-----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, Fz/9J5XGzKPDOjrDN2Z3YHkEEQg+6Pym1MFxpuY9eVOl+NQKCvV8Cz1GJTPlxwRi Pjkucb+rHJdA7Ci1MYvf8g== 0000950134-98-004465.txt : 19980518 0000950134-98-004465.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950134-98-004465 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 000-25202 FILM NUMBER: 98623336 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 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1998 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 QUARTERLY PERIOD ENDED MARCH 31, 1998 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 8, 1998: 16,766,881. 1 2 KITTY HAWK, INC. AND SUBSIDIARIES
PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets March 31, 1998 and December 31, 1997 ...................... 3 Condensed Consolidated Statements of Operations Three months ended March 31, 1998 and 1997 .................... 4 Condensed Consolidated Statements of Stockholders' Equity Three months ended March 31, 1998 ......................... 5 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1998 and 1997 ................ 6 Notes to Condensed Consolidated Financial Statements .......... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................... 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings ......................................... 22 Item 2. Changes in Securities ..................................... 22 Item 3. Defaults upon Senior Securities ........................... 22 Item 4. Submission of Matters to a Vote of Security Holders ....... 22 Item 5. Other Information ......................................... 22 Item 6. Reports on Form 8-K and Exhibits .......................... 22
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
MARCH 31, DECEMBER 31, 1998 1997 ------------ ------------ ASSETS Current assets Cash and cash equivalents ........................ $ 21,229,372 $ 17,906,714 Restricted cash and short-term investments ....... 16,473,613 58,629,084 Trade accounts receivable ........................ 74,985,257 122,190,906 Deferred income taxes ............................ 15,798,161 15,798,161 Inventory and aircraft supplies .................. 52,753,936 37,158,207 Prepaid expenses and other current assets ........ 27,716,899 25,596,064 ------------ ------------ Total current assets ......................... 208,957,238 277,279,136 ------------ ------------ Property and equipment, net ........................... 598,846,268 545,496,622 Other assets, net ..................................... 13,552,160 13,970,168 ------------ ------------ Total assets .......................................... $821,355,666 $836,745,926 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable ................................. $ 43,170,498 $ 43,646,806 Accrued expenses ................................. 72,403,422 91,128,193 Accrued maintenance reserves ..................... 20,006,594 19,138,292 Revolving Credit Facility ........................ 15,000,000 10,000,000 Current maturities of long-term debt ............. 4,584,653 2,395,208 ------------ ------------ Total current liabilities .................... 155,165,167 166,308,499 ------------ ------------ Long-term debt ........................................ 389,483,830 392,248,252 Deferred income taxes ................................. 99,153,075 99,153,075 Minority interest ..................................... 4,174,202 4,162,689 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 -16,766,881 and 16,750,957 .................... 167,669 167,510 Additional capital ............................... 130,757,613 130,522,885 Retained earnings ................................ 42,454,110 44,183,016 ------------ ------------ Total stockholders' equity ................... 173,379,392 174,873,411 ------------ ------------ Total liabilities and stockholders' equity ............ $821,355,666 $836,745,926 ============ ============
See accompanying notes. 3 4 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED MARCH 31, -------------------------------- 1998 1997 ------------- ------------- Revenues: Air freight carrier ................................... $ 123,825,387 $ 14,887,806 Air logistics ......................................... 14,810,634 13,214,661 Maintenance and other ................................. 8,717,777 -- ------------- ------------- Total revenues .................................... 147,353,798 28,102,467 Costs of revenues: Air freight carrier ................................... 111,262,843 10,872,952 Air logistics ......................................... 12,386,830 11,874,751 Maintenance and other ................................. 6,785,608 -- ------------- ------------- Total costs of revenues ........................... 130,435,281 22,747,703 ------------- ------------- Gross profit ............................................... 16,918,517 5,354,764 General and administrative expenses ........................ 9,434,340 2,512,563 Non-qualified employee profit sharing expense .............. 530,420 271,186 ------------- ------------- Operating income ........................................... 6,953,757 2,571,015 Other income (expense): Interest expense ...................................... (9,699,154) (481,325) Other, net ............................................ 675,398 266,878 ------------- ------------- Income (loss) before minority interest and income taxes .... (2,069,999) 2,356,568 Minority interest .......................................... (811,513) -- ------------- ------------- Income (loss) before income taxes .......................... (2,881,512) 2,356,568 Income tax expense (benefit) ............................... (1,152,606) 942,627 ------------- ------------- Net income (loss) .......................................... $ (1,728,906) $ 1,413,941 ============= ============= Basic and diluted earnings (loss) per share ................ $ (0.10) $ 0.14 ============= ============= Weighted average common shares outstanding ................. 16,759,089 10,451,807 ============= =============
See accompanying notes. 4 5 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)
NUMBER OF COMMON ADDITIONAL RETAINED SHARES STOCK CAPITAL EARNINGS TOTAL ------------- ------------- ------------- ------------- ------------- Balance at December 31, 1997 ........... 16,750,957 $ 167,510 $ 130,522,885 $ 44,183,016 $ 174,873,411 Shares issued in connection with the Employee Stock Purchase Plan ......... 9,084 91 122,728 -- 122,819 Shares issued in connection with the Omnibus Securities Plan .............. 6,840 68 112,000 -- 112,068 Net loss ............................... -- -- -- (1,728,906) (1,728,906) ------------- ------------- ------------- ------------- ------------- Balance at March 31, 1998 .............. 16,766,881 $ 167,669 $ 130,757,613 $ 42,454,110 $ 173,379,392 ============= ============= ============= ============= =============
See accompanying notes. 5 6 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
THREE MONTHS ENDED MARCH 31, ------------------------------ 1998 1997 ------------ ------------ Operating activities: Net income (loss) ................................... $ (1,728,906) $ 1,413,941 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ..................... 11,500,160 2,239,449 Gain on sale of assets ............................ (32,300) -- Minority interest ................................. 811,513 -- Changes in operating assets and liabilities: Trade accounts receivable ....................... 46,732,378 18,237,045 Inventory and aircraft supplies ................. (15,520,729) (761,806) Prepaid expenses and other current assets ....... (5,311,472) 993,179 Accounts payable and accrued expenses ........... (21,381,982) (22,480,903) Accrued maintenance reserves .................... 868,302 31,260 ------------ ------------ Net cash provided by (used in) operating activities .... 15,936,964 (327,835) Investing activities: Capital expenditures ................................ (61,906,537) (17,976,541) Redemption of short term investments ................ 43,794,500 -- Proceeds from sale of assets ........................ 1,831,500 -- ------------ ------------ Net cash used in investing activities .................. (16,280,537) (17,976,541) Financing activities: Proceeds from issuance of long-term debt ............ -- 3,349,578 Repayments of long-term debt ........................ (574,977) (910,679) Net borrowings on Revolving Credit Facility ......... 5,000,000 -- Distributions to minority interest .................. (800,000) -- Note receivable issued to stockholder ............... 41,140 -- Stock issued in connection with the Omnibus Securities Plan ..................................... 68 -- ------------ ------------ Net cash provided by financing activities .............. 3,666,231 2,438,899 ------------ ------------ Net increase (decrease) in cash and cash equivalents ... 3,322,658 (15,865,477) Cash and cash equivalents at beginning of period ....... 17,906,714 27,320,402 ------------ ------------ Cash and cash equivalents at end of period ............. $ 21,229,372 $ 11,454,925 ============ ============
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 filed with the Securities and Exchange Commission for the year ended December 31, 1997, are unaudited (except for the December 31, 1997 condensed consolidated balance sheet which was derived from the Company's audited consolidated balance sheet included in the aforementioned Form 10-K), 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, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. 2. ACQUISITION OF THE KALITTA COMPANIES On November 19, 1997, the Company acquired by merger all of the outstanding common stock of American International Airways, Inc. ("AIA"), including a 60% interest in American International Cargo ("AIC"), Kalitta Flying Service, Inc. ("KFS"), Flight One Logistics, Inc. ("FOL"), O. K. Turbines, Inc. ("OKT") and American International Travel, Inc. ("AIT") (collectively, the "Kalitta Companies") in exchange for 4,099,150 shares of the Company's common stock (valued by an independent appraisal at approximately $60.3 million) and $20 million in cash. The transaction has been accounted for as a purchase. Concurrently with the consummation of the acquisition, the Company closed a 3,000,000 share common stock offering and a $340 million senior secured note offering. Of the 3,000,000 shares sold in the common stock offering, the Company sold 2,200,000 shares and certain stockholders of the Company (the "Selling Stockholders") sold 800,000 shares. Net proceeds to the Company from the common stock offering were approximately $38.3 million. The Company did not receive any of the net proceeds from the sale of shares by the Selling Stockholders. 3. LEGAL PROCEEDINGS The Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company. 4. NEW ACCOUNTING PRONOUNCEMENTS In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") effective for years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of financial statements. Because the Company does not currently have any transactions that give rise to differences between net income and comprehensive income, SFAS 130 is not expected to have a significant impact on the Company. 5. SUPPLEMENTAL GUARANTOR INFORMATION In November 1997, the Company sold $340 million of 9.95% Senior Secured Notes due 2004 (the "Notes"). 7 8 Each of the Company's subsidiaries, with the exception of AIC, (collectively, the "Guarantors") have fully and unconditionally and jointly and severally guaranteed (the "Guarantees") on a senior basis, the full and prompt performance of the Company's obligations under the Notes. The Guarantees are limited to the largest amount that would not render such Guarantees subject to avoidance under any applicable federal or state fraudulent conveyance or similar law. The Guarantees rank senior in right of payment to any subordinated indebtedness and, except with respect to collateral, pari passu with all existing and future unsubordinated indebtedness of the Guarantors. Each of the Guarantors is a wholly-owned subsidiary of the Company. Supplemental financial information is presented for the year ended December 31, 1997 and the three months ended March 31, 1998. The Company has not presented separate financial statements and other disclosures concerning the Guarantors because the Company's management has determined that such information is not material to investors. Prior to January 1, 1998, the Company was not required to present such supplemental financial information. 8 9 Kitty Hawk, Inc. Notes to Condensed Consolidated Financial Statements - (Continued) Supplemental Combining Balance Sheets Condensed Financial Information December 31, 1997 ASSETS
The Company AIC excluding AIC (Non- (Guarantors) Guarantor) Eliminations Total ------------- ------------- ------------- ------------- Cash and cash equivalents $ 16,624,585 $ 1,282,129 -- $ 17,906,714 Restricted cash and short-term investments 58,629,084 -- -- 58,629,084 Trade accounts receivable 114,396,047 9,632,462 $ (1,837,603) 122,190,906 Deferred income taxes 15,798,161 -- -- 15,798,161 Inventory and aircraft supplies 37,158,207 -- -- 37,158,207 Prepaid expenses and other current assets 25,505,936 90,128 -- 25,596,064 ------------- ------------- ------------- ------------- Total current assets 268,112,020 11,004,719 (1,837,603) 277,279,136 Property and equipment, net 544,935,738 560,884 -- 545,496,622 Investment in AIC 6,271,033 -- (6,271,033) -- Other assets, net 13,970,168 -- -- 13,970,168 ------------- ------------- ------------- ------------- Total assets $ 833,288,959 $ 11,565,603 $ (8,108,636) $ 836,745,926 ============= ============= ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 44,423,513 $ 587,255 $ (1,363,962) $ 43,646,806 Accrued expenses 91,030,207 571,627 (473,641) 91,128,193 Accrued maintenance reserves 19,138,292 -- -- 19,138,292 Revolving Credit Facility 10,000,000 -- -- 10,000,000 Current maturities of long-term debt 2,395,208 -- -- 2,395,208 ------------- ------------- ------------- ------------- Total current liabilities 166,987,220 1,158,882 (1,837,603) 166,308,499 Long-term debt 392,248,252 -- -- 392,248,252 Deferred income taxes 99,153,075 -- -- 99,153,075 ------------- ------------- ------------- ------------- Total liabilities 658,388,547 1,158,882 (1,837,603) 657,709,826 ------------- ------------- ------------- ------------- Minority interest in AIC -- -- 4,162,689 4,162,689 Stockholders' equity Preferred stock -- -- -- -- Common stock 167,510 -- -- 167,510 Additional capital 130,522,885 2,817,472 (2,817,472) 130,522,885 Retained earnings 44,210,017 7,589,249 (7,616,250) 44,183,016 ------------- ------------- ------------- ------------- Total stockholders' equity 174,900,412 10,406,721 (10,433,722) 174,873,411 ------------- ------------- ------------- ------------- Total liabilities and stockholders' equity $ 833,288,959 $ 11,565,603 $ (8,108,636) $ 836,745,926 ============= ============= ============= =============
9 10 Kitty Hawk, Inc. Notes to Condensed Consolidated Financial Statements - (Continued) Supplemental Combining Balance Sheets Condensed Financial Information March 31, 1998 ASSETS
The Company AIC excluding AIC (Non- (Guarantors) Guarantor) Eliminations Total ------------ ------------ ------------ ------------ Cash and cash equivalents $ 19,279,438 $ 1,949,934 -- $ 21,229,372 Restricted cash and short-term investments 16,473,613 -- -- 16,473,613 Trade accounts receivable 67,350,867 9,176,716 $ (1,542,326) 74,985,257 Deferred income taxes 15,798,161 -- -- 15,798,161 Inventory and aircraft supplies 52,753,936 -- -- 52,753,936 Prepaid expenses and other current assets 27,428,276 288,623 -- 27,716,899 ------------ ------------ ------------ ------------ Total current assets 199,084,291 11,415,273 (1,542,326) 208,957,238 Property and equipment, net 598,299,771 546,497 -- 598,846,268 Investment in AIC 5,044,033 -- (5,044,033) -- Other assets, net 13,552,160 -- -- 13,552,160 ------------ ------------ ------------ ------------ Total assets $815,980,255 $ 11,961,770 $ (6,586,359) $821,355,666 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 43,749,491 $ 942,083 $ (1,521,076) $ 43,170,498 Accrued expenses 71,840,489 584,183 (21,250) 72,403,422 Accrued maintenance reserves 20,006,594 -- -- 20,006,594 Revolving Credit Facility 15,000,000 -- -- 15,000,000 Current maturities of long-term debt 4,584,653 -- -- 4,584,653 ------------ ------------ ------------ ------------ Total current liabilities 155,181,227 1,526,266 (1,542,326) 155,165,167 Long-term debt 389,483,830 -- -- 389,483,830 Deferred income taxes 99,153,075 -- -- 99,153,075 ------------ ------------ ------------ ------------ Total liabilities 643,818,132 1,526,266 (1,542,326) 643,802,072 Minority interest in AIC -- -- 4,174,202 4,174,202 Stockholders' equity Preferred stock -- -- -- -- Common stock 167,669 -- -- 167,669 Additional capital 130,757,613 8,406,722 (8,406,722) 130,757,613 Retained earnings 41,236,841 2,028,782 (811,513) 42,454,110 ------------ ------------ ------------ ------------ Total stockholders' equity 172,162,123 10,435,504 (9,218,235) 173,379,392 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $815,980,255 $ 11,961,770 $ (6,586,359) $821,355,666 ============ ============ ============ ============
10 11 Kitty Hawk, Inc. Notes to Condensed Consolidated Financial Statements - (Continued) Supplemental Combining Statements of Operations Condensed Financial Information For the year ended December 31, 1997
The Company AIC excluding AIC (Non- (Guarantors) Guarantor) Eliminations Total ------------- ------------- ------------- ------------- Revenue Air freight carrier $ 134,703,342 $ 8,234,142 $ (5,651,217) $ 137,286,267 Air logistics 112,556,233 -- -- 112,556,233 ------------- ------------- ------------- ------------- Total revenues 247,259,575 8,234,142 (5,651,217) 249,842,500 Costs of revenues Air freight carrier 99,473,877 6,775,738 (5,651,217) 100,598,398 Air logistics 95,092,512 -- -- 95,092,512 ------------- ------------- ------------- ------------- Total costs of revenues 194,566,389 6,775,738 (5,651,217) 195,690,910 ------------- ------------- ------------- ------------- Gross profit 52,693,186 1,458,404 -- 54,151,590 General and administrative expenses 14,872,206 233,621 -- 15,105,827 Non-qualified employee profit sharing expense 2,428,934 -- -- 2,428,934 ------------- ------------- ------------- ------------- Operating income 35,392,046 1,224,783 -- 36,616,829 Other income (expense): Interest expense (6,923,998) -- -- (6,923,998) Other, net 1,091,342 18,767 -- 1,110,109 ------------- ------------- ------------- ------------- Income before minority interest and income taxes 29,559,390 1,243,550 -- 30,802,940 Minority interest in AIC -- -- (497,420) (497,420) ------------- ------------- ------------- ------------- Income before income taxes 29,559,390 1,243,550 (497,420) 30,305,520 Income taxes 12,415,802 -- -- 12,415,802 ------------- ------------- ------------- ------------- Net income $ 17,143,588 $ 1,243,550 $ (497,420) $ 17,889,718 ============= ============= ============= =============
11 12 Kitty Hawk, Inc. Notes to Consolidated Condensed Financial Statements - (Continued) Supplemental Combining Statements of Operations Condensed Financial Information For the three months ended March 31, 1998
The Company AIC excluding AIC (Non- (Guarantors) Guarantor) Eliminations Total ------------- ------------- ------------- ------------- Revenue Air freight carrier $ 116,545,849 $ 14,345,907 $ (7,066,369) $ 123,825,387 Air logistics 14,810,634 -- -- 14,810,634 Maintenance 8,717,777 -- -- 8,717,777 ------------- ------------- ------------- ------------- Total revenues 140,074,260 14,345,907 (7,066,369) 147,353,798 Costs of revenues Air freight carrier 106,363,072 11,966,140 (7,066,369) 111,262,843 Air logistics 12,386,830 -- -- 12,386,830 Maintenance 6,785,608 -- -- 6,785,608 ------------- ------------- ------------- ------------- Total costs of revenues 125,535,510 11,966,140 (7,066,369) 130,435,281 ------------- ------------- ------------- ------------- Gross profit 14,538,750 2,379,767 -- 16,918,517 General and administrative expenses 9,044,898 389,442 -- 9,434,340 Non-qualified employee profit sharing expense 530,420 -- -- 530,420 ------------- ------------- ------------- ------------- Operating income 4,963,432 1,990,325 6,953,757 Other income (expense): Interest expense (9,699,154) -- -- (9,699,154) Other, net 636,941 38,457 -- 675,398 ------------- ------------- ------------- ------------- Income (loss) before minority interest and income taxes (4,098,781) 2,028,782 -- (2,069,999) Minority interest in AIC -- -- (811,513) (811,513) ------------- ------------- ------------- ------------- Income (loss) before income taxes (4,098,781) 2,028,782 (811,513) (2,881,512) Income tax benefit (1,152,606) -- -- (1,152,606) ------------- ------------- ------------- ------------- Net income (loss) $ (2,946,175) $ 2,028,782 $ (811,513) $ (1,728,906) ============= ============= ============= =============
12 13 Kitty Hawk, Inc. Notes to Consolidated Condensed Financial Statements - (Continued) Supplemental Combining Statement of Cash Flows Condensed Financial Information For the year ended December 31, 1997
The Company AIC excluding AIC (Non- (Guarantors) Guarantor) Eliminations Total ------------- ------------- ------------- ------------- Cash provided by operating activities $ 19,053,252 $ 1,043,545 $ 497,420 $ 20,594,217 Investing Activities: Purchase of Kalitta Companies, net of cash acquired (315,550,749) -- -- (315,550,749) Proceeds from sale of assets 1,810,000 6,800 -- 1,816,800 Investment in AIC 977,420 -- (977,420) -- Capital expenditures (113,460,317) -- -- (113,460,317) ------------- ------------- ------------- ------------- Net cash provided by (used in) investing activities (426,223,646) 6,800 (977,420) (427,194,266) Financing Activities Proceeds from 9.95% Senior Secured Notes, net 329,069,351 -- -- 329,069,351 Proceeds from issuance of common stock, net 38,341,566 -- -- 38,341,566 Proceeds from issuance of long-term debt, net 50,418,441 -- -- 50,418,441 Borrowings on Revolving Credit Facility 16,230,000 -- -- 16,230,000 Repayments of debt (36,511,857) -- -- (36,511,857) Net partner withdrawals -- (800,000) 800,000 -- Distributions to minority interest -- -- (320,000) (320,000) Note receivable from shareholder (41,140) -- -- (41,140) ------------- ------------- ------------- ------------- Net cash provided by (used in) investing activities 397,506,361 (800,000) 480,000 397,186,361 ------------- ------------- ------------- ------------- Increase (decrease) in cash (9,664,033) 250,345 -- (9,413,688) Cash and cash equivalents, beginning of period 26,288,618 1,031,784 -- 27,320,402 ------------- ------------- ------------- ------------- Cash and cash equivalents, end of period $ 16,624,585 $ 1,282,129 $ -- $ 17,906,714 ============= ============= ============= =============
13 14 Kitty Hawk, Inc. Notes to Consolidated Condensed Financial Statements - (Continued) Supplemental Combining Statement of Cash Flows Condensed Financial Information For the three months ended March 31, 1998
The Company AIC excluding AIC (Non- (Guarantors) Guarantor) Eliminations Total ------------ ------------ ------------ ------------ Cash provided by operating activities $ 12,438,890 $ 2,686,561 $ 811,513 $ 15,936,964 Investing Activities: Capital expenditures (61,887,781) (18,756) -- (61,906,537) Redemption of short term investments 43,794,500 -- -- 43,794,500 Investment in AIC 2,011,513 -- (2,011,513) -- Proceeds from sale of assets 1,831,500 -- -- 1,831,500 ------------ ------------ ------------ ------------ Net cash (used in) investing activities (14,250,268) (18,756) (2,011,513) (16,280,537) Financing Activities Repayments of debt (574,977) -- -- (574,977) Net borrowings of revolver 5,000,000 -- -- 5,000,000 Net partner withdrawals -- (2,000,000) 2,000,000 -- Distributions to minority interest -- -- (800,000) (800,000) Note receivable from shareholder 41,140 -- -- 41,140 Stock issued in connection with the Omnibus Securities Plan 68 -- -- 68 ------------ ------------ ------------ ------------ Net cash provided by (used by) investing activities 4,466,231 (2,000,000) 1,200,000 3,666,231 ------------ ------------ ------------ ------------ Increase in cash 2,654,853 667,805 -- 3,322,658 Cash and cash equivalents, beginning of period 16,624,585 1,282,129 -- 17,906,714 ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period $ 19,279,438 $ 1,949,934 $ -- $ 21,229,372 ============ ============ ============ ============
14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Acquisition of the Kalitta Companies. On November 19, 1997, the Company acquired all of the outstanding common stock of American International Airways, Inc., including a 60% interest in American International Cargo ("AIC"), Kalitta Flying Service, Inc., Flight One Logistics, Inc., O. K. Turbines, Inc. and American International Travel, Inc. (collectively, the "Kalitta Companies"). The results of operations for the three months ended March 31, 1998 include the results of operations of the Kalitta Companies. The pro forma results of operations for the three months ended March 31, 1997 include the results of the Kalitta Companies as if they had been acquired as of January 1, 1997. The historical results of operations for the three months ended March 31, 1997 do not include the results of operations of the Kalitta Companies. Revenues. The Company's revenues are derived from three related businesses: (i) air freight carrier, (ii) air logistics and (iii) maintenance. Air freight carrier revenues are derived substantially from aircraft, crew, maintenance, and insurance ("ACMI") contracts and on-demand charters flown with the Company's aircraft. In addition, revenues from the Company's scheduled overnight freight service and passenger charter services are also included in air freight carrier revenues. Air logistics revenues are derived substantially from on-demand air freight charters arranged by the Company for its customers utilizing the flight services of third party air freight carriers. With respect to on- demand charters that are arranged by the Company and flown with its aircraft, 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. Maintenance revenues are generated through maintenance performed on engines, airframes and other accessories owned by third parties. The principal factors that have contributed to revenue growth over the past several years have been (i) increases in the Company's fleet through purchases of aircraft and the acquisition of the Kalitta Companies in November 1997, (ii) the general U.S. economic expansion and (iii) increased global demand for time sensitive air freight services. Costs of Revenues. The principal components of the costs of revenues attributable to the air freight carrier business 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 ACMI contract charters is generally provided by the customer or billed to the customer on a direct pass-through basis, although the Company absorbs the cost of fuel in its scheduled freight operations. 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 on the Company's aircraft, all related air transportation expenses are allocated to the air freight carrier business and all related cargo ground handling and transportation expenses are allocated to the air logistics business. The principal components of the costs of revenues for maintenance consist of maintenance personnel salaries and aircraft and engine parts and supplies. The Company's gross margins have been substantially higher in its air freight carrier business (which uses Company aircraft) than in its air logistics business (which principally uses third party aircraft). In addition, the air freight carrier business historically has provided a more predictable revenue base. Accordingly, the Company is continuing to shift its aircraft from on-demand service to ACMI contracts. Pro Forma Results of Operations. The following sets forth the unaudited pro forma consolidated statement of operations for the quarter ended March 31, 1997, giving effect to (i) the November 1997 acquisition of the Kalitta Companies, (ii) the issuance of the Company's 9.95% Senior Secured Notes due 2004 (the "Notes"), (iii) the incurrence of a $45.9 million term loan and (iv) the September 1997 acquisition of 16 Boeing 727s from the Kalitta Companies, each as if they occurred on January 1, 1997. This information is presented for illustrative purposes only 15 16 and does not purport to present the results of operations of the Company had these transactions occurred on the dates indicated, nor are they necessarily indicative of the consolidated results of operations which may be expected to occur in the future. No pro forma adjustments have been applied to reflect (i) revenues or operating costs expected to be generated from the two Boeing 747s recently purchased and to be modified with approximately $56 million of the net proceeds from the sale of the Notes or (ii) operating efficiencies or cost savings (other than approximately $1.5 million of insurance savings) expected to result from the acquisition of the Kalitta Companies. In addition, pro forma results have not been adjusted to eliminate (i) abnormally high engine maintenance expenses previously incurred in response to certain Federal Aviation Administration ("FAA") Airworthiness Directives ("Directives"), (ii) costs previously incurred to add and maintain flight crews in anticipation of increased air freight carrier business which had not yet materialized in part due to delays in acquiring aircraft and (iii) start-up costs previously incurred to establish the Company's wide-body passenger charter business.
THREE MONTHS ENDED ------------------ MARCH 31, 1997 -------------- Pro Forma Revenues: Air freight carrier ................................... $ 100,421,153 Air logistics ......................................... 13,214,661 Maintenance and other ................................. 6,410,799 ------------- Total revenues .................................... 120,046,613 Costs of revenues: Air freight carrier ................................... 105,910,516 Air logistics ......................................... 11,874,751 Maintenance and other ................................. 4,513,202 ------------- Total costs of revenues ........................... 122,298,469 ------------- Gross profit (loss) ........................................ (2,251,856) General and administrative expenses ........................ 8,394,738 Non-qualified employee profit sharing expense .............. 271,186 ------------- Operating loss ............................................. (10,917,780) Other income (expense): Interest expense ...................................... (10,147,080) Other, net ............................................ 1,792,546 ------------- Loss before minority interest and income taxes ............. (19,272,314) Minority interest .......................................... (337,939) ------------- Loss before income taxes ................................... (19,610,253) Income tax benefit ......................................... (7,459,966) ------------- Net loss ................................................... $ (12,150,287) ============= Basic and diluted loss per share ........................... $ (0.73) ============= Weighted average common shares outstanding ................. 16,750,957 =============
16 17 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, ---------------------------- 1998 PRO FORMA 1997 HISTORICAL 1997 ----------------------- ---------------------------- ----------------------- Air freight carrier: Revenues .............. $ 123,825 100.0% $ 100,421 100.0% $ 14,888 100.0% Costs of revenues ..... 111,263 89.9 105,910 105.5 10,873 73.0 --------- --------- --------- --------- --------- --------- Gross profit (loss) ... $ 12,562 10.1% $ (5,489) (5.5)% $ 4,015 27.0% ========= ========= ========= ========= ========= ========= Air logistics: Revenues .............. $ 14,811 100.0% $ 13,215 100.0% $ 13,215 100.0% Costs of revenues ..... 12,387 83.6 11,875 89.9 11,875 89.9 --------- --------- --------- --------- --------- --------- Gross profit .......... $ 2,424 16.4% $ 1,340 10.1% $ 1,340 10.1% ========= ========= ========= ========= ========= ========= Maintenance and other: Revenues .............. $ 8,718 100.0% $ 6,411 100.0% -- -- Costs of revenues ..... 6,785 77.8 4,513 70.4 -- -- --------- --------- --------- --------- --------- --------- Gross profit .......... $ 1,933 22.2% $ 1,898 29.6% -- -- ========= ========= ========= ========= ========= =========
The following table presents, for the periods indicated, condensed consolidated statement of operations data expressed as a percentage of total revenues:
THREE MONTHS ENDED MARCH 31, ----------------------------- 1998 PRO FORMA 1997 HISTORICAL 1997 ---------- ----------------------------- --------------- Revenues: Air freight carrier .................... 84.0% 83.7% 53.0% Air logistics .......................... 10.1 11.0 47.0 Maintenance and other .................. 5.9 5.3 -- ----- ----- ----- Total revenues ..................... 100.0 100.0 100.0 Total costs of revenues ..................... 88.5 101.9 80.9 ----- ----- ----- Gross profit (loss) ......................... 11.5 (1.9) 19.1 General and administrative expenses ......... 6.4 7.0 8.9 Non-qualified employee profit sharing ....... 0.4 0.2 1.0 ----- ----- ----- expense ..................................... Operating income (loss) ..................... 4.7 (9.1) 9.2 Interest expense ............................ (6.6) (8.5) (1.7) Other income ................................ 0.5 1.5 0.9 ----- ----- ----- Income (loss) before minority interest and income taxes ............................ (1.4) (16.1) 8.4 Minority interest ........................... 0.6 0.2 -- ----- ----- ----- Income (loss) before income taxes ........... (2.0) (16.3) 8.4 Income taxes expense (benefit) .............. (0.8) (6.2) 3.4 ----- ----- ----- Net income (loss) ........................... (1.2)% (10.1)% 5.0% ===== ===== =====
Due to the impact the acquisition of the Kalitta Companies and related transactions have had on the financial statements and results of operations of the Company, management has determined that the historical results of operations for the quarter ended March 31, 1997 lack meaningful comparibility to the results of operations for the quarter ended March 31, 1998. As a result, the Company has provided a comparison of the pro forma quarter ended March 31, 1997 to the quarter ended March 31, 1998, which the Company believes provides the most relevant and useful information to investors. Other than the information provided above, no further comparison of the historical results of operations for the quarter ended March 31, 1997 to the quarter ended March 31, 1998 is provided herein. 17 18 QUARTER ENDED MARCH 31, 1998 COMPARED TO PRO FORMA QUARTER ENDED MARCH 31, 1997 Revenues - Air Freight Carrier. Air freight carrier revenues increased $23.4 million, or 23.3%, to $123.8 million in the quarter ended March 31, 1998, from $100.4 million in the pro forma quarter ended March 31, 1997. This increase was primarily attributable to an increase in the jet aircraft fleet from 63 aircraft at March 31, 1997 to 68 aircraft at March 31, 1998 which permitted an increase in ACMI contract charters, including passenger charters attributable to placing two Lockheed L-1011s and two Boeing 747s into revenue service after March 31, 1997. Air freight carrier on- demand charters, ACMI contract charters and scheduled operations revenues were $14.7 million, $72.4 million and $36.2 million, or 11.9%, 58.5% and 29.2%, respectively, of total air freight carrier revenues for the quarter ended March 31, 1998, as compared to $17.2 million, $45.8 million and $36.4 million, or 17.2%, 45.6% and 36.2%, respectively, for the pro forma quarter ended March 31, 1997. Revenues from on-demand charters flown by Company aircraft for the quarter ended March 31, 1998 decreased 14.4% from the pro forma prior year period due to aircraft being shifted from on-demand to ACMI contract charter service, consistent with the Company's strategy of using more of its fleet in ACMI business which produces relatively stable revenues. Revenue from the Company's scheduled operations declined $0.2 million in the quarter ended March 31, 1998 as compared to the pro forma quarter ended March 31, 1997 due to increased weather-related downtime. The Company has also implemented selective price increases for its ACMI contract charters and scheduled operations. Revenues - Air Logistics. Air logistics revenues increased $1.6 million, or 12.1%, to $14.8 million in the quarter ended March 31, 1998, from $13.2 million in the pro forma quarter ended March 31, 1997. This increase was primarily due to increased demand for charters that require large aircraft, which generate greater revenues. The number of trips managed increased slightly from 3,191 in the pro forma quarter ended March 31, 1997 to 3,219 for the period ended March 31, 1998. Prices for the Company's air logistics services remained relatively constant. Revenues - Maintenance and Other. Maintenance and other revenues increased $2.3 million, or 36.7%, to $8.7 million in the quarter ended March 31, 1998, from $6.4 million in the pro forma quarter ended March 31, 1997. This increase was primarily due to increased third party engine maintenance revenue and to additional revenues from airframe maintenance performed for a third party. Costs of Revenues - Air Freight Carrier. Air freight carrier costs of revenues increased $5.4 million, or 5.1%, to $111.3 million in the quarter ended March 31, 1998, from $105.9 million in the pro forma quarter ended March 31, 1997. This increase was primarily due to increased fleet size and operating additional ACMI contract charters. The gross profit margin from the air freight carrier increased to 10.1% in the quarter ended March 31, 1998, from a gross loss margin of (5.5)% in the pro forma quarter ended March 31, 1997. This increase in gross margin was a result of (i) lower maintenance expenses during the period ended March 31, 1998 as compared to the pro forma quarter ended March 31, 1997 when higher component repairs were required by several engine-related Directives and (ii) lower average fuel prices in the quarter ended March 31, 1998 as compared to the quarter ended March 31, 1997. Costs of Revenues - Air Logistics. Air logistics costs of revenues increased $0.5 million, or 4.3%, to $12.4 million in the quarter ended March 31, 1998, from $11.9 million in the pro forma quarter ended March 31, 1997, reflecting an increased volume of business. The gross profit margin from air logistics increased to 16.4% in the quarter ended March 31, 1998 from 10.1% in the pro forma quarter ended March 31, 1997. The increase in gross margin is a result of directing a larger percentage of on-demand charters to the Company's aircraft (including aircraft acquired from the Kalitta Companies) rather than to third party aircraft, which results in a higher gross margin to the Company. Costs of Revenues - Maintenance and Other. Maintenance and other costs of revenues increased $2.3 million, or 50.3%, to $6.8 million in the quarter ended March 31, 1998, from $4.5 million in the pro forma quarter ended March 31, 1997, reflecting an increase in third party maintenance revenues. The gross profit margin from maintenance decreased to 22.2% in the quarter ended March 31, 1998 from 29.2% in the pro forma quarter ended March 31, 1997. The decrease in gross margin is a result of higher costs incurred, which the Company was unable to pass on to customers based on negotiated pricing. Garrett Devries Fax 651-5940 18 19 General and Administrative Expenses. General and administrative expenses increased $1 million, or 12.4%, to $9.4 million in the quarter ended March 31, 1998, from $8.4 million in the pro forma quarter ended March 31, 1997. 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, 1998. As a percentage of total revenues, general and administrative expenses decreased to 6.4% in the quarter ended March 31, 1998, as compared to 7% for the pro forma quarter ended March 31, 1997. Operating Income. As a result of the above, operating income increased $17.9 million to $7 million in the quarter ended March 31, 1998, from an operating loss of $10.9 million in the pro forma quarter ended March 31, 1997. Operating income margin increased to 4.7% in the quarter ended March 31, 1998, from a loss margin of (9.1)% in the pro forma quarter ended March 31, 1997. Interest Expense. Interest expense decreased to $9.7 million for the quarter ended March 31, 1998, from $10.1 million for the pro forma quarter ended March 31, 1997, a 4.4% decrease. The decrease was primarily the result of capitalizing approximately $0.7 million of interest expense in connection with funds used in the cargo modification of one Boeing 747. Income Tax Benefit. Income tax benefit as a percentage of loss before income taxes increased to 40% for the quarter ended March 31, 1998, from 38% for the pro forma prior year period. The increase was primarily due to the pro forma results not reflecting the full tax benefit of the net operating loss carryforwards of the Kalitta Companies due to the uncertainty of the Kalitta Companies' future ability to realize such net operating loss carry forwards prior to the Company's acquisition of the Kalitta Companies. Net Loss. As a result of the above, the Company's net loss decreased to $1.7 million in the quarter ended March 31, 1998, compared to a net loss of $12.2 million in the pro forma quarter ended March 31, 1997. Net loss as a percentage of total revenues increased to (1.2)% in the quarter ended March 31, 1998, from (10.1)% in the pro forma prior year period. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily for the acquisition and modification of aircraft, working capital and the expansion and improvement of maintenance and support facilities. In addition, the Company has, and will continue to have, capital requirements for the requisite periodic and major overhaul maintenance checks for its fleet and for debt service. The Company also has seasonal working capital needs, because it generates higher revenue and cash flow in the fourth calendar quarter and lower revenue and cash flow in the first calendar quarter. The Company's cash requirements for maintenance and working capital (particularly its seasonal requirements) have increased substantially due to the acquisition of the Kalitta Companies. Funding requirements have historically been met through internally generated funds, bank borrowings and aircraft sales and from public and private offerings of equity and debt securities. From time to time, the Company has entered into sale/leaseback transactions to acquire aircraft and may do so in the future. In connection with the acquisition of the Kalitta Companies, the Company sold 2,200,000 shares of Common Stock resulting in net proceeds to the Company of approximately $38.3 million. In addition, the Company issued the Notes, resulting in net proceeds to the Company of approximately $329.1 million. Of the approximately $367.4 million of net proceeds, the Company used approximately $249.8 million to pay off substantially all of the Kalitta Companies pre- acquisition indebtedness, $33 million to refinance Kitty Hawk's indebtedness, $39.6 million to acquire two Boeing 747s, $20 million to pay the cash portion of the consideration for the Kalitta Companies, $16.4 million to fund a portion of the costs to modify two recently acquired Boeing 747s from passenger to cargo configuration, $6 million for working capital purposes and $2.6 million to pay expenses incurred in connection with the acquisition, a new credit facility and a new term loan. The Notes provide for semi-annual interest payments of approximately $16.9 million on each May 15 and November 15 and mature in November 2004. The Notes are secured by a fleet of 30 aircraft, including nine Boeing 19 20 747s (two of which were purchased in February 1998), eight Lockheed L-1011s and 13 Boeing 727s. The Notes are guaranteed by all of the Company's subsidiaries, other than AIC. The Company has a $45.9 million outstanding Term Loan. The Term Loan is due in quarterly installments of $2.25 million commencing in March 1999, with the balance of $12.15 million due upon maturity in September 2002. Interest on the Term Loan accrues at LIBOR plus 3% or a Base Rate plus 1.5%, subject to reduction. The Base Rate is the higher of the Prime Rate of Wells Fargo Bank, N.A. ("WFB") or the Federal Funds Rate plus .5%. As of March 31, 1998, the interest rate was 8.63%. The Term Loan is secured by accounts receivable, all spare parts (including rotables), inventory, intangibles and contract rights, cash, 16 Boeing 727s and related engines, the stock of each of the Company's subsidiaries and the Company's 60% interest in AIC. The Term Loan is guaranteed by all of the Company's subsidiaries, other than AIC. In addition, to fund ongoing capital requirements, including possible acquisitions, the Company has entered into a Credit Facility with WFB, individually and as agent for various lenders. The Credit Facility provides the Company with up to $100 million in revolving loans (subject to a current borrowing base limitation of approximately $61.1 million) and is secured by the same collateral as the Term Loan. The Credit Facility initially bears interest at LIBOR plus 2.75% or a Base Rate plus 1.25%, subject to adjustment. The Base Rate is the higher of WFB's Prime Rate or the Federal Funds Rate plus .5%. Borrowings under the Credit Facility are subject to borrowing base limitations based on eligible inventory and accounts receivable. The Credit Facility matures in November 2002. As of March 31, 1998, the Company had a balance of $15 million outstanding under the Credit Facility bearing interest at 9.75% and available borrowings under the Credit Facility of approximately $46.1 million. Borrowings under the Credit Facility and Term Loan are subject to certain financial covenants. Capital expenditures were $61.9 million and $18.0 million for three months ended March 31, 1998 and 1997, respectively. Capital expenditures for the first quarter of 1998 were primarily for the purchase of (i) two Boeing 747s, (ii) cargo modifications to one Boeing 747 and one Boeing 727, (iii) heavy maintenance checks on three Boeing 727s, (iv) noise abatement modifications for three Boeing 727s, (v) engine overhauls, (vi) improvements to new office space at Dallas/Fort Worth International Airport and (vii) purchase of rotable aircraft parts. Capital expenditures for first quarter of 1997 were primarily for the purchase of (i) two Boeing 727 aircraft, (ii) cargo and noise abatement modifications for one Boeing 727 aircraft and one DC9-15F aircraft, (iii) two used JT8-7 jet engines, (iv) leasehold improvements to Boeing 727-200 aircraft, (v) the lease of the Company's 40,000 square foot headquarters facility and (vi) major maintenance checks. During the remainder of 1998, the Company estimates that capital expenditures will aggregate approximately $93.6 million and that it will make substantial capital expenditures thereafter. As of March 24, 1998, the Company had acquired two Boeing 747s for approximately $39.6 million (net of deposits) and anticipates modifying these aircraft to cargo configuration and having other work performed at an aggregate cost of approximately $30.7 million. The acquisition of the Boeing 747s was funded with approximately $39.6 million of the net proceeds from the Company's November 1997 Note offering. The cargo conversion will be funded with approximately $16.4 million of the net proceeds from the Note offering and approximately $14.3 million of internally generated funds or borrowings under the Credit Facility. Additionally, the Company anticipates converting one Boeing 727 aircraft from passenger to freighter configuration during 1998 at a cost of approximately $5 million. During 1998, the Company anticipates capital expenditures ranging from $27 million to $32 million for noise abatement modifications to Douglas DC-9 and Boeing 727 aircraft currently owned. The Company's total capital expenditures for noise abatement modifications for its existing fleet of owned and leased aircraft is expected to be between $80 million and $90 million. The entire fleet must be Stage III compliant by the year 2000. In the event more aircraft are acquired, anticipated capital expenditures for noise abatement modifications could materially increase. Service Bulletins and Directives issued under the FAA's "Aging Aircraft" program or issued on an ad hoc basis cause certain of the Company's aircraft to be subject to extensive aircraft examinations and require certain of the Company's aircraft to undergo structural inspections and modifications to address problems of corrosion and structural fatigue among other things, at specified times. 20 21 The Company operates a fleet of 29 Boeing 727s, all of which were previously converted from passenger configuration to cargo configuration by the installation of a large cargo door and numerous interior modifications related to the installation of cargo container handling systems. The FAA has issued a proposed Directive, which if adopted, would limit the cargo capacity of 28 of these Boeing 727s until certain modifications are made. The costs to make such modifications and the amount of revenue that could be lost cannot currently be estimated. However, the Company believes this Directive will not have a material adverse effect of the Company. It is possible that additional Service Bulletins or Directives applicable to the Company's fleet could be issued in the future. The cost of compliance with such Directives and Service Bulletins cannot currently be estimated, but could be substantial. The Company believes that 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, debt service 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. However, there can be no assurance that the Company will be able to sell any additional equity or debt securities or obtain additional credit facilities. Notwithstanding the foregoing, the Company may sell additional equity or debt securities or obtain additional credit facilities at any time. YEAR 2000 The Company believes that its computer systems are generally year 2000 compliant. The Company does not yet know whether the computer systems of the FAA or its customers, suppliers, vendors and air logistics service providers are generally year 2000 compliant. The Company has begun discussions with its significant suppliers, customers and financial institutions to ensure that those parties have appropriate plans to remediate year 2000 issues where their systems interface with the Company's systems or otherwise impact its operations and assess the extent to which its operations are vulnerable should those organizations fail to remediate properly their computer systems. The Company's comprehensive year 2000 initiative is being managed by a team of internal staff and outside consultants reporting directly to the Company's Audit Committee. The team's activities are designed to ensure that there is no adverse effect on the Company's core business operations and that transactions with customers, suppliers and financial institutions are fully supported. While the Company believes its planning efforts will be adequate to address its year 2000 concerns, there can be no guarantee that the systems of other companies will be converted on a timely basis and will not have a material adverse effect on the Company. The cost of the Company's year 2000 initiatives is not expected to have a material adverse effect on the Company. SEASONALITY Certain of the Company's customers engage in seasonal businesses, especially the U.S. Postal Service and customers in the automotive industry. As a result, the Company's air freight charter logistics business has historically experienced its highest quarterly revenues and profitability during the fourth quarter of the calendar year due to the peak Christmas season activity of the U.S. Postal Service and during the period from June 1 to November 30 when production schedules of the automotive industry typically increase. Consequently, the Company experiences its lowest quarterly revenue and profitability during the first quarter of the calendar year. 21 22 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. 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 Not applicable. ITEM 6. REPORTS ON FORM 8-K AND EXHIBITS (a) Reports on Form 8-K: Not applicable. (b) Exhibits: The following exhibits are filed herewith or are incorporated by reference from previous filings with the Securities and Exchange Commission. EXHIBIT NO. DESCRIPTION 3.1 - Certificate of Incorporation of the Company.(2) 3.2 - Amended and Restated Bylaws of the Company.(1) 3.3 - Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 4.1 - Specimen Common Stock Certificate.(3) 21.1 - Subsidiaries of the Registrant.(4) 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. (4) Previously filed as an exhibit to the Company's Registration Statement on Form S-4 (Reg. No. 333-43645) dated as of February 1998, and incorporated herein by reference. 22 23 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 May 14, 1998. KITTY HAWK, INC. By: /s/RICHARD R. WADSWORTH, JR. -------------------------------------- Richard R. Wadsworth, Jr. Senior Vice President - Finance, Chief Financial Officer, and Secretary 23 24 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION - ------------- ------------------------------------------------------------- 3.1 - Certificate of Incorporation of the Company.(2) 3.2 - Amended and Restated Bylaws of the Company.(1) 3.3 - Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 4.1 - Specimen Common Stock Certificate.(3) 21.1 - Subsidiaries of the Registrant.(4) 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. (4) Previously filed as an exhibit to the Company's Registration Statement on Form S-4 (Reg. No. 333-43645) dated as of February 1998, and incorporated herein by reference. EX-3.2 2 AMENDED & RESTATED BYLAWS OF THE COMPANY 1 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF KITTY HAWK, INC. A DELAWARE CORPORATION APRIL 28, 1998 2 TABLE OF CONTENTS
Page ARTICLE ONE: OFFICES ................................................ 1 1.1 Registered Office and Agent ............................. 1 1.2 Other Offices ........................................... 1 ARTICLE TWO: MEETINGS OF STOCKHOLDERS ............................... 1 2.1 Annual Meeting .......................................... 1 2.2 Special Meeting ......................................... 1 2.3 Place of Meetings ....................................... 2 2.4 Notice .................................................. 2 2.5 Notice of Stockholder Business; Nomination of Director Candidates ....................... 2 2.6 Voting List ............................................. 4 2.7 Quorum .................................................. 4 2.8 Required Vote; Withdrawal of Quorum ..................... 5 2.9 Method of Voting; Proxies ............................... 5 2.10 Record Date ............................................. 5 2.11 Conduct of Meeting ...................................... 6 2.12 Inspectors .............................................. 6 ARTICLE THREE: DIRECTORS ............................................ 6 3.1 Management .............................................. 6 3.2 Number; Qualification; Election; Term ................... 7 3.3 Change in Number ........................................ 7 3.4 Vacancies ............................................... 8 3.5 Meetings of Directors ................................... 8 3.6 First Meeting ........................................... 8 3.7 Election of Officers .................................... 8 3.8 Regular Meetings ........................................ 8 3.9 Special Meetings ........................................ 8 3.10 Notice .................................................. 8 3.11 Quorum; Majority Vote ................................... 9 3.12 Procedure ............................................... 9 3.13 Presumption of Assent ................................... 9 3.14 Compensation ............................................ 9 ARTICLE FOUR: COMMITTEES ............................................ 10 4.1 Designation ............................................. 10 4.2 Number; Qualification; Term ............................. 10 4.3 Authority ............................................... 10 4.4 Committee Changes ....................................... 10 4.5 Alternate Members of Committees ......................... 10
- i - 3 4.6 Regular Meetings......................................... 10 4.7 Special Meetings......................................... 10 4.8 Quorum; Majority Vote.................................... 11 4.9 Minutes.................................................. 11 4.10 Compensation............................................. 11 4.11 Responsibility........................................... 11 ARTICLE FIVE: NOTICE................................................. 11 5.1 Method................................................... 11 5.2 Waiver................................................... 12 ARTICLE SIX: OFFICERS................................................ 12 6.1 Number; Titles; Term of Office........................... 12 6.2 Removal.................................................. 12 6.3 Vacancies................................................ 12 6.4 Authority................................................ 12 6.5 Compensation............................................. 12 6.6 Chairman of the Board and Chief Executive Officer........ 12 6.7 President................................................ 13 6.8 Vice Presidents.......................................... 13 6.9 Treasurer................................................ 13 6.10 Assistant Treasurers..................................... 13 6.11 Secretary................................................ 14 6.12 Assistant Secretaries.................................... 14 6.13 Vice Chairman of the Board............................... 14 ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS......................... 14 7.1 Certificates for Shares.................................. 14 7.2 Replacement of Lost or Destroyed Certificates............ 14 7.3 Transfer of Shares....................................... 15 7.4 Registered Stockholders.................................. 15 7.5 Regulations.............................................. 15 7.6 Legends.................................................. 15 ARTICLE EIGHT: MISCELLANEOUS PROVISIONS.............................. 15 8.1 Dividends................................................ 15 8.2 Reserves................................................. 16 8.3 Books and Records........................................ 16 8.4 Fiscal Year.............................................. 16 8.5 Seal..................................................... 16 8.6 Resignations............................................. 16 8.7 Securities of Other Corporations......................... 16 8.8 Telephone Meetings....................................... 16 8.9 Action Without a Meeting................................. 17 8.10 Invalid Provisions....................................... 17
- ii - 4 8.11 Mortgages, etc........................................... 17 8.12 Headings................................................. 17 8.13 References............................................... 17 8.14 Amendments............................................... 18 8.15 Citizenship Requirements of Officers and Directors....... 18
- iii - 5 AMENDED AND RESTATED BYLAWS OF KITTY HAWK, INC. A DELAWARE CORPORATION PREAMBLE These amended and restated bylaws ("BYLAWS") are subject to, and governed by, the General Corporation Law of the State of Delaware (the "DELAWARE CORPORATION LAW") and the certificate of incorporation ("CERTIFICATE OF INCORPORATION") of Kitty Hawk, Inc., a Delaware corporation (the "CORPORATION"). In the event of a direct conflict between the provisions of these bylaws and the mandatory provisions of the Delaware Corporation Law or the provisions of the Certificate of Incorporation, such provisions of the Delaware Corporation Law or the Certificate of Incorporation, as the case may be, will be controlling. ARTICLE ONE: OFFICES 1.1 Registered Office and Agent. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the "BOARD OF DIRECTORS") may from time to time determine or as the business of the Corporation may require. ARTICLE TWO: MEETINGS OF STOCKHOLDERS 2.1 Annual Meeting. An annual meeting of stockholders of the Corporation shall be held each calendar year on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. At such meeting, the stockholders shall elect directors and transact such other business as may be properly brought before the meeting. 2.2 Special Meeting. A special meeting of the stockholders may be called by the Board of Directors pursuant to a resolution adopted by a majority of the members of the Classified Directors (as defined in Section 3.2 hereof) then serving, by the Chairman of the Board and Chief Executive Officer, or by any holder or holders of record of at least 25% of the outstanding shares of capital stock of the Corporation then entitled to vote on any matter for which the respective special meeting is being called. A special meeting shall be held on such date and at such time as shall be designated by the person(s) calling the meeting and stated in the notice of the 6 meeting or in a duly executed waiver of notice of such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting given in accordance with these bylaws or in a duly executed waiver of notice of such meeting. 2.3 Place of Meetings. An annual meeting of stockholders may be held at any place within or without the State of Delaware designated by the Board of Directors. A special meeting of stockholders may be held at any place within or without the State of Delaware designated in the notice of the meeting or a duly executed waiver of notice of such meeting. Meetings of stockholders shall be held at the principal office of the Corporation unless another place is designated for meetings in the manner provided herein. 2.4 Notice. Written or printed notice stating the place, day, and time of each meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board and Chief Executive Officer, the Secretary, or the officer or person(s) calling the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is to be sent by mail, it shall be directed to such stockholder at his address as it appears on the records of the Corporation, unless he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy and shall not, at the beginning of such meeting, object to the transaction of any business because the meeting is not lawfully called or convened, or who shall, either before or after the meeting, submit a signed waiver of notice, in person or by proxy. 2.5 Notice of Stockholder Business; Nomination of Director Candidates. (a) At annual meetings of the stockholders, only such business shall be conducted as shall have been brought before the meetings (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors, or (iii) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 2.5, who shall be entitled to vote at such meeting, and who complies with the notice procedures set forth in this Section 2.5. (b) Only persons who are nominated in accordance with the procedures set forth in these bylaws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of - 2 - 7 giving of notice provided for in this Section 2.5, who shall be entitled to vote for the election of directors at the meeting, and who complies with the notice procedures set forth in this Section 2.5. (c) A stockholder must give timely, written notice to the Secretary of the Corporation to nominate directors at an annual meeting pursuant to Section 2.5(b) hereof or to propose business to be brought before an annual or special meeting pursuant to clause (iii) of Section 2.5(a) hereof. To be timely in the case of an annual meeting, a stockholder's notice must be received at the principal executive offices of the Corporation not more than 180 days nor less than 120 days before the first anniversary of the preceding year's annual meeting. To be timely in the case of a special meeting or in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, a stockholder's notice must be received at the principal executive offices of the Corporation no later than the close of business on the tenth day following the earlier of the day on which notice of the meeting date was mailed or public disclosure of the meeting date was made. For purposes of this Section 2.5(c), "PUBLIC DISCLOSURE" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934. Such stockholder's notice shall set forth (i) with respect to each matter, if any, that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) with respect to each person, if any, whom the stockholder proposes to nominate for election as a director, all information relating to such person (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director) that is required under the Securities Exchange Act of 1934, as amended, (iii) the name and address, as they appear on the Corporation's records, of the stockholder proposing such business or nominating such persons (as the case may be), and the name and address of the beneficial owner, if any, on whose behalf the proposal or nomination is made, (iv) the class and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder of record and by the beneficial owner, if any, on whose behalf the proposal or nomination is made, and (v) any material interest or relationship that such stockholder of record and/or the beneficial owner, if any, on whose behalf the proposal or nomination is made may respectively have in such business or with such nominee. At the request of the Board of Directors, any person nominated for election as a director shall furnish to the Secretary of the Corporation the information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. - 3 - 8 (d) Notwithstanding anything in these bylaws to the contrary, no business shall be conducted, and no person shall be nominated to serve as a director, at an annual or special meeting of stockholders, except in accordance with the procedures set forth in this Section 2.5. The chairman of the meeting shall, if the facts warrant, determine that business was not properly brought before the meeting, or that a nomination was not made, in accordance with the procedures prescribed by these bylaws and, if he shall so determine, he shall so declare to the meeting, and any such business not properly brought before the meeting shall not be transacted and any defective nomination shall be disregarded. A stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.5. 2.6 Voting List. At least 10 days before each meeting of stockholders, the Secretary or other officer of the Corporation who has charge of the Corporation's stock ledger, either directly or through another officer appointed by him or through a transfer agent appointed by the Board of Directors, shall prepare a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and number of shares of capital stock registered in the name of each stockholder. For a period of 10 days prior to such meeting, such list shall be kept on file at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting or a duly executed waiver of notice of such meeting or, if not so specified, at the place where the meeting is to be held and shall be open to examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours. Such list shall be produced at such meeting and kept at the meeting at all times during such meeting and may be inspected by any stockholder who is present. 2.7 Quorum. The holders of a majority of the outstanding shares of capital stock entitled to vote on a matter, present in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by law, the Certificate of Incorporation, or these bylaws. If a quorum shall not be present, in person or by proxy, at any meeting of stockholders, the stockholders entitled to vote thereat who are present, in person or by proxy (or, if no stockholder entitled to vote is present, any officer of the Corporation), may adjourn the meeting from time to time without notice other than announcement at the meeting (unless the Board of Directors, after such adjournment, fixes a new record date for the adjourned meeting), until a quorum shall be present, in person or by proxy. At any adjourned meeting at which a quorum shall be present, in person or by proxy, any business may be transacted which may have been transacted at the original meeting had a quorum been present; provided that, if the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. - 4 - 9 2.8 Required Vote; Withdrawal of Quorum. When a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares of capital stock entitled to vote thereat who are present, in person or by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of law, the Certificate of Incorporation, or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question; provided, however, that the vote of the holders of a plurality of the outstanding shares of capital stock entitled to vote in the election of directors who are present, in person or by proxy, shall be required to effect elections of directors. The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 2.9 Method of Voting; Proxies. Except as otherwise provided in the Certificate of Incorporation or by law, each outstanding share of capital stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Elections of directors need not be by written ballot. At any meeting of stockholders, every stockholder having the right to vote may vote either in person or by a proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after three years from the date of its execution, unless otherwise provided in the proxy. If no date is stated in a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by law. 2.10 Record Date. For the purpose of determining stockholders entitled (a) to notice of or to vote at any meeting of stockholders or any adjournment thereof, (b) to receive payment of any dividend or other distribution or allotment of any rights, or (c) to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, for any such determination of stockholders, such date in any case to be not more than 60 days and not less than 10 days prior to such meeting nor more than 60 days prior to any other action. If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. - 5 - 10 (ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 2.11 Conduct of Meeting. The Chairman of the Board and Chief Executive Officer, if such office has been filled, and, if such office has not been filled or if the Chairman of the Board and Chief Executive Officer is absent or otherwise unable to act, the President shall preside at all meetings of stockholders. The Secretary shall keep the records of each meeting of stockholders. In the absence or inability to act of any such officer, such officer's duties shall be performed by the officer given the authority to act for such absent or non-acting officer under these bylaws or by resolution adopted by the Board of Directors, or if no officer has been given such authority, by some person appointed at the meeting. 2.12 Inspectors. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count, and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. ARTICLE THREE: DIRECTORS 3.1 Management. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. - 6 - 11 3.2 Number; Qualification; Election; Term. The Board of Directors shall consist of no less than one director (plus such number of directors as may be elected from time to time pursuant to the terms of any series of preferred stock that may be issued and outstanding from time to time). Subject to the preceding sentence, the number of directors which shall constitute the whole Board of Directors shall from time to time be fixed and determined by resolution adopted by the Board of Directors. The directors of the Corporation (exclusive of directors who are elected pursuant to the terms of, and serve as representatives of the holders of, any series of preferred stock of the Corporation) shall be referred to herein as "CLASSIFIED DIRECTORS" and shall be divided into three classes, with the first class referred to herein as "CLASS 1," the second class as "CLASS 2," and the third class as "CLASS 3." If the total number of Classified Directors equals a number divisible by three, then the number of directors in each of Class 1, Class 2, and Class 3 shall be that number of directors equal to the total number of directors divided by three. If, however, the total number of Classified Directors equals a number that is not divisible by three, each such class of directors shall consist of that number of directors as nearly equal in number as possible to the total number of directors divided by three, as determined by the Board of Directors in advance of each respective election of directors by holders of shares of capital stock of the Corporation then entitled to vote in such election. The term of office of the initial Class 1 directors shall expire at the 1995 annual meeting of stockholders, the term of office of the initial Class 2 directors shall expire at the 1996 annual meeting of stockholders and the term of office of the initial Class 3 directors shall expire at the 1997 annual meeting of stockholders, with each director to hold office until his successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the 1995 annual meeting, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his successor shall have been duly elected and qualified. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by series or by class (excluding holders of common stock), to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies, and other features of such directorships shall be governed by the terms of the Certificate of Incorporation (including any amendment to the Certificate of Incorporation that designates a series of preferred stock), and such directors so elected by the holders of preferred stock shall not be divided into classes pursuant to this Section 3.2 unless expressly provided by the terms of the Certificate of Incorporation. 3.3 Change in Number. No decrease in the number of directors constituting the entire Board of Directors shall have the effect of shortening the term of any incumbent director. - 7 - 12 3.4 Vacancies. Any or all Classified Directors may be removed for cause at any annual or special meeting of stockholders, upon the affirmative vote of the holders of a majority of the outstanding shares of each class of capital stock then entitled to vote in person or by proxy at an election of such Classified Directors, provided that notice of the intention to act upon such matter shall have been given in the notice calling such meeting. Newly created directorships resulting from any increase in the authorized number of directors and any vacancies occurring in the Board of Directors caused by death, resignation, retirement, disqualification, removal or other termination from office of any directors may be filled by the vote of a majority of the directors then in office, though less than a quorum, or by the affirmative vote, at a special meeting of the stockholders called for the purpose of filling such directorship, of the holders of a majority of the outstanding shares of capital stock then entitled to vote in person or by proxy at such meeting. Each successor director so chosen shall hold office until the next election of the class for which such director shall have been chosen and until his respective successor shall have been duly elected and qualified. Any newly created or eliminated directorships resulting from an increase or decrease in the authorized number of directors shall be appointed or allocated by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal in number as possible. 3.5 Meetings of Directors. The directors may hold their meetings and may have an office and keep the records of the Corporation, except as otherwise provided by law, in such place or places within or without the State of Delaware as the Board of Directors may from time to time determine or as shall be specified in the notice of such meeting or duly executed waiver of notice of such meeting. 3.6 First Meeting. Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of stockholders, and no notice of such meeting shall be necessary. 3.7 Election of Officers. At the first meeting of the Board of Directors after each annual meeting of stockholders at which a quorum shall be present, the Board of Directors shall elect the officers of the Corporation. 3.8 Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required. 3.9 Special Meetings. Special meetings of the board of directors shall be held whenever called by the Chairman of the Board and Chief Executive Officer, or any director. 3.10 Notice. The Secretary shall give notice of each special meeting to each director at least 24 hours before the meeting. Notice of any such meeting need not - 8 - 13 be given to any director who, either before or after the meeting, submits a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him. The purpose of any special meeting shall be specified in the notice or waiver of notice of such meeting. 3.11 Quorum; Majority Vote. At all meetings of the Board of Directors, a majority of the directors fixed in the manner provided in these bylaws shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there is less than a quorum present, a majority of those present or any director solely present may adjourn the meeting from time to time without further notice. Unless the act of a greater number is required by law, the Certificate of Incorporation, or these bylaws, the act of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the Board of Directors. At any time that the Certificate of Incorporation provides that directors elected by the holders of a class or series of stock shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of directors shall refer to a majority or other proportion of the votes of such directors. 3.12 Procedure. At meetings of the Board of Directors, business shall be transacted in such order as from time to time the Board of Directors may determine. The Chairman of the Board and Chief Executive Officer, if such office has been filled, and, if such office has not been filled or if the Chairman of the Board and Chief Executive Officer is absent or otherwise unable to act, the President shall preside at all meetings of the Board of Directors. In the absence or inability to act of such officers, a chairman shall be chosen by the Board of Directors from among the directors present. The Secretary of the Corporation shall act as the secretary of each meeting of the Board of Directors unless the Board of Directors appoints another person to act as secretary of the meeting. The Board of Directors shall keep regular minutes of its proceedings which shall be placed in the minute book of the Corporation. 3.13 Presumption of Assent. A director of the Corporation who is present at the meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 3.14 Compensation. The Board of Directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, paid to directors for attendance at regular or special meetings of the Board of Directors or any committee thereof; provided, that nothing contained herein shall be construed to preclude any - 9 - 14 director from serving the Corporation in any other capacity or receiving compensation therefor. ARTICLE FOUR: COMMITTEES 4.1 Designation. The Board of Directors may designate one or more committees. 4.2 Number; Qualification; Term. Each committee shall consist of one or more directors appointed by resolution adopted by a majority of the entire Board of Directors. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire Board of Directors. Each committee member shall serve as such until the earliest of (i) the expiration of his term as director, (ii) his resignation as a committee member or as a director, or (iii) his removal as a committee member or as a director. 4.3 Authority. Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation except to the extent expressly restricted by law, the Certificate of Incorporation, or these bylaws. 4.4 Committee Changes. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. 4.5 Alternate Members of Committees. The Board of Directors may designate one or more directors as alternate members of any committee. Any such alternate member may replace any absent or disqualified member at any meeting of the committee. If no alternate committee members have been so appointed to a committee or each such alternate committee member is absent or disqualified, the member or members of such committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. 4.6 Regular Meetings. Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof. 4.7 Special Meetings. Special meetings of any committee may be held whenever called by any committee member. The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least two days before such special meeting. Neither the business to be transacted at, nor the - 10 - 15 purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting. 4.8 Quorum; Majority Vote. At meetings of any committee, a majority of the number of members designated by the Board of Directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the Certificate of Incorporation, or these bylaws. 4.9 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the Board of Directors upon the request of the Board of Directors. The minutes of the proceedings of each committee shall be delivered to the Secretary of the Corporation for placement in the minute books of the Corporation. 4.10 Compensation. Committee members may, by resolution of the Board of Directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary. 4.11 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the Board of Directors or any director of any responsibility imposed upon it or such director by law. ARTICLE FIVE: NOTICE 5.1 Method. Whenever by statute, the Certificate of Incorporation, or these bylaws, notice is required to be given to any committee member, director, or stockholder and no provision is made as to how such notice shall be given, personal notice shall not be required and any such notice may be given (a) in writing, by mail, postage prepaid, addressed to such committee member, director, or stockholder at his address as it appears on the books or (in the case of a stockholder) the stock transfer records of the Corporation, or (b) by any other method permitted by law (including but not limited to overnight courier service, telegram, telex, or telefax). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given at the time delivered to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex, or telefax shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. - 11 - 16 5.2 Waiver. Whenever any notice is required to be given to any stockholder, director, or committee member of the Corporation by statute, the Certificate of Incorporation, or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a stockholder, director, or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE SIX: OFFICERS 6.1 Number; Titles; Term of Office. The officers of the Corporation shall be a Chairman of the Board and Chief Executive Officer, a President, a Secretary, and such other officers as the Board of Directors may from time to time elect or appoint, including one or more Vice Presidents (with each Vice President to have such descriptive title, if any, as the Board of Directors shall determine) and a Treasurer. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Any two or more offices may be held by the same person. None of the officers need be a stockholder or a director of the Corporation or a resident of the State of Delaware. 6.2 Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by death, resignation, removal, or otherwise) may be filled by the Board of Directors. 6.4 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these bylaws or as may be determined by resolution of the Board of Directors not inconsistent with these bylaws. 6.5 Compensation. The compensation, if any, of officers and agents shall be fixed from time to time by the Board of Directors; provided, however, that the Board of Directors may delegate the power to determine the compensation of any officer and agent (other than the officer to whom such power is delegated) to the Chairman of the Board and Chief Executive Officer or the President. 6.6 Chairman of the Board and Chief Executive Officer. The Chairman of the Board and Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision of the Board of Directors of the - 12 - 17 Corporation, shall have the general management and control of the Corporation and its subsidiaries (including the right to vote the voting securities of the subsidiaries of the Corporation on behalf of the Corporation), shall preside at all meetings of the stockholders and of the Board of Directors and may sign all certificates for shares of capital stock of the Corporation. 6.7 President. The President shall be the chief operating officer of the Corporation and, subject to the supervision of the Chairman of the Board and Chief Executive Officer, he shall have general executive charge, management, and control of the properties and operations of the Corporation in the ordinary course of its business, with all such powers with respect to such properties and operations as may be reasonably incident to such responsibilities. In the absence or inability to act of the Chairman of the Board and Chief Executive Officer, the President shall exercise all of the powers and discharge all of the duties of the Chairman of the Board and Chief Executive Officer. As between the Corporation and third parties, any action taken by the President in the performance of the duties of the Chairman of the Board and Chief Executive Officer shall be conclusive evidence that the Chairman of the Board and Chief Executive Officer is absent or unable to act. The President may sign all certificates for shares of stock of the Corporation. 6.8 Vice Presidents. Each Vice President shall have such powers and duties as may be assigned to him by the Board of Directors, the Chairman of the Board and Chief Executive Officer, or the President, and (in order of their seniority as determined by the Board of Directors or, in the absence of such determination, as determined by the length of time they have held the office of Vice President) shall exercise the powers of the President during that officer's absence or inability to act. As between the Corporation and third parties, any action taken by a Vice President in the performance of the duties of the President shall be conclusive evidence of the absence or inability to act of the President at the time such action was taken. 6.9 Treasurer. The Treasurer shall have custody of the Corporation's funds and securities, shall keep full and accurate account of receipts and disbursements, shall deposit all monies and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board and Chief Executive Officer, or the President. 6.10 Assistant Treasurers. Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the Board of Directors, the Chairman of the Board and Chief Executive Officer, or the President. The Assistant Treasurers (in the order of their seniority as determined by the Board of Directors or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Treasurer) shall exercise the powers of the Treasurer during that officer's absence or inability to act. - 13 - 18 6.11 Secretary. Except as otherwise provided in these bylaws, the Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders in books provided for that purpose, and he shall attend to the giving and service of all notices. He may sign with the Chairman of the Board and Chief Executive Officer or the President, in the name of the Corporation, all contracts of the Corporation and affix the seal, if any, of the Corporation thereto. He may sign with the Chairman of the Board and Chief Executive Officer or the President all certificates for shares of stock of the Corporation, and he shall have charge of the certificate books, transfer books, and stock papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection by any director upon application at the office of the Corporation during business hours. He shall in general perform all duties incident to the office of the Secretary, subject to the control of the Board of Directors, the Chairman of the Board and Chief Executive Officer, and the President. 6.12 Assistant Secretaries. Each Assistant Secretary shall have such powers and duties as may be assigned to him by the Board of Directors, the Chairman of the Board and Chief Executive Officer, or the President. The Assistant Secretaries (in the order of their seniority as determined by the Board of Directors or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Secretary) shall exercise the powers of the Secretary during that officer's absence or inability to act. 6.13 Vice Chairman of the Board. The Vice Chairman of the Board shall have such powers and duties as may be provided herein or assigned to him by the Board of Directors or the Chairman of the Board and Chief Executive Officer. ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS 7.1 Certificates for Shares. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the Board of Directors. The certificates shall be signed by the Chairman of the Board and Chief Executive Officer or the President or a Vice President and also by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures on the certificate may be a facsimile and may be sealed with the seal of the Corporation or a facsimile thereof. If any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon, a certificate has ceased to be such officer, transfer agent, or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. The certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and the number of shares. 7.2 Replacement of Lost or Destroyed Certificates. The Corporation may direct a new certificate or certificates to be issued in place of a certificate or - 14 - 19 certificates theretofore issued by the Corporation and alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates representing shares to be lost or destroyed. When authorizing such issue of a new certificate or certificates the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond with a surety or sureties satisfactory to the Corporation in such sum as it may direct as indemnity against any claim, or expense resulting from a claim, that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost or destroyed. 7.3 Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. 7.4 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 7.5 Regulations. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer, and registration or the replacement of certificates for shares of stock of the Corporation. 7.6 Legends. The Board of Directors shall have the power and authority to provide that certificates representing shares of stock bear such legends as the Board of Directors deems appropriate to assure that the Corporation does not become liable for violations of federal or state securities laws or other applicable law. ARTICLE EIGHT: MISCELLANEOUS PROVISIONS 8.1 Dividends. Subject to provisions of law and the Certificate of Incorporation, dividends may be declared by the Board of Directors at any regular or special meeting and may be paid in cash, in property, or in shares of stock of the Corporation. Such declaration and payment shall be at the discretion of the Board of Directors. - 15 - 20 8.2 Reserves. There may be created by the Board of Directors out of funds of the Corporation legally available therefor such reserve or reserves as the directors from time to time, in their discretion, consider proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the Board of Directors shall consider beneficial to the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. 8.3 Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its stockholders and Board of Directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. 8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors; provided, that if such fiscal year is not fixed by the Board of Directors and the selection of the fiscal year is not expressly deferred by the Board of Directors, the fiscal year shall be the calendar year. 8.5 Seal. The seal of the Corporation shall be such as from time to time may be approved by the Board of Directors. 8.6 Resignations. Any director, committee member, or officer may resign by so stating at any meeting of the Board of Directors or by giving written notice to the Board of Directors, the Chairman of the Board and Chief Executive Officer, the President, or the Secretary. Such resignation shall take effect at the time specified therein or, if no time is specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 8.7 Securities of Other Corporations. The Chairman of the Board and Chief Executive Officer or the President shall have the power and authority to transfer, endorse for transfer, vote, consent, or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. 8.8 Telephone Meetings. Members of the Board of Directors and members of a committee of the Board of Directors may participate in and hold a meeting of such Board of Directors or committee by means of a conference telephone or similar communications equipment by means of which persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting, except where a person participates in - 16 - 21 the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 8.9 Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or by these bylaws, any action required or permitted to be taken at a meeting of the Board of Directors, or of any committee of the Board of Directors, may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all the directors or all the committee members, as the case may be, entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a vote of such directors or committee members, as the case may be, and may be stated as such in any certificate or document filed with the Secretary of State of the State of Delaware or in any certificate delivered to any person. Such consent or consents shall be filed with the minutes of proceedings of the Board or committee, as the case may be. Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 8.10 Invalid Provisions. If any part of these bylaws shall be held invalid or inoperative for any reason, the remaining parts, so far as it is possible and reasonable, shall remain valid and operative. 8.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage, or other instrument executed by the Corporation through its duly authorized officer or officers, the attestation to such execution by the Secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage, or other instrument a valid and binding obligation against the Corporation unless the resolutions, if any, of the Board of Directors authorizing such execution expressly state that such attestation is necessary. 8.12 Headings. The headings used in these bylaws have been inserted for administrative convenience only and do not constitute matter to be construed in interpretation. 8.13 References. Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender should include each other gender where appropriate. - 17 - 22 8.14 Amendments. The Board of Directors may, upon the affirmative vote of at least two-thirds of the Classified Directors then serving, make, adopt, alter, amend, and repeal from time to time these bylaws and make from time to time new bylaws of the Corporation (subject to the right of the stockholders entitled to vote thereon to adopt, alter, amend, and repeal bylaws made by the Board of Directors or to make new bylaws); provided, however, that the stockholders of the Corporation may adopt, alter, amend, or repeal bylaws made by the Board of Directors or make new bylaws solely upon the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock then entitled to vote thereon. 8.15 Citizenship Requirements of Officers and Directors. Persons who are not U.S. Citizens (as defined in the Certificate of Incorporation) are not qualified to serve as a director or officer of the Corporation. * * * * * - 18 - 23 The undersigned Secretary of the Corporation hereby certifies that the foregoing bylaws were adopted by unanimous consent of the directors of the Corporation as of April 28, 1998. /s/ RICHARD R. WADSWORTH ---------------------------------------- Richard R. Wadsworth, Secretary - 19 - EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 21,229,372 16,473,613 74,985,257 0 52,753,936 208,957,238 639,926,112 (41,079,844) 821,355,666 155,165,167 0 0 0 167,669 173,211,723 821,355,666 0 147,353,798 0 130,435,281 530,420 0 9,699,154 (2,881,512) (1,152,606) 0 0 0 0 (1,728,906) (0.10) (0.10)
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