-----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, M7LUvHwXQjy99HpBKQ+dAOEKixTzfwrORJpXErP5a4aRjEp5Ec4gcOXN/GE3ldtw 4mV4Mfrr/jYZc/RY+00HVg== 0000950134-97-009142.txt : 19971205 0000950134-97-009142.hdr.sgml : 19971205 ACCESSION NUMBER: 0000950134-97-009142 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971119 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971204 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: 8-K SEC ACT: SEC FILE NUMBER: 000-25202 FILM NUMBER: 97732549 BUSINESS ADDRESS: STREET 1: P O BOX 612787 STREET 2: 1515 W 20TH ST CITY: DALLAS/FORT WORTH IN STATE: TX ZIP: 75261 BUSINESS PHONE: 2144562220 MAIL ADDRESS: STREET 1: P O BOX 612787 CITY: DALLAS/FORT WORTH IN STATE: TX ZIP: 75261 8-K 1 FORM 8-K 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): NOVEMBER 19, 1997 KITTY HAWK, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) State of Delaware 0-25202 75-2564006 (STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
1515 West 20th Street P.O. Box 612787 Dallas/Fort Worth International Airport, Texas 75261 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (972) 456-2200 Not Applicable (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) - -------------------------------------------------------------------------------- 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On September 22, 1997, Kitty Hawk, Inc. ("Kitty Hawk" or the "Company"), Kitty Hawk - AIA, Inc. ("Kitty Hawk - AIA"), Kitty Hawk - AIT, Inc. ("Kitty Hawk - AIT"), Kitty Hawk - FOL, Inc. ("Kitty Hawk - FOL"), Kitty Hawk - KFS, Inc. ("Kitty Hawk - KFS"), Kitty Hawk - OK, Inc. ("Kitty Hawk - OK"), M. Tom Christopher, Conrad A. Kalitta, American International Airways, Inc. ("AIA"), American International Travel, Inc. ("AIT"), Flight One Logistics, Inc. ("FOL"), Kalitta Flying Service, Inc. ("KFS") and O.K. Turbines, Inc. ("OK"), entered into an Agreement and Plan of Merger, which was subsequently amended (as amended, the "Merger Agreement"). As used herein, Kitty Hawk - AIA, Kitty Hawk - AIT, Kitty Hawk - FOL, Kitty Hawk - KFS and Kitty Hawk - OK are collectively referred to as the "Merger Subs" and AIA, AIT, FOL, KFS and OK are collectively referred to as the "Kalitta Companies". On November 19, 1997, the Company consummated the transactions contemplated by the Merger Agreement and acquired the Kalitta Companies from Mr. Kalitta. Pursuant to the terms of the Merger Agreement, each of the Kalitta Companies were merged with and into separate Merger Subs, with each Kalitta Company surviving as a direct, wholly owned subsidiary of the Company. In connection with the mergers, (i) four of the Kalitta Companies' outstanding shares of common stock were converted, in the aggregate, into 4,099,150 shares of the Company's common stock, par value $.01 per share and (ii) one of the Kalitta Companies' outstanding shares of common stock were converted into the right to receive $20 million cash. The terms of the Merger Agreement, including the amount of consideration to be paid by the Company in connection with the mergers, were derived through arm's length negotiations between the parties. Subsequent to the merger, Mr. Kalitta became Vice Chairman of the Company and beneficially owns 4,099,150 shares of the Company's common stock or 24.5% of the Company's outstanding common stock. The Company funded the $20 million cash portion of the merger consideration through a concurrent 2,200,000 share common stock offering and a $340 million senior secured note offering. Prior to the mergers, the Kalitta Companies provided scheduled and charter air freight carrier services, air passenger charter services and aircraft maintenance services. The Company expects the Kalitta Companies to continue to provide these services after the merger. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements Historical financial statements of the Kalitta Companies required by Item 7(a) of Form 8-K are filed herewith.
Financial Statement Index Page ------------------------- ---- Independent Auditors' Report................................ F-1 Combined Balance Sheets at December 31, 1995 and 1996 and September 30, 1997 (unaudited)............................ F-2 Combined Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and the nine month periods ended September 30, 1996 and 1997 (unaudited)..... F-3 Combined Statements of Stockholder's Equity for the years ended December 31, 1994, 1995 and 1996 and the nine months ended September 30, 1997 (unaudited)...................... F-4 Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the nine month periods ended September 30, 1996 and 1997 (unaudited)..... F-5 Notes to Combined Financial Statements...................... F-7
(b) Pro Forma Financial Information Pro forma financial information relating to the acquisition of the Kalitta Companies required by Item 7(b) of Form 8-K is filed herewith.
Pro Forma Financial Statements Index Page ------------------------------------ ---- Unaudited Pro Forma Combined Financial Information.......... F-17 Unaudited Pro Forma Combined Balance Sheet at September 30, 1997........................................ F-18 Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 1996.......................... F-19 Unaudited Pro Forma Combined Statement of Operations for the nine months ended September 30, 1997.................. F-20 Notes to Unaudited Pro Forma Combined Financial Information............................................... F-21
2 3 (c) Exhibits 2.1 Agreement and Plan of Merger, dated as of September 22, 1997 (the "Merger Agreement"), by and among Kitty Hawk, Inc., Kitty Hawk - AIA, Inc., Kitty Hawk - AIT, Inc., Kitty Hawk - FOL, Inc., Kitty Hawk - KFS, Inc., Kitty Hawk - OK, Inc., M. Tom Christopher, American International Airways, Inc., American International Travel, Inc., Flight One Logistics, Inc., Kalitta Flying Service, Inc., O.K. Turbines, Inc., and Conrad Kalitta. (1) 2.2 Amendment No. 1 to the Merger Agreement, dated October 23, 1997. (1) 2.3 Amendment No. 2 to the Merger Agreement, dated October 29, 1997. (1) 2.4 Amendment No. 3 to the Merger Agreement, dated November 14, 1997. (1) 23.1 Consent of Deloitte & Touche, LLP. (2) _____________ (1) Incorporated by reference from the Company's Registration Statement on Form S-1 (Reg. No. 333-36125), dated November 1997. (2) Filed herewith. 3 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. KITTY HAWK, INC. Date: December 3, 1997 By: /s/ RICHARD R. WADSWORTH ---------------------------------- Name: Richard R. Wadsworth Title: Senior Vice President -- Finance 4 5 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholder of American International Airways, Inc. and Related Companies Ypsilanti, Michigan We have audited the accompanying combined balance sheets of American International Airways, Inc. and related companies as of December 31, 1996 and 1995, and the related combined statements of operations, stockholder's equity and cash flows for each of the three years in the period ended December 31, 1996. The combined financial statements include the accounts of American International Airways, Inc. and its 60% owned partnership, American International Cargo; and related companies Kalitta Flying Services, Inc., O.K. Turbines, Inc., American International Travel, Inc. and Flight One Logistics, Inc. (collectively, the "Companies"). These Companies are under common ownership and common management. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the combined financial position of American International Airways, Inc. and related companies as of December 31, 1996 and 1995, and the results of their combined operations and cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Companies will continue as a going concern. As discussed in Note 11 to the financial statements, the Companies (1) are experiencing difficulty in generating sufficient cash flows to meet their obligations and sustain their operations, (2) failed to make certain principal payments and are not in compliance with certain covenants of their long-term debt agreements (3) have negative working capital and (4) have incurred substantial losses subsequent to December 31, 1996, which raises substantial doubt about their ability to continue as a going concern. Management's plans concerning these matters are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. DELOITTE & TOUCHE LLP Ann Arbor, Michigan October 16, 1997 F-1 6 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES COMBINED BALANCE SHEETS DECEMBER 31, 1995 AND 1996 AND SEPTEMBER 30, 1997 ASSETS
DECEMBER 31, --------------------------- SEPTEMBER 30, 1995 1996 1997 ------------ ------------ ------------- (UNAUDITED) CURRENT ASSETS: Cash...................................................... $ 1,091,960 $ 2,324,353 $ 3,282,142 Restricted cash........................................... 795,030 14,036,924 Accounts receivable, net (Notes 1 and 3).................. 88,273,823 67,081,125 64,908,684 Accounts receivable -- related parties.................... 4,390,261 2,960,778 1,254,798 Expendable parts and supplies............................. 12,330,854 20,742,140 24,624,354 Aircraft held for resale (Note 4)......................... 6,593,069 6,117,266 5,346,453 Deposits, prepaid expenses and other assets............... 4,914,056 8,018,273 7,326,008 Prepaid fuel.............................................. 4,080,373 5,828,047 6,999,565 Notes receivable, current................................. 186,085 186,085 100,804 ------------ ------------ ------------ Total current assets.................................... 121,860,481 114,053,097 127,879,732 PROPERTY AND EQUIPMENT: Land and improvements..................................... 228,678 228,678 228,678 Building and leasehold improvements (Note 4).............. 9,347,825 12,752,356 14,363,228 Rotable parts (Note 3).................................... 14,560,287 16,779,386 17,661,392 Equipment (Note 3)........................................ 19,685,442 23,677,640 26,317,512 Aircraft (Note 3)......................................... 264,266,383 320,276,140 303,778,995 ------------ ------------ ------------ Total............................................... 308,088,615 373,714,200 362,349,805 Less accumulated depreciation............................. 81,246,881 109,707,512 113,883,560 ------------ ------------ ------------ Net................................................. 226,841,734 264,006,688 248,466,245 Aircraft in modification (Note 3)......................... 25,557,078 988,541 21,925,586 Construction in progress.................................. 3,152,560 923,150 1,427,361 ------------ ------------ ------------ Total property and equipment, net................... 255,551,372 265,918,379 271,819,192 NOTES RECEIVABLE, LESS CURRENT PORTION...................... 184,968 131,805 -- RECEIVABLE FROM AFFILIATED COMPANY.......................... -- -- 777,284 ------------ ------------ ------------ TOTAL ASSETS (Notes 3 and 4)................................ $377,596,821 $380,103,281 $400,476,208 ============ ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable: Trade (Note 1).......................................... $ 62,125,228 $ 46,070,230 $ 49,898,805 Related parties......................................... 4,421,143 77,450 121 Accrued liabilities....................................... 20,342,988 24,172,883 22,969,507 Deferred gain on sale of aircraft (Note 11)............... -- -- 30,255,291 Deferred revenue.......................................... -- 795,030 3,036,924 Notes payable to bank, reclassified as current (Note 3)... -- 47,105,413 55,434,351 Long term debt, reclassified as current (Note 4).......... -- 155,910,954 104,623,812 Notes payable to bank (Note 3)............................ 12,226,496 1,024,035 2,994,849 Current maturities of long-term debt (Note 4)............. 42,444,612 34,310,440 91,739,507 ------------ ------------ ------------ Total current liabilities........................... 141,560,467 309,466,435 360,953,167 NOTES PAYABLE, NONCURRENT (Note 3).......................... 34,983,000 -- -- LONG-TERM DEBT, LESS CURRENT PORTION (Note 4)............... 130,717,485 -- -- NOTE PAYABLE TO STOCKHOLDER (Note 8)........................ 100,000 -- 300,462 ------------ ------------ ------------ Total liabilities................................... 307,360,952 309,466,435 361,253,629 COMMITMENTS AND CONTINGENCIES (Notes 6 and 9) MINORITY INTEREST IN AMERICAN INTERNATIONAL CARGO........... 3,944,070 3,551,735 3,572,437 STOCKHOLDER'S EQUITY (Note 5): Common stock, par value $1 per share, authorized 275,000 shares in 1995, 1996 and 1997, issued and outstanding 53,000 shares in 1995, 1996 and 1997.................... 53,000 53,000 53,000 Additional paid-in capital.................................. 14,062,669 17,839,157 17,839,157 Retained earnings........................................... 52,176,130 49,192,954 17,757,985 ------------ ------------ ------------ Total stockholder's equity.......................... 66,291,799 67,085,111 35,650,142 ------------ ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................. $377,596,821 $380,103,281 $400,476,208 ============ ============ ============
See notes to combined financial statements. F-2 7 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
DECEMBER 31, SEPTEMBER 30, ------------------------------------------ --------------------------- 1994 1995 1996 1996 1997 ------------ ------------ ------------ ------------ ------------ (UNAUDITED) Revenues (Note 9): Air transportation services..... $298,080,850 $359,404,248 $388,192,479 $275,211,481 $302,344,768 Maintenance and other........... 7,448,982 14,278,793 36,348,245 25,801,347 23,299,368 ------------ ------------ ------------ ------------ ------------ Total revenues........... 305,529,832 373,683,041 424,540,724 301,012,828 325,644,136 Operating Costs and Expenses: Flight.......................... 115,613,706 168,774,779 150,255,587 107,006,096 126,207,639 Maintenance..................... 64,722,079 103,388,710 115,081,955 81,561,290 107,432,257 Fuel............................ 57,361,888 54,538,321 82,717,539 58,433,493 55,094,783 Depreciation.................... 13,809,281 20,971,405 32,091,119 23,958,549 26,467,600 Selling, general and administrative................ 13,272,361 21,676,079 21,889,355 15,353,022 17,847,884 Provision for doubtful accounts...................... 2,231,485 1,862,283 1,010,663 2,386,059 1,633,958 ------------ ------------ ------------ ------------ ------------ Total cost and expenses............... 267,010,800 371,211,577 403,046,218 288,698,509 334,684,121 ------------ ------------ ------------ ------------ ------------ Income (Loss) from Operations..... 38,519,032 2,471,464 21,494,506 12,314,319 (9,039,985) Other Income (Expense): Interest expense, net........... (8,007,389) (14,748,611) (21,632,389) (15,755,315) (19,740,204) Gain on disposition of property and equipment, net............ 3,389,881 11,707,673 130,934 425,742 624,395 Gain on contract settlement..... -- -- 1,123,200 1,123,200 -- Gain on insurance reimbursement................. -- 8,147,878 -- -- 542,302 Merger related costs............ -- -- -- -- (1,269,100) Net, miscellaneous.............. (550,000) (110) 13,116 13,214 -- ------------ ------------ ------------ ------------ ------------ Total other (expense) income................. (5,167,508) 5,106,830 (20,365,139) (14,193,159) (19,842,607) ------------ ------------ ------------ ------------ ------------ Income (Loss) Before Minority Interest in American International Cargo............. 33,351,524 7,578,294 1,129,367 (1,878,840) (28,882,592) Minority Interest in American International Cargo............. (2,758,372) (3,092,513) (1,146,019) (907,730) (1,858,958) ------------ ------------ ------------ ------------ ------------ Net Income (Loss)................. $ 30,593,152 $ 4,485,781 $ (16,652) $ (2,786,570) $(30,741,550) ============ ============ ============ ============ ============ Unaudited Pro forma Data (Note 1): Income (loss) before provision for income taxes.............. $ 30,593,152 $ 4,485,781 $ (16,652) $ (2,786,570) $(30,741,550) Provision for income taxes...... 11,625,398 1,704,597 -- -- -- ------------ ------------ ------------ ------------ ------------ Pro forma net income (loss)....... $ 18,967,754 $ 2,781,184 $ (16,652) $ (2,786,570) $(30,741,550) ============ ============ ============ ============ ============
See notes to combined financial statements. F-3 8 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AMERICAN KALITTA AMERICAN FLIGHT INTERNATIONAL FLYING O.K. GRAND INTERNATIONAL ONE AIRWAYS SERVICES, TURBINES, HOLDINGS, TRAVEL, LOGISTICS INC. INC. INC. INC. INC. INC. TOTAL ------------- --------- --------- --------- ------------- --------- ------- Balance, December 31, 1993..... $25,000 $25,000 $1,000 $ -- $ -- $ -- $51,000 Acquisition of Grand Holdings, Inc. (Note 2).... -- -- -- 100 -- -- 100 Distributions to stockholder................ -- -- -- -- -- -- -- Net income................... -- -- -- -- -- -- -- ------- ------- ------ ----- ------ ------ ------- Balance, December 31, 1994..... 25,000 25,000 1,000 100 -- -- 51,100 Issuance of common stock..... -- -- -- -- 1,000 1,000 2,000 Disposal of Grand Holdings, Inc. (Note 2).............. -- -- -- (100) -- -- (100) Contributions by stockholder (Note 2)................... -- -- -- -- -- -- -- Distributions to stockholder................ -- -- -- -- -- -- -- Net income................... -- -- -- -- -- -- -- ------- ------- ------ ----- ------ ------ ------- Balance, December 31, 1995..... 25,000 25,000 1,000 -- 1,000 1,000 53,000 Contributions by stockholder................ -- -- -- -- -- -- -- Distributions to stockholder................ -- -- -- -- -- -- -- Net loss..................... -- -- -- -- -- -- -- ------- ------- ------ ----- ------ ------ ------- Balance, December 31, 1996..... 25,000 25,000 1,000 -- 1,000 1,000 53,000 Distributions to stockholder (unaudited)................ -- -- -- -- -- -- -- Net loss (unaudited)......... -- -- -- -- -- -- -- ------- ------- ------ ----- ------ ------ ------- Balance, September 30, 1997 (Unaudited).................. $25,000 $25,000 $1,000 $ -- $1,000 $1,000 $53,000 ======= ======= ====== ===== ====== ====== ======= ADDITIONAL PAID-IN RETAINED CAPITAL EARNINGS ----------- ------------ Balance, December 31, 1993..... $ 7,054,995 $ 39,354,622 Acquisition of Grand Holdings, Inc. (Note 2).... 8,875,000 -- Distributions to stockholder................ -- (8,830,125) Net income................... -- 30,593,152 ----------- ------------ Balance, December 31, 1994..... 15,929,995 61,117,649 Issuance of common stock..... -- -- Disposal of Grand Holdings, Inc. (Note 2).............. (8,875,000) 303,411 Contributions by stockholder (Note 2)................... 7,007,674 -- Distributions to stockholder................ -- (13,730,711) Net income................... -- 4,485,781 ----------- ------------ Balance, December 31, 1995..... 14,062,669 52,176,130 Contributions by stockholder................ 3,776,488 -- Distributions to stockholder................ -- (2,966,524) Net loss..................... -- (16,652) ----------- ------------ Balance, December 31, 1996..... 17,839,157 49,192,954 Distributions to stockholder (unaudited)................ -- (693,419) Net loss (unaudited)......... -- (30,741,550) ----------- ------------ Balance, September 30, 1997 (Unaudited).................. $17,839,157 $ 17,757,985 =========== ============
See notes to combined financial statements. F-4 9 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
DECEMBER 31, SEPTEMBER 30, ------------------------------------------ --------------------------- 1994 1995 1996 1996 1997 ------------ ------------ ------------ ------------ ------------ (UNAUDITED) Cash flows from operating activities: Net income (loss).............................. $ 30,593,152 $ 4,485,781 $ (16,652) $ (2,786,570) $(30,741,550) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation................................. 13,809,281 20,971,405 32,091,119 23,958,549 26,467,600 Provision for doubtful accounts.............. 2,231,485 1,862,283 1,010,663 2,386,059 1,633,958 Gain (loss) on disposition of property and equipment.................................. (3,389,881) (11,707,673) (130,934) (425,742) (624,395) Minority interest in American International Cargo...................................... 2,758,372 3,093,262 1,143,637 907,730 1,858,958 Changes in assets and liabilities which provided (used) cash: Restricted cash............................ -- -- -- -- (11,000,000) Accounts receivable........................ (20,725,807) (17,819,263) 21,611,518 33,008,115 2,819,463 Expendable parts and supplies.............. (4,454,286) (3,470,152) (7,034,678) (3,987,431) (4,118,881) Deposits, prepaid expenses and other assets................................... (1,845,978) (3,740,088) (3,972,997) (3,327,352) (1,466,394) Aircraft held for resale................... (6,975,000) 21,754,521 (1,702,354) (440,061) (1,261,293) Accounts payable........................... 17,099,346 26,128,641 (20,398,691) (21,757,622) 4,543,332 Accrued liabilities........................ 4,742,342 7,956,796 3,829,895 140,188 (1,203,376) ------------ ------------ ------------ ------------ ------------ Total adjustments........................ 3,249,874 45,029,732 26,447,178 30,462,433 17,648,972 ------------ ------------ ------------ ------------ ------------ Net cash provided by (used in) operating activities............................. 33,843,026 49,515,513 26,430,526 27,675,863 (13,092,578) Cash flows from investing activities: Purchase of property and equipment............. (77,831,613) (153,719,347) (53,413,262) (43,597,858) (54,508,576) Proceeds from disposition of property and equipment.................................... 5,250,000 33,603,329 11,008,725 10,145,798 55,127,500 Collections on note receivable................. 139,620 119,324 53,163 53,163 -- Issuance of notes receivable to affiliated company...................................... -- -- -- -- (777,284) Disposal of Grand Holdings, Inc., net of cash......................................... -- (948,818) -- -- -- Acquisition of Grand-Holdings, Inc. net of cash acquired..................................... (97,077) -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net cash provided by (used in) investing activities............................. (72,539,070) (120,945,512) (42,351,374) (33,398,897) (158,360) Cash flows from financing activities: Repayments of notes and long-term debt......... (21,997,617) (36,899,953) (52,117,964) (53,307,078) (63,198,575) Borrowings under notes and long-term debt agreements................................... 74,466,207 119,952,548 70,097,213 61,295,530 79,640,259 Net (repayments) borrowings under note payable to stockholder............................... -- 14,000 (100,000) 340,462 300,462 Issuance of common stock....................... -- 2,000 -- -- -- Contribution of capital by stockholder......... -- 554,102 3,776,488 3,759,903 -- Distributions to American International Cargo minority stockholder......................... (1,367,328) (2,106,000) (1,535,972) (1,540,000) (1,840,000) Distributions to stockholder................... (8,830,125) (13,730,711) (2,966,524) (2,580,655) (693,419) ------------ ------------ ------------ ------------ ------------ Net cash provided by financing activities............................. 42,271,137 67,785,986 17,153,241 7,968,162 14,208,727 ------------ ------------ ------------ ------------ ------------ Increase (decrease) in cash...................... 3,575,093 (3,644,013) 1,232,393 2,245,128 957,789 Cash, beginning of period........................ 1,160,880 4,735,973 1,091,960 1,091,960 2,324,353 ------------ ------------ ------------ ------------ ------------ Cash, end of period.............................. $ 4,735,973 $ 1,091,960 $ 2,324,353 $ 3,337,088 $ 3,282,142 ============ ============ ============ ============ ============ Supplemental disclosure of cash flow information -- Cash paid during the period for interest....................................... $ 7,677,452 $ 16,334,750 $ 21,806,688 $ 13,688,820 $ 18,916,308 ============ ============ ============ ============ ============
F-5 10 Noncash operating and investing activities: In 1994, the Companies transferred assets with a net book value of $738,094 from property and equipment to aircraft held for resale. In 1995, the sole stockholder sold 80% of Grand Holdings, Inc. The nonmonetary combining effect on the Companies was $8,193,747. In 1995, the Companies refinanced $680,000 of notes payable to a bank on a long-term basis. In 1995, the sole stockholder of the Companies contributed property and equipment of $6,453,572. In 1996, the Companies transferred assets with a net book value of $1,436,000 from aircraft held for resale to property and equipment. In 1996, the Companies transferred assets with a net book value of $1,376,608 from property and equipment to inventory. In 1996, the Companies received $795,030 in restricted cash from customers for deposit. In 1996, the Companies deferred a $878,894 loss on the sale-leaseback of an aircraft held for resale. In 1997 (unaudited), the Companies sold certain assets held for resale for $1,150,000 in exchange for accounts receivable and reduction of outstanding liabilities. In 1997 (unaudited), the Companies received $2,241,894 in restricted cash from customers for deposit. In 1997 (unaudited), the Companies transferred assets with a net book value of $137,000 from inventory to property and equipment. In 1997 (unaudited), the Companies transferred assets with a net book value of $635,774 from property and equipment to assets held for resale. In 1997 (unaudited), the Companies netted $217,086 due under notes receivable with outstanding liabilities. In 1997 (unaudited), the Companies deferred a gain of $30,255,291 on the sale of 16 Boeing 727 aircraft to Kitty Hawk. See notes to combined financial statements. F-6 11 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS (INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Description -- American International Airways, Inc. and its related companies (the "Companies") provide worldwide scheduled air cargo and charter services. The scheduled air cargo delivery business includes an overnight freight service operating within a network of North American cities. By integrating their scheduled and charter freight business and scheduled air cargo from the United States to the Far East, the Companies are able to provide air express delivery of virtually any type of air freight throughout the world. The Companies also provide a wide variety of aviation services, including ground handling support and airframe and engine maintenance and overhaul for their own aircraft and for other aircraft operators, travel services for the Companies' flight crews and maintenance personnel, and air charter management and services for the Companies. Significant Accounting Policies: Principles of Combined Financial Statements -- The combined financial statements include the accounts of American International Airways, Inc. and its 60% owned partnership, American International Cargo ("AIA"); and related companies Kalitta Flying Services, Inc. ("KFS"), O.K. Turbines, Inc. ("O.K."), American International Travel, Inc. ("AIT") and Flight One Logistics, Inc. ("FOL") (collectively referred to as the "Companies"). Combined financial statements are presented because AIA and the related companies are owned by the same individual and are operated by common management. All significant intercompany accounts and transactions have been eliminated. Interim Financial Statements -- The combined financial statements as of and for the nine months ended September 30, 1996 and 1997 reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations for such periods. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Instruments of the Companies consist principally of accounts receivable, accounts payable, notes payable to stockholder, debt and letters of credit. The recorded value of financial instruments included in the financial statements approximates fair value. Restricted Cash represents passenger customer deposits held in escrow with a corresponding credit to deferred revenue until the charter services are provided. In addition, at September 30, 1997, $11 million was held in escrow for the modification of a Boeing 747 aircraft (unaudited). Accounts Receivable are net of an allowance of $2,062,000 and $2,389,000 for the years ended December 31, 1995 and 1996 and $3,381,000 for the nine months ended September 30, 1997 (unaudited), respectively. Expendable Parts and Supplies are carried at the lower of cost (using the first-in, first-out method or average cost convention) or market. Aircraft Held for Resale -- The Companies may periodically purchase aircraft for resale. These aircraft are carried at the lower of cost or net realizable value. The long-term portion of debt associated with these aircraft is classified as current (Note 4). The sale of such assets is expected within twelve months. F-7 12 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Property and Equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:
YEARS ------ Building and leasehold improvements......................... 5 - 40 Aircraft.................................................... 5 - 14 Equipment................................................... 3 - 10 Rotable parts............................................... 3 - 7
During 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to these assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS 121 is required to be adopted for the Companies' 1996 fiscal year. The Companies have completed the process of evaluating the impact on the combined financial statements that will result from adopting SFAS 121 and does not believe the effect to be material. Rotable Parts are net of an allowance of $1,016,667 and $816,667 for the years ended December 31, 1995 and 1996 and $1,016,667 for the nine months ended September 30, 1997 (unaudited), respectively. Aircraft In Modification includes aircraft in the process of being converted from passenger to freighter configuration. Accounts Payable Trade includes bank overdrafts of $4,954,225 and $4,812,147 at December 31, 1995 and 1996 and $5,430,166 at September 30, 1997 (unaudited), respectively. Revenue Recognition -- Revenue from scheduled and chartered services represent charges for movement of air cargo and passengers and is recognized when movement is complete. Revenue for maintenance, overhaul and repair services is recognized when services are rendered. Export Sales -- The Companies consider sales of services to unaffiliated customers in foreign countries as export sales. Taxes on Income -- The Companies have elected to be taxed as S Corporations under the Internal Revenue Code. As S Corporations, the income of the Companies is taxable to the sole stockholder and, accordingly, these combined financial statements do not include a provision for corporate income taxes. Approximately $3,390,000 of the Companies' retained earnings at December 31, 1996 was earned prior to the S Corporation elections and would be taxed to the sole stockholder in the event of distribution. The unaudited pro forma provision for income taxes reported on the combined statements of operations shows the approximate federal and state income taxes (by applying statutory rates) that would have been incurred if the Companies had been subject to tax as a C Corporation. No tax benefit has been provided for the year ended December 31, 1996 and for the nine months ended September 30, 1996 and 1997 due to the uncertainty of the Companies' ability to recover such benefits. Interest Costs -- Interest on funds used to finance the acquisition and modification of aircraft up to the date the asset is placed in service is capitalized and included in the cost of the asset. Interest capitalized during the years ended December 31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 was $668,000, $1,692,000, $562,000 and $533,000, respectively. No interest cost was capitalized for the nine months ended September 30, 1997 (unaudited). F-8 13 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Foreign Transactions -- All significant monetary transactions of the Companies are denominated in U.S. currency. Reclassifications -- Certain reclassifications were made to the 1994, 1995 and 1996 financial statements to conform with the classifications used in 1997. 2. ACQUISITION AND DISPOSAL OF RELATED COMPANY On December 31, 1994, the sole stockholder of the Companies acquired all outstanding shares of Grand Holdings, Inc. ("GHI") for $8,875,100 in cash and notes. GHI operated a charter passenger service. The acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price was allocated to the fair value of assets acquired and liabilities assumed. The primary assets acquired from the transaction were three aircraft. On June 30, 1995, the sole stockholder of the Companies sold 80% of his share in Grand Holdings, Inc. ("GHI"). Prior to June 30, 1995, the aircraft of GHI were distributed to the sole stockholder and in turn contributed to AIA. 3. NOTES PAYABLE TO BANK Notes payable to banks consist of the following:
DECEMBER 31, ------------------------- SEPTEMBER 30, 1995 1996 1997 ----------- ----------- ------------- (UNAUDITED) Current: Outstanding borrowings on a bridge loan with a bank (Note 10), at the bank's prime rate plus 2% (10.25% effective rate at December 31, 1996), expires December 9, 1999. Under the terms of the bridge loan, the Companies may borrow up to $14,250,000 to cover the purchase and modification of certain aircraft until permanent financing is obtained. The principal collateral for the bridge loan is the related aircraft. The loan is also secured by all assets of KFS and the assignment of a life insurance policy on the stockholder and the guaranty of the stockholder...................................... $ 9,456,496 $ -- $ -- Outstanding borrowings on a $3,000,000 revolving credit agreement with a bank under which the Companies may borrow up to 75% on eligible accounts receivable. The agreement calls for interest at the bank's prime rate plus .5% (8.75% effective rate at December 31, 1996). Security consists of accounts receivable and the guaranty of the stockholder and the minority interest holder of American International Cargo........... 2,770,000 1,024,035 2,994,849 ----------- ----------- ----------- Total....................................... $12,226,496 $ 1,024,035 $ 2,994,849 =========== =========== ===========
F-9 14 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, ------------------------- SEPTEMBER 30, 1995 1996 1997 ----------- ----------- ------------- (UNAUDITED) Long-term, reclassified as current: Outstanding borrowings on a $60,000,000 revolving credit agreement with a bank under which the Companies may borrow on eligible accounts receivable, a percentage of eligible rotable and consumable parts and 50% of the fair value of eligible aircraft. The agreement calls for interest at the bank's prime rate plus 1.25% (9.5% effective at December 31, 1996). The agreement expires December 9, 1999 at which time the entire amount outstanding is due. At December 31, 1996 and September 30, 1997 (unaudited), the credit available was $4,521,537 and $1,410,137, respectively. Security consists of accounts receivable and aircraft spare parts as well as an assignment of life insurance policy on the stockholder. Also secured by all assets of KFS and guaranteed by the stockholder................ $ -- $47,105,413 $55,434,351 =========== =========== =========== Long-Term: Outstanding borrowings on a $40,000,000 revolving credit agreement with a bank under which the Companies may borrow on eligible accounts receivable. The agreement calls for interest at the bank's prime rate plus .5% (9% effective at December 31, 1995). The agreement expires June 1, 1997 at which time the entire amount outstanding is due. Security consists of accounts receivable and aircraft spare parts as well as an assignment of life insurance policy on the stockholder. The note is also secured by all assets of KFS and guaranteed by the stockholder.................... $34,983,000 $ -- $ -- =========== =========== ===========
These credit agreements include certain restrictive covenants. At December 31, 1996, the Companies were in violation of the following covenants: (1) maintaining a combined fixed charge ratio of 1 to 1 and (2) certain cross collateralization covenants. As a result of these and other non-financial loan covenant violations, all debt has been classified as current. At September 30, 1997 (unaudited), the Companies had failed to make certain principal payments and were in violation of the following covenants: (1) maintaining a minimum tangible net worth of not less than $60 million; (2) maintaining a minimum debt to net worth ratio of not more than 5 to 1 and (3) certain cross collateralization covenants. As a result of these and other non-financial loan covenant violations, all debt has been classified as current. F-10 15 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 4. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, SEPTEMBER 30, --------------------------- ------------- 1995 1996 1997 ------------ ------------ ------------- (UNAUDITED) Various notes payable with interest rates ranging from 7.49% to 12%. Certain interest rates are at prime plus 1% to 2.5% (9.25% to 10.75% effective rates at December 31, 1996). The notes are secured by property and equipment with a net book value of $231,792,981. Certain notes are also secured by substantially all of the Companies' assets, and the personal guaranty of the stockholder...................................... $173,162,097 $190,221,394 $196,363,319 Less: Current maturities of long-term debt............. 37,608,059 31,568,769 88,072,920 Outstanding debt on aircraft held for resale..... 4,836,553 2,741,671 3,666,587 ------------ ------------ ------------ Total.................................... 42,444,612 34,310,440 91,739,507 ------------ ------------ ------------ Net long-term debt, reclassified as current........ -- 155,910,954 104,623,812 ------------ ------------ ------------ Net long-term debt................................. $130,717,485 $ -- $ -- ============ ============ ============
Without regard to the lenders exercising their right to demand payment, the aggregate amount of required payments on long-term debt and notes payable to bank (Note 3) as of December 31, 1996 are as follows: 1997................................................... $ 35,334,475 1998................................................... 69,298,498 1999................................................... 75,547,575 2000................................................... 23,925,286 2001................................................... 19,417,825 Thereafter............................................. 14,827,183 ------------ Total........................................ $238,350,842 ============
These credit agreements include certain restrictive covenants. At December 31, 1996, the Companies were in violation of the following covenants: (1) maintaining a minimum net worth of not less than $78 million; (2) maintaining a debt service coverage ratio of not less than 1.2 to 1; (3) maintaining a maximum debt to net worth ratio of not more than 4 to 1; (4) maintaining an EBITDA ratio of not less than 1.1 to 1; and (5) certain cross collateralization covenants. As a result of these and other non-financial loan covenant violations, all debt has been classified as current. At September 30, 1997 (unaudited), the Companies had failed to make certain principal payments on indebtedness and were in violation of the following covenants: (1) ratio of earnings to fixed charges; (2) ratio of cash flow to fixed charges; (3) cash flow to coverage; (4) minimum net income; (5) current ratio; (6) tangible net worth; (7) shareholder's equity; (8) debt service coverage; (9) fixed charge coverage; (10) debt to net worth ratios; (11) certain cross collateralization covenants as well as restrictions relating to encumbering their assets. As a result of these and other non-financial loan covenant violations, all debt has been classified as current. F-11 16 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Effective in July and August 1997, the Companies entered into agreements with certain lenders for the deferment of principal payments for a period of one to eight months. The aggregate monthly deferrals range from $693,000 to $2,824,000. The Companies are to make interest payments only during this period. At the end of the deferral periods, the Companies will resume principal payments in accordance with the terms of the loan agreement. 5. COMMON STOCK Common stock of the Companies is as follows:
DECEMBER 31, SEPTEMBER 30, ------------------ ------------- 1995 1996 1997 ------- ------- ------------- (UNAUDITED) American International Airways, Inc., $1 par value; 25,000 shares authorized, 25,000 shares issued and outstanding....................................... $25,000 $25,000 $25,000 Kalitta Flying Services, Inc., $1 par value; 100,000 shares authorized, 25,000 shares issued and outstanding....................................... 25,000 25,000 25,000 O.K. Turbines, Inc., $1 par value; 50,000 shares authorized, 1,000 shares issued and outstanding... 1,000 1,000 1,000 American International Travel, Inc., $1 par value; 50,000 shares authorized, 1,000 shares issued and outstanding....................................... 1,000 1,000 1,000 Flight One Logistics, Inc., $1 par value; 50,000 shares authorized, 1,000 shares issued and outstanding....................................... 1,000 1,000 1,000 ------- ------- ------- Total..................................... $53,000 $53,000 $53,000 ======= ======= =======
6. OPERATING LEASES The Companies lease office building, hangars, cargo storage, and related facilities under noncancelable operating leases which expire on various dates through 2011. In addition, the Companies periodically lease aircraft and other equipment under month-to-month lease agreements. Lease expense for all operating leases was $15,659,000, $24,095,000, $10,815,000, $7,576,000 and $6,094,000, for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 and 1997 (unaudited), respectively. Aggregate future minimum rental payments required under noncancelable operating leases at December 31, 1996 are as follows:
AMOUNT ----------- Years Ending December 31: 1997.................................................. $ 3,177,000 1998.................................................. 1,950,000 1999.................................................. 1,620,000 2000.................................................. 1,006,000 2001.................................................. 789,000 Thereafter............................................ 5,685,000 ----------- Total minimum rental payments................. $14,227,000 ===========
F-12 17 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 7. EMPLOYEE SAVINGS PLAN The Companies have three separate 401(k) employee savings plans, covering substantially all employees. The Companies' contributions to the plans are discretionary and were $133,000, $158,000, $353,000, $4,430 and $91,771, for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 and 1997 (unaudited), respectively. 8. RELATED PARTY TRANSACTIONS The Companies lease certain aircraft to a company owned and operated by a relative of the sole stockholder of the Companies. In addition to providing services to unrelated third parties, the related company flies subcharter flights for the Companies and also provides lift capacity for the Companies' overnight scheduled cargo service. The Companies perform ground handling for the related company in certain locations. The related company also reimburses the Companies for certain applicable fuel, parking and landing and ground handling paid on the related company's behalf. The Companies also have certain transactions with an affiliated company that is partially owned by the Companies' sole stockholder. The remaining ownership of this affiliated company are relatives of the sole stockholder of the Companies. The Companies lease an office facility from this affiliated company for an annual rent of approximately $713,000. The lease expires May 14, 2007. Transactions and balances with related parties were as follows:
DECEMBER 31, SEPTEMBER 30, ------------------------------------- ----------------------- 1994 1995 1996 1996 1997 ---------- ----------- ---------- ---------- ---------- (UNAUDITED) Transactions and balances with sole stockholder: Note payable, noninterest bearing................ $ -- $ 100,000 $ -- $ -- $ 300,462 Contribution of cash...... -- 473,972 2,266,630 -- -- Contribution of aircraft and equipment.......... -- 6,453,572 -- -- -- Transactions with a company owned by a relative of the sole stockholder: Revenues.................. 352,800 11,582,257 5,176,150 5,043,643 916,849 Cost of revenues.......... 2,366,288 6,097,447 28,727 28,646 121,511 Sale of DC8............... -- 5,200,000 -- -- -- Transactions and balances with an affiliated company: Receivable from affiliated company................... -- -- -- -- 777,284 Rental expense............ -- -- -- -- 266,342 Transactions with GHI -- Purchase of three DC8 engines................... -- 1,950,000 -- -- -- Transactions with sole stockholder and relatives of the sole stockholder -- Promotional revenues...... 830,616 1,257,771 1,206,529 898,209 315,934 Promotional expenses...... 2,602,038 3,643,611 3,096,724 2,128,292 2,344,562
F-13 18 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) 9. COMMITMENTS AND CONTINGENCIES Purchase Commitments -- In March 1997, the Companies committed to purchase three Boeing 747-200 aircraft and associated engines, four additional spare engines and certain other related spare parts for approximately $63,000,000. In connection with these purchase commitments, the Companies intend to modify these aircraft for approximately $24,000,000. The Companies took delivery of one of the aircraft and a spare engine on September 26, 1997, for $21 million and negotiated a revised agreement to purchase the remaining two aircraft and related spare parts for $42 million which includes a $1 million non-refundable deposit and a $1 million option purchase price which the seller can retain if the Companies fail to complete the purchase by February 16, 1998. In July 1997, the Companies purchased two L1011 aircraft for a total purchase price of $7,000,000. In connection with this purchase, the Companies have a commitment for the modification of these aircraft for $11,400,000. In addition, the Companies have a nonrefundable deposit of $320,000 with respect to a purchase commitment of $1,400,000. The realization of this deposit is dependent upon the Companies' ability to fulfill this purchase commitment. Letters of Credit -- The Companies' banks have issued to various airports and suppliers letters of credit totaling $5,071,000, $3,088,000, and $3,155,512, at December 31, 1995 and 1996 and September 30, 1997, respectively, against which accounts receivable are pledged as collateral. The last of the letters of credit expires in 1998. Legal Proceedings, Claims and Other -- The Companies are subject to legal proceedings and claims which have arisen in the ordinary course of business. Management intends to vigorously defend against these legal proceedings and believes, based upon the advice of legal counsel, that the outcome will not have a materially adverse effect on the Companies' financial position, results of operations, or cash flows. In January 1996, the FAA issued a series of Directives on certain Boeing 747 aircraft which were modified for freight hauling by GATX-Airlog Company, a subsidiary of General American Transportation Corp ("GATX"). The Directives, which became effective on January 30, 1996, were issued because of concerns relating to the integrity of the cargo door and surrounding floor area in the event the aircraft were operated at their maximum cargo capacity of approximately 220,000 pounds. In spite of the fact that the aircraft affected by the Directives have flown over 83,000 hours without incident, the Directives require certain modifications to be made to the aircraft. Absent such modifications, the Directives limit the cargo capacity of these aircraft to 120,000 lbs., a limit which restricts the Companies' ability to profitably operate the aircraft. One of each of the Companies' Boeing 747-200 and Boeing 747-100 freighters are affected by these Directives and have been out of service since January 1996. GATX has proposed a solution to the problem identified by one of the Directives which has been approved by the FAA. An appropriate means to test the proposed solution, however, has not yet been identified. Currently, the Companies anticipate modifying the Boeing 747-100 to be in compliance with a portion of the Directive for which the FAA has approved a solution by the latter half of 1998, which will allow the Companies to operate it with a reduced cargo capacity of 160,000 lbs. The Companies are awaiting engineering solutions to address the remaining Directives. If the cost necessary to fully implement these solutions and return both the Boeing 747-100 and -200 to maximum cargo capacity is uneconomical, the Companies may either operate one or both of the aircraft at limited load or use one or both for spare parts. The Companies are currently involved in litigation against GATX to recover the cost to repair these aircraft as well as revenues lost as a consequence of the aircraft downtime. In September 1996 pursuant to the FAA's National Aviation Safety Inspection Program, the Companies underwent a broad but routine inspection of all of the Companies' aircraft and maintenance operations. This F-14 19 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) inspection resulted in a report from the FAA citing the Companies with a number of regulatory infractions, none of which were sufficiently serious to cause the FAA to curtail or otherwise restrict any of the Companies' operations. As a consequence of the FAA's inspection, however, the FAA and the Companies entered into a Consent Order in January 1997 which required the Companies to revise certain internal policies and procedures to address the regulatory violations noted in the inspection report as well as enforcement actions that had been pending prior to the inspection. Without admitting any fault, the Companies agreed to pay a fine of $450,000, one-third of which is suspended and will be forgiven if the Companies comply with all the terms of the Consent Order. At this time, management believes the Companies are in compliance with the Consent Order and expect the FAA to conduct another inspection of similar scope in the fourth quarter of 1997 to verify such compliance. The Consent Order also provides that it is a full and conclusive settlement of any civil penalties the Companies could incur for regulatory violations occurring before January 1, 1997, but does not preclude the FAA from taking enforcement action to revoke the Companies' air carrier operating certificate. Only six of the Companies' twenty Douglas DC-8 aircraft comply with the FAA Stage III noise control standards. The Companies may elect not to modify the fourteen remaining Douglas DC-8 aircraft to meet the Stage III noise control standards because the anticipated cost of approximately $3.5 million per aircraft (not including aircraft downtime) may exceed the economic benefits of such modifications. If the Companies cannot or do not modify these fourteen Douglas DC-8 aircraft, the Companies will have to remove these aircraft from service in the United States before January 1, 2000 and may have to replace them with other aircraft. In addition, thirteen of the Companies' Boeing 727 aircraft currently do not comply with the Stage III noise control standards. The Companies currently anticipate modifying their Boeing 727 fleet (at an anticipated cost of approximately $24 million) to be in compliance with the Stage III noise control standards by the applicable deadlines. However, there can be no assurance that the Companies will have sufficient funds or be able to obtain financing to cover the costs of these modifications or to replace such aircraft. 10. MAJOR CUSTOMERS The Companies had sales to two major customers which are entities of the United States Government, representing approximately 28%, 17%, 21%, 15% and 7% of combined revenues for the years ended December 31, 1994, 1995, 1996 and for the nine months ended September 30, 1996 and 1997 (unaudited), respectively. Accounts receivable from these customers were approximately $45,118,000, $12,024,000 and $3,997,000 at December 31, 1995, 1996 and September 30, 1997 (unaudited), respectively. 11. MANAGEMENT'S PLANS -- SALE OF AIRCRAFT AND PLANNED MERGER The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Companies (1) are experiencing difficulty in generating sufficient cash flows to meet their obligations and sustain their operations, (2) failed to make certain principal payments and are not in compliance with certain covenants of their long-term debt agreements (3) have negative working capital and (4) have incurred substantial losses subsequent to December 31, 1996. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Companies be unable to continue as a going concern. The Companies' continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet their obligations on a timely basis, to comply with the terms and covenants of their financing agreements, to obtain additional financing or refinancing as may be required, and ultimately to attain successful operations. Management is continuing its efforts to obtain additional funds so that the Company can meet its obligations and sustain operations from sources that are described below. F-15 20 AMERICAN INTERNATIONAL AIRWAYS, INC. AND RELATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) On September 22, 1997, the Companies, the sole stockholder of the Companies, and Kitty Hawk, Inc. ("Kitty Hawk") entered into a merger agreement, under which each of the respective Companies will be merged with separate subsidiaries of Kitty Hawk, with each of the Companies surviving the merger as a direct, wholly owned subsidiary of Kitty Hawk. On October 23, 1997, the merger agreement was amended so that at the effective time of the merger, the outstanding shares of capital stock of four Companies (AIA, AIT, FOL and O.K.) will be converted, into the right to receive their prorata portion of 4,099,150 shares of Kitty Hawk common stock (unaudited). The outstanding shares of capital stock of KFS will be converted into the right to receive $20,000,000. Concurrent with the consummation of the merger agreement will be the closing of a proposed 3,000,000 share common stock offering (of which Kitty Hawk will sell 2,200,000 shares, not including up to 450,000 additional shares for which Kitty Hawk has granted the underwriters a 30 day option to purchase) and the consummation of a proposed note offering under Rule 144A of the Securities Act for $340,000,000 aggregate principal amount of senior secured notes of Kitty Hawk. The proceeds of the notes and a portion of the proceeds of the sale of shares will be used to pay the cash portion of the acquisition of the Companies and to refinance and restructure the outstanding debt of the Companies and Kitty Hawk. As an interim step toward the merger, on September 17, 1997, the Companies sold to Kitty Hawk sixteen Boeing 727-200 aircraft constituting the Companies' 727-200 fleet for approximately $51 million. This interim transaction was deemed necessary in order to generate cash to be used to pay for the acquisition of a Boeing 747 aircraft from an unrelated third party (see Note 9), to acquire an L-1011 aircraft and provide the Companies with working capital. As part of the transaction, the Companies assigned to Kitty Hawk all of its customer contracts relating to the aircraft sold. The purchase agreement provides the Companies the option to repurchase, no later than March 31, 1998, all except three of the 727-200 aircraft from Kitty Hawk at Kitty Hawk's purchase price, less $14 million for the three aircraft not subject to the option, plus any costs incurred by Kitty Hawk to maintain the repurchased aircraft. Similarly, Kitty Hawk has the option to require the Companies to repurchase, no later than December 31, 1997, all except three of the 727-200 aircraft at Kitty Hawk's purchase price less $14 million for the three aircraft not subject to the option, plus any costs incurred by Kitty Hawk to maintain the repurchased aircraft. At September 30, 1997, the Companies deferred a gain of approximately $30 million (unaudited) in connection with this transaction. This gain will be recognized if the merger is not finalized and the put and call options are not exercised. F-16 21 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following sets forth the Company's Unaudited Pro Forma Combined Financial Information for 1996 and the nine months ended September 30, 1997, in each case giving effect to (i) the Company's November 1997 3,000,000 share common stock offering (2,200,000 shares of which were sold by the Company and 800,000 shares of which were sold by certain stockholders of the Company) (the "Common Stock Offering"), (ii) the Company's November 1997 $340 million senior secured note offering (the "Note Offering"), (iii) the Company's November 1997 acquisition of the Kalitta Companies by merger (the "Merger"), (iv) the November 1997 refinancing of all but approximately $10 million of the outstanding indebtedness of the Company and the Kalitta Companies with a portion of the net proceeds of the Common Stock Offering, the Note Offering and a new $45.9 million term loan (the "Refinancings"), (v) a $750,000 distribution by the Kalitta Companies to Mr. Kalitta for a portion of his 1997 income tax liability (the "Kalitta Tax Distribution") and (vi) the sale of a Hawker Siddeley HS-125 aircraft by the Kalitta Companies to Mr. Kalitta (the "Hawker Sale"). The Company's Unaudited Pro Forma Combined Statement of Operations Information gives effect to the Common Stock Offering, the Note Offering, the Merger, the Refinancings, the Kalitta Tax Distribution and the Hawker Sale, as if they had been consummated at the beginning of 1996. The Company's Unaudited Pro Forma Combined Balance Sheet Information gives effect to the Common Stock Offering, the Note Offering, the Merger, the Refinancings, the Kalitta Tax Distribution and the Hawker Sale as if they had been consummated on September 30, 1997. The Unaudited Pro Forma Combined Financial Information of the Company is presented for illustrative purposes only and does not purport to present the financial position or results of operations of the Company had the Common Stock Offering, the Note Offering, the Merger, the Refinancings, the Kalitta Tax Distribution and the Hawker Sale occurred on the dates indicated, nor are they necessarily indicative of the results of operations which may be expected to occur in the future. The Unaudited Pro Forma Combined Financial Information should be read in conjunction with the separate historical financial statements of Kitty Hawk appearing in its annual and transition reports on Form 10-K and of the Kalitta Companies appearing elsewhere in this Form 8-K. Certain amounts reported in the Kalitta Companies' historical combined financial statements have been reclassified to conform with the Kitty Hawk presentations in the Unaudited Pro Forma Combined Financial Information. The accompanying Unaudited Pro Forma Combined Financial Information has been prepared under guidelines established by Article 11 of Regulation S-X under the Securities Act. Under those guidelines, there are limitations on the adjustments that can be made in the presentation of pro forma financial information. Accordingly, no pro forma adjustments have been applied to reflect (i) revenues or operating costs expected to be generated from two Boeing 747s expected to be purchased and modified to cargo configuration with approximately $56 million of the net proceeds from the Note Offering or the recent purchase of one Boeing 747 or (ii) operating efficiencies or cost savings (other than approximately $1.5 million of insurance savings) expected to result from the Merger. In addition, pro forma results have not been adjusted to eliminate abnormally high engine overhaul expenses, costs incurred to add and maintain flight crews in anticipation of increased air freight carrier business which has not yet materialized in part due to delays in acquiring aircraft and start-up costs associated with establishing the Kalitta Companies' wide-body passenger charter business. The historical balance sheet information for Kitty Hawk and the Kalitta Companies has been derived from the unaudited September 30, 1997 balance sheets of Kitty Hawk appearing in its quarterly report on Form 10-Q for the quarter ended September 30, 1997 and of the Kalitta Companies included elsewhere in this Form 8-K. The historical statement of operations data for 1996 has been derived from unaudited information presented in Footnote 10 to Kitty Hawk's audited financial statements included in its transition report on Form 10-K and from the audited combined statements of operations of the Kalitta Companies for the year ended December 31, 1996 included elsewhere in this Form 8-K. The historical statement of operations data for Kitty Hawk and the Kalitta Companies for the nine months ended September 30, 1997 has been derived from the unaudited statements of operations for the nine months ended September 30, 1997 of Kitty Hawk appearing in its quarterly report on Form 10-Q for the quarter ended September 30, 1997 and of the Kalitta Companies appearing elsewhere in this Form 8-K. The pro forma adjustments relating to the purchase of the Kalitta Companies represent the Company's preliminary determinations of these adjustments and are based upon available information and certain assumptions the Company considers reasonable under the circumstances. Final amounts could differ from those set forth therein and those differences could be material. The Company will finalize its purchase price allocation subsequent to the date hereof. The unaudited interim financial statements of Kitty Hawk referred to above include, in the opinion of management of Kitty Hawk, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of Kitty Hawk for the unaudited interim period. The unaudited interim financial statements of the Kalitta Companies referred to above include, in the opinion of management of the Kalitta Companies, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results of the Kalitta Companies for the unaudited interim period. F-17 22 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION BALANCE SHEET SEPTEMBER 30, 1997
HISTORICAL ---------------------- PRO FORMA KALITTA ----------------------- KITTY HAWK COMPANIES ADJUSTMENTS COMBINED ---------- --------- ----------- -------- Current Assets Cash and cash equivalents....................... $ 2,403 $ 3,282 $ 5,9653a $ 11,650 Restricted cash................................. -- 14,037 56,0003b 70,037 Trade accounts receivable....................... 21,645 64,909 -- 86,554 Accounts receivable -- related parties.......... -- 1,255 -- 1,255 Inventory and aircraft supplies................. 5,588 24,624 -- 30,212 Prepaid expenses and other current assets....... 6,808 19,773 (101)3c 26,480 -------- -------- --------- -------- Total current assets.................... 36,444 127,880 61,864 226,188 Property and equipment, net....................... 140,357 271,819 46,2763d 458,452 Other assets...................................... -- 777 10,1233e 10,900 -------- -------- --------- -------- Total assets............................ $176,801 $400,476 $ 118,263 $695,540 ======== ======== ========= ======== Current Liabilities Accounts payable and accrued expenses........... $ 27,968 $ 75,906 $ 15,6833f $119,557 Deferred gain on sale of aircraft............... -- 30,255 (30,255)3g -- Notes payable to bank, classified as current.... -- 55,434 (55,434)3h -- Long-term debt, classified as current........... -- 196,364 (196,364)3h -- Note payable and bank line of credit............ -- 2,995 (2,995)3h -- Current maturities of long-term debt............ 8,373 -- (4,573)3h 3,800 -------- -------- --------- -------- Total current liabilities............... 36,341 360,954 (273,938) 123,357 Note payable...................................... -- 300 -- 300 Existing long-term debt........................... 72,674 -- (66,474)3h 6,200 Notes............................................. -- -- 340,0003h 340,000 Term Loan......................................... -- -- 45,9003h 45,900 Deferred income taxes............................. 2,545 -- 8,9553i 11,500 Minority interest................................. -- 3,572 -- 3,572 Stockholders' equity, net......................... 65,241 35,650 63,8204 164,711 -------- -------- --------- -------- Total liabilities and stockholders' equity................................ $176,801 $400,476 $ 118,263 $695,540 ======== ======== ========= ========
See accompanying notes. F-18 23 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
HISTORICAL ---------------------- PRO FORMA KALITTA ----------------------- KITTY HAWK COMPANIES ADJUSTMENTS COMBINED ---------- --------- ----------- -------- Revenues: Air freight carrier.............................. $ 55,504 $388,193 $ (5,432)2a $438,265 Air logistics.................................... 77,168 -- -- 77,168 Maintenance and other............................ -- 36,348 -- 36,348 -------- -------- -------- -------- Total revenues........................... 132,672 424,541 (5,432) 551,781 Costs of Revenues: Air freight carrier.............................. 40,860 357,830 (3,996)2b 394,694 Air logistics.................................... 67,938 -- -- 67,938 Maintenance and other............................ -- 22,316 -- 22,316 -------- -------- -------- -------- Total costs of revenues.................. 108,798 380,146 (3,996) 484,948 -------- -------- -------- -------- Gross profit (loss)................................ 23,874 44,395 (1,436) 66,833 General and administrative expenses................ 8,943 22,900 -- 31,843 Non-qualified employee profit sharing.............. 1,243 -- -- 1,243 Stock option grants to executives.................. 4,231 -- -- 4,231 -------- -------- -------- -------- Total operating expenses................. 14,417 22,900 -- 37,317 -------- -------- -------- -------- Operating income (loss)............................ 9,457 21,495 (1,436) 29,516 Other Income (expense): Interest expense, net............................ (2,062) (21,632) (16,632)2c (40,326) Other, net....................................... 291 1,266 -- 1,557 -------- -------- -------- -------- Income (loss) before income taxes and minority interest......................................... 7,686 1,129 (18,068) (9,253) Minority interest.................................. -- (1,146) -- (1,146) -------- -------- -------- -------- Income (loss) before income taxes.................. 7,686 (17) (18,068) (10,399) Income taxes (benefit)............................. 3,038 -- (3,038)2d -- -------- -------- -------- -------- Net income (loss)........................ $ 4,648 $ (17) $(15,030) $(10,399) ======== ======== ======== ======== Net income (loss) per share........................ $ 0.55 $ (0.70) ======== ======== Weighted average common and common equivalent shares outstanding............................... 8,477 6,299 14,776 ======== ======== ========
See accompanying notes. F-19 24 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997
HISTORICAL ----------------------- PRO FORMA KALITTA ------------------------ KITTY HAWK COMPANIES ADJUSTMENTS COMBINED ---------- --------- ----------- -------- Revenues: Air freight carrier...................... $55,789 $302,345 $ (4,942)2a $353,192 Air logistics............................ 45,878 -- -- 45,878 Maintenance and other.................... -- 23,299 -- 23,299 ------- -------- -------- -------- Total revenues................... 101,667 325,644 (4,942) 422,369 Costs of Revenues: Air freight carrier...................... 38,076 297,968 (16,721)2b 319,323 Air logistics............................ 42,037 -- -- 42,037 Maintenance and other.................... -- 17,235 -- 17,235 ------- -------- -------- -------- Total costs of revenues.......... 80,113 315,203 (16,721) 378,595 ------- -------- -------- -------- Gross profit............................... 21,554 10,441 11,779 43,774 General and administrative expenses........ 7,550 19,481 -- 27,031 Non-qualified employee profit sharing...... 1,161 -- -- 1,161 ------- -------- -------- -------- Total operating expenses......... 8,711 19,481 -- 28,192 ------- -------- -------- -------- Operating income (loss).................... 12,843 (9,040) 11,779 15,582 Other Income (expense): Interest expense, net.................... (1,809) (19,740) (8,696)2c (30,245) Other, net............................... 579 (103) -- 476 ------- -------- -------- -------- Income (loss) before income taxes and minority interest................................. 11,613 (28,883) 3,083 (14,187) Minority interest.......................... -- (1,859) -- (1,859) ------- -------- -------- -------- Income (loss) before income taxes.......... 11,613 (30,742) 3,083 (16,046) Income taxes (benefit)..................... 4,645 -- (4,645)2d -- ------- -------- -------- -------- Net income (loss)................ $ 6,968 $(30,742) $ 7,728 $(16,046) ======= ======== ======== ======== Net income (loss) per share................ $ 0.67 $ (0.96) ======= ======== Weighted average common and common equivalent shares outstanding............ 10,452 6,299 16,751 ======= ======== ========
See accompanying notes. F-20 25 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS) 1. Allocation of Purchase Price -- Based upon the Kalitta Companies' September 30, 1997 unaudited balance sheet, the purchase price would have been calculated and allocated as follows: PURCHASE PRICE DETERMINATION: Cash...................................................... $ 20,000 4,099,150 shares of Kitty Hawk common stock at an assumed value of $15 per share................................. 61,487 Related expenses.......................................... 2,178 Plus fair value of liabilities assumed: Accounts payable and accrued expenses (including $14,933 maintenance accrual to conform to Kitty Hawk accounting method and record the Kalitta Tax Distribution)......................................... 91,589 Notes payable, reclassified as current................. 58,429 Long-term debt, reclassified as current, including approximately $3,000 in early payment penalties....... 199,364 Note payable........................................... 300 Deferred income taxes.................................. 8,955 Minority interest...................................... 3,572 --------- Total purchase price to allocate.................. $ 445,874 ========= PURCHASE PRICE ALLOCATION: Current assets............................................ $ 127,779 Property and equipment, principally aircraft.............. 318,095 --------- $ 445,874 =========
The foregoing purchase price determination and allocation are based on the September 30, 1997 Kalitta Companies' balance sheet and preliminary estimates of fair value of assets acquired and liabilities assumed. The final purchase price allocation is contingent upon final assessment or appraisal of the fair value of the net assets acquired and the final consideration given. F-21 26 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED) (DOLLARS IN THOUSANDS) 2. Pro Forma Combined Statement of Operations -- The Company's Pro Forma Combined Statement of Operations data for the year ended December 31, 1996 and the nine months ended September 30, 1997 includes the following adjustments:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1996 1997 ------------ ------------- a. Revenues: - Elimination of intercompany revenue................... $ (4,914) $ (4,639) - Elimination of revenue on aircraft to be purchased by Mr. Kalitta........................................... (518) (303) -------- --------- (5,432) (4,942) -------- --------- b. Costs of revenues: - Elimination of intercompany revenue................... (4,914) (4,639) - Elimination of the cost of revenues associated with the aircraft to be purchased by Mr. Kalitta........... (466) (273) - Conforming the Kalitta Companies' aircraft maintenance accounting policy to that of Kitty Hawk............... (2,323) (14,534) - Decreasing insurance costs for the combined fleet..... (1,500) (1,125) - Increase in depreciation expense from the step-up in fair value of acquired property and equipment, principally aircraft, and adjusting the useful lives of the acquired aircraft.............................. 5,207 3,850 -------- --------- (3,996) (16,721) -------- --------- c. Interest expense: - Repaying existing Kalitta Company credit facilities... 20,912 19,200 - Repaying existing Kitty Hawk credit facilities........ 1,882 1,674 - The Notes............................................. (33,830) (25,373) - Term Loan............................................. (4,039) (3,029) - Amortizing deferred financing costs................... (1,557) (1,168) -------- --------- (16,632) (8,696) d. Adjustments to reduce income tax expense by the amount incurred by Kitty Hawk.................................. (3,038) (4,645) -------- --------- $(15,030) $ 7,728 ======== =========
The tax effects of the remaining pro forma net operating loss carryforward at December 31, 1996 and at September 30, 1997 have not been reflected as an income tax benefit in the pro forma statements of operations due the uncertainty of future realization. Interest expense on the $340 million of senior secured notes (the "Notes") is based upon an interest rate of 9.95%. Interest expense on the Company's $45.9 million term loan (the "Term Loan") is calculated assuming an interest rate of 8.8%. Interest on the Term Loan currently accrues at approximately 8.7% and subsequently will accrue at a variable rate equal to LIBOR plus 3% or a base rate plus 1.5%, subject to reduction. Each 1/4 percentage point change in the interest rate of the Term Loan results in a change in interest expense of $115 and $86 for 1996 and the nine months ended September 30, 1997, respectively. F-22 27 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED) (DOLLARS IN THOUSANDS) 3. Pro Forma Balance Sheet -- For purposes of preparing the Unaudited Pro Forma Combined Balance Sheet, the Kalitta Companies' assets and liabilities assumed have been recorded at their estimated fair values, the final determination of which has not yet been made. Accordingly, the purchase accounting adjustments made in connection with the development of the unaudited pro forma financial information reflect the Company's best estimate based upon currently available information. However, such adjustments could change and such changes may be material.
AS OF SEPTEMBER 30, 1997 -------------------- a. Cash: - Issuing 2,200,000 shares of common stock at an offering price of $19 per share................................. $ 41,800 - Cash payment to Mr. Kalitta............................ (20,000) - Proceeds of the Notes.................................. 340,000 - Repaying existing credit facilities including early payment penalties of approximately $3,000.............. (328,840) - Restricted cash........................................ (56,000) - Expenses of the Transactions and the Refinancings...... (16,895) - Proceeds from the Term Loan............................ 45,900 --------- $ 5,965 b. Restricted Cash resulting from the proceeds from the Note Offering used to fund the acquisition of two Boeing 747s..................................................... 56,000 c. Other current assets..................................... (101) d. Property and equipment................................... 46,276 e. Other assets, principally deferred debt costs............ 10,123 f. Adjusting accrued maintenance to conform the Kalitta Companies' accounting policy to that of Kitty Hawk and recording the Kalitta Tax Distribution................... 15,683 g. Deferred gain on sale of aircraft........................ (30,255) h. Adjusting debt outstanding for the following: - The Note Offering...................................... 340,000 - Repayment of existing credit facilities................ (325,840) - Term Loan.............................................. 45,900 --------- 60,060 i. Recording deferred income taxes related to the book and tax basis differences of the assets acquired and liabilities assumed in the Merger........................ $ 8,955
Approximately $10 million of existing debt was not refinanced in connection with the Refinancings. This amount has been reflected on the pro forma balance sheet as Current maturities of long-term debt and Existing long-term debt. 4. Stockholders' Equity -- Stockholders' equity has been adjusted to reflect the issuance of 4,099,150 shares of Kitty Hawk's common stock in conjunction with the Merger and the issuance of 2,200,000 shares at an offering price of $19 per share. F-23 28 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Agreement and Plan of Merger, dated as of September 22, 1997 (the "Merger Agreement"), by and among Kitty Hawk, Inc., Kitty Hawk - AIA, Inc., Kitty Hawk - AIT, Inc., Kitty Hawk - FOL, Inc., Kitty Hawk - KFS, Inc., Kitty Hawk - OK, Inc., M. Tom Christopher, American International Airways, Inc., American International Travel, Inc., Flight One Logistics, Inc., Kalitta Flying Service, Inc., O.K. Turbines, Inc., and Conrad Kalitta. (1) 2.2 Amendment No. 1 to the Merger Agreement, dated October 23, 1997. (1) 2.3 Amendment No. 2 to the Merger Agreement, dated October 29, 1997. (1) 2.4 Amendment No. 3 to the Merger Agreement, dated November 14, 1997. (1) 23.1 Consent of Deloitte & Touche, LLP. (2)
_____________ (1) Incorporated by reference from the Company's Registration Statement on Form S-1 (Reg. No. 333-36125), dated November 1997. (2) Filed herewith. EX-23.1 2 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.1 [DELOITTE & TOUCHE LLP LETTERHEAD] INDEPENDENT AUDITORS' CONSENT To the Board of Directors and Stockholders of American International Airways, Inc. and Related Companies Ypsilanti, Michigan We consent to the incorporation by reference in Registration Statements 333-15667, 333-28553 and 333-23597 of Kitty Hawk, Inc. on Forms S-8 pertaining to the Kitty Hawk, Inc. Amended and Restated Annual Incentive Compensation Plan, Kitty Hawk, Inc. Amended and Restated Employee Stock Purchase Plan and Kitty Hawk, Inc. Amended and Restated Omnibus Securities Plan, respectively, of our report relating to the combined financial statements of American International Airways, Inc. and related companies (collectively the "Companies") dated October 16, 1997 (which report expressed an unqualified opinion and includes an explanatory paragraph which indicates that there are matters that raise substantial doubt about the Companies' ability to continue as a going concern) appearing in this Current Report - Form 8-K of Kitty Hawk, Inc. dated December 4, 1997. DELOITTE & TOUCHE LLP Ann Arbor, Michigan December 4, 1997 -----END PRIVACY-ENHANCED MESSAGE-----