAB No. 83 (2) -- 544,274 ----------- ----------- Weighted average common and common equivalent shares outstanding ............................. 10,451,807 7,967,710 =========== =========== Net income ......................................... $ 1,413,941 $ 149,483 =========== =========== Net income per share ............................... $ 0.14 $ 0.02 =========== ===========
(1) The Company reports primary net income per share as the effect of dilutive securities is less than 3%. (2) Stock options granted to executives within 12 months of the filing date of the Company's initial public offering have been included in this line item through the date of exercise. See Note 1 of Notes to Consolidated Financial Statements. EX-27.1 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 11,454,925 0 19,590,973 0 3,551,788 40,294,688 81,765,399 (17,629,464) 104,430,623 18,813,605 0 0 0 106,695 59,582,884 104,430,623 0 28,102,467 0 22,747,703 4,308 0 481,325 2,356,568 942,627 1,413,941 0 0 0 1,413,941 0.14 0.14
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