-----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, TJmh5sAYCdtn7hLcjRZ9UAr7ceu59zgo4abIMlU2SiVwXM6FEzCIwYtiy7dyEKxe EM5lSip5b2BIto5rfzV26A== 0000950134-99-004347.txt : 19990518 0000950134-99-004347.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950134-99-004347 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99625878 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, 1999 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, 1999 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 13, 1999: 16,995,987. 2 KITTY HAWK, INC. AND SUBSIDIARIES
PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets March 31, 1999 and December 31, 1998 .............................. 3 Condensed Consolidated Statements of Operations Three months ended March 31, 1999 and 1998 ........................ 4 Condensed Consolidated Statements of Stockholders' Equity Three months ended March 31, 1999 ................................. 5 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1999 and 1998 ........................ 6 Notes to Condensed Consolidated Financial Statements ................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................. 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk ....... 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings ................................................ 21 Item 2. Changes in Securities ............................................ 21 Item 3. Defaults upon Senior Securities .................................. 21 Item 4. Submission of Matters to a Vote of Security Holders .............. 21 Item 5. Other Information ................................................ 21 Item 6. Reports on Form 8-K and Exhibits ................................. 21
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
MARCH 31, DECEMBER 31, 1999 1998 -------- -------- ASSETS (unaudited) Current assets Cash and cash equivalents ........................ $ 13,663 $ 15,077 Restricted cash and short-term investments ....... -- 1,964 Trade accounts receivable ........................ 73,007 140,014 Deferred income taxes ............................ 16,088 16,088 Inventory and aircraft supplies .................. 49,390 50,135 Prepaid expenses and other current assets ........ 23,284 22,871 -------- -------- Total current assets ......................... 175,432 246,149 Property and equipment, net ........................... 734,978 720,808 Other assets, net ..................................... 17,511 15,628 -------- -------- Total assets .......................................... $927,921 $982,585 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable ................................. $ 45,050 $ 53,967 Accrued expenses ................................. 83,402 104,278 Accrued maintenance reserves ..................... 21,592 22,382 Current maturities of long-term debt ............. 19,158 20,564 -------- -------- Total current liabilities .................... 169,202 201,191 Revolving credit facility ............................. 71,900 86,900 Long-term debt ........................................ 380,726 382,287 Deferred income taxes ................................. 113,261 113,261 Minority interest ..................................... -- 4,749 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 -16,995,987 and 16,927,942, respectively ...... 170 169 Additional capital ............................... 133,801 133,166 Retained earnings ................................ 58,861 60,862 -------- -------- Total stockholders' equity ................... 192,832 194,197 -------- -------- Total liabilities and stockholders' equity ............ $927,921 $982,585 ======== ========
See accompanying notes. 3 4 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
THREE MONTHS ENDED MARCH 31, ----------------------- 1999 1998 --------- --------- Revenues: Air freight carrier ......................... $ 65,055 $ 72,424 Air logistics ............................... 26,348 27,691 Scheduled freight ........................... 42,991 36,181 Maintenance and other ....................... 4,111 8,718 --------- --------- Total revenues .......................... 138,505 145,014 Costs of revenues: Flight expense .............................. 59,220 69,190 Maintenance expense ......................... 34,598 34,208 Aircraft fuel expense ....................... 11,785 15,450 Depreciation expense ........................ 16,784 10,881 --------- --------- Total costs of revenues ................. 122,387 129,729 --------- --------- Gross profit ..................................... 16,118 15,285 General and administrative expenses .............. 8,410 7,801 Non-qualified employee profit sharing expense .... -- 530 --------- --------- Operating income ................................. 7,708 6,954 Other income (expense): Interest expense ............................ (12,182) (9,699) Other, net .................................. 1,336 675 --------- --------- Loss before minority interest and income taxes ... (3,138) (2,070) Minority interest ................................ 196 812 --------- --------- Loss before income taxes ......................... (3,334) (2,882) Income tax benefit ............................... (1,333) (1,153) --------- --------- Net loss ......................................... $ (2,001) $ (1,729) ========= ========= Basic and diluted loss per share ................. $ (0.12) $ (0.10) ========= ========= Weighted average common shares outstanding ....... 16,981 16,759 ========= =========
See accompanying notes. 4 5 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except share data) (unaudited)
NUMBER OF COMMON ADDITIONAL RETAINED SHARES STOCK CAPITAL EARNINGS TOTAL ---------- ------ ---------- -------- --------- Balance at December 31, 1998 ........... 16,927,942 $169 $133,166 $ 60,862 $ 194,197 Shares issued in connection with the Employee Stock Purchase Plan ......... 68,045 1 635 -- 636 Net loss ............................... -- -- -- (2,001) (2,001) ---------- ---- -------- -------- --------- Balance at March 31, 1999 .............. 16,995,987 $170 $133,801 $ 58,861 $ 192,832 ========== ==== ======== ======== =========
See accompanying notes. 5 6 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
THREE MONTHS ENDED MARCH 31, ----------------------- 1999 1998 -------- -------- Operating activities: Net loss .............................................. $ (2,001) $ (1,729) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ....................... 17,478 11,500 Gain on sale of assets .............................. (877) (32) Minority interest ................................... 196 812 Changes in operating assets and liabilities: Trade accounts receivable ......................... 67,517 46,732 Inventory and aircraft supplies ................... (4,367) (15,521) Prepaid expenses and other current assets ......... (405) (5,311) Accounts payable and accrued expenses ............. (32,344) (21,382) Accrued maintenance reserves ...................... (1,181) 868 -------- -------- Net cash provided by operating activities ................ 44,016 15,937 Investing activities: Capital expenditures .................................. (26,347) (61,907) Redemption of short term investments .................. -- 43,795 Proceeds from sale of assets .......................... 1,234 1,832 -------- -------- Net cash used in investing activities .................... (25,113) (16,280) Financing activities: Proceeds from issuance of long-term debt .............. 2,965 -- Repayments of long-term debt .......................... (8,282) (575) Net borrowings (paydowns) on revolving credit facility ...................................... (15,000) 5,000 Distributions to minority interest .................... -- (800) Note receivable issued to stockholder ................. -- 41 -------- -------- Net cash (used in) provided by financing activities ...... (20,317) 3,666 -------- -------- Net increase (decrease) in cash and cash equivalents ..... (1,414) 3,323 Cash and cash equivalents at beginning of period ......... 15,077 17,907 -------- -------- Cash and cash equivalents at end of period ............... $ 13,663 $ 21,230 ======== ========
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 Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1998, are unaudited (except for the December 31, 1998 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, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. 2. 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's financial position or results of operations. 3. SEGMENT REPORTING The Company operates in four principal businesses: an air freight carrier, an air logistics service provider, a scheduled freight service provider and a maintenance operation. Each of these is a business segment, with its respective financial performance detailed below. Included in each are intersegment transactions for revenues and costs of revenues which generally approximate market prices. Each business segment is currently evaluated on financial performance at the operating income line. The Company's air freight carrier provides services to third parties under contractual arrangements where the Company provides the aircraft, crew, maintenance and insurance (ACMI). Additionally, the air freight carrier performs ad hoc charters for the air logistics service provider and other governmental and commercial customers. The air freight carrier is further divided into a wide-body division (Kitty Hawk International, Inc., formerly American International Airways, Inc.) and a narrow-body division (Kitty Hawk Aircargo, Inc.). The air freight carrier also provided passenger charters during fiscal years 1997 and 1998. The Company eliminated its passenger charter division in January 1999. The Company's air logistics service provider arranges the delivery of time sensitive freight within North America, principally the United States. Also included in this segment is the Company's fleet of small jet and prop aircraft. The air logistics service provider utilizes third party aircraft as well as its own fleet of small aircraft and the fleet of the air freight carrier. The Company's scheduled freight service consists of an overnight freight service provider operating in a network of approximately 46 North American cities, as well as a service between Los Angeles, the Hawaiian islands and several Pacific Rim countries. The Company's maintenance operation provides engine overhauls for third parties as well as for certain of the Company's aircraft. The Company has recently curtailed its third party maintenance operation to provide only engine overhauls on JT3 engines for Douglas DC8s and JT8 engines for Boeing 727s and Douglas DC9s. The Company's maintenance operation also provides airframe repairs for the Company's Boeing 727s and Douglas DC-9s. 7 8 The other category consists of corporate activities as well as the activities of Longhorn Solutions, Inc., its wholly owned software developer/reseller and in house management information systems service supplier. Business assets are owned by or allocated to each of the business segments. Assets included in other include cash, investment in subsidiaries and intercompany receivable.
ACMI ACMI Total Wide- Narrow- Air Freight Air Scheduled Body Body Carrier Logistics Freight ---- ---- ------- --------- ------- (AMOUNTS IN THOUSANDS) Quarter ended March 31, 1999 Revenue from external customers $ 27,352 $ 38,909 $ 66,261 $29,159 $42,991 Revenue from intersegment operations 29,806 11,487 41,293 600 202 Operating income 340 2,960 3,300 2,940 2,199 Interest expense Other income (expense) Loss before minority interest and taxes Total assets $ 705,438 $240,552 $945,990 $64,437 $35,230 Quarter ended March 31, 1998 Revenue from external customers $ 56,988 $ 21,459 $ 78,447 $30,386 $36,181 Revenue from intersegemnt operations 16,913 7,620 24,533 3,143 334 Operating income (498) 4,281 3,783 2,154 726 Interest expense Other income (expense) Income before minority interest and taxes Total assets $ 550,280 $133,346 $683,626 $57,850 $24,733 Intersegment Consolidated Other Eliminations Balance ----- ------------ ------- Quarter ended March 31, 1999 Revenue from external customers $ 94 $138,505 Revenue from intersegemnt operations 112 $ (42,207) -- Operating income (731) 7,708 Interest expense (12,182) Other income (expense) 1,336 Loss before minority interest and taxes $ (3,138) Total assets $ 559,929 $(677,665) $927,921 Quarter ended March 31, 1998 Revenue from external customers $ -- $145,014 Revenue from intersegement operations -- $ (28,010) -- Operating income 291 6,954 Interest expense (9,699) Other income (expense) 675 Income before minority interest and taxes $ (2,070) Total assets $ 483,569 $(428,422) $821,356
The Company does not separately report results of its maintenance operation and related asset information to the Company's chief operating decision maker. Accordingly, financial data for the maintenance operation is included under the ACMI Wide-Body, ACMI Narrow-Body and Air Logistics captions above. Third party maintenance revenue included under the ACMI Wide-Body, ACMI Narrow-Body and Air Logistics captions above amounted to $0.7 million, $0.5 million and $2.8 million for the quarter ended March 31, 1999, respectively, and $6 million, $0 and $2.7 million for the quarter ended March 31, 1998, respectively. 4. Supplemental Guarantor Information In connection with the issuance of the $340 million 9.95% Senior Secured Notes (the "Notes") in November 1997, each of the Company's subsidiaries, with the exception of American International Cargo ("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. The Company has not presented separate financial statements and other disclosures concerning the Guarantors because the Company's management believes that such information is not material to investors. 8 9 Kitty Hawk, Inc. Supplemental Consolidating Balance Sheets Condensed Financial Information March 31, 1999
ASSETS Kitty Hawk, Subsidiaries AIC Inc. (Parent) (Guarantors) (Non-Guarantor) Eliminations Total ------------- ------------ --------------- ------------ ----- Cash and cash equivalents $ 7,930 $ (1,162) $ 6,895 $ -- $ 13,663 Trade accounts receivable 143 60,442 12,422 -- 73,007 Deferred income taxes -- 16,088 -- -- 16,088 Inventory and aircraft supplies -- 49,390 -- -- 49,390 Prepaid expenses and other current assets 1,222 22,012 50 -- 23,284 --------- --------- -------- --------- -------- Total current assets 9,295 146,770 19,367 -- 175,432 Property and equipment, net 790 733,347 841 -- 734,978 Intercompany receivable 448,468 29,141 -- (477,609) -- Investment in subsidiaries 84,242 -- -- (84,242) -- Other assets, net 13,652 3,859 -- -- 17,511 --------- --------- -------- --------- -------- Total assets $ 556,447 $ 913,117 $ 20,208 $(561,851) $927,921 ========= ========= ======== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 392 $ 39,902 $ 4,756 $ -- $ 45,050 Accrued expenses 11,365 65,472 6,565 -- 83,402 Intercompany payable 29,141 448,980 8 (512) (477,609) -- Accrued maintenance reserves -- 21,592 -- -- 21,592 Current maturities of long-term debt 700 18,458 -- -- 19,158 --------- --------- -------- --------- -------- Total current liabilities 41,598 594,404 10,809 (477,609) 169,202 Revolving credit facility 71,900 -- -- -- 71,900 Long-term debt 341,650 39,076 -- -- 380,726 Deferred income taxes -- 113,261 -- -- 113,261 --------- --------- -------- --------- -------- Total liabilities 455,148 746,741 10,809 (477,609) 735,089 --------- --------- -------- --------- -------- Stockholders' equity Preferred stock -- -- -- -- -- Common stock 170 -- -- -- 170 Additional capital 133,801 75,618 8,624 (84,242) 133,801 Retained earnings (32,672) 90,758 775 -- 58,861 --------- --------- -------- --------- -------- Total stockholders' equity 101,299 166,376 9,399 (84,242) 192,832 --------- --------- -------- --------- -------- Total liabilities and stockholders' equity $ 556,447 $ 913,117 $ 20,208 $(561,851) $927,921 ========= ========= ======== ========= ========
9 10 Kitty Hawk, Inc. Supplemental Consolidating Statements of Operations Condensed Financial Information For the quarter ended March 31, 1999
Kitty Hawk, Subsidiaries AIC Inc. (Parent) (Guarantors) (Non-Guarantor) Eliminations Total ------------- ------------ --------------- ------------ ----- Revenue Air freight carrier $ -- $ 73,289 $ -- $(8,234) $ 65,055 Air logistics -- 26,348 -- -- 26,348 Scheduled freight -- 27,828 15,163 -- 42,991 Maintenance and other -- 4,223 -- (112) 4,111 ----- --------- -------- ------- --------- Total revenues -- 131,688 15,163 (8,346) 138,505 Costs of revenues Flight expense -- 57,148 10,306 (8,234) 59,220 Maintenance expense -- 34,598 -- -- 34,598 Aircraft fuel expense -- 8,524 3,261 -- 11,785 Depreciation expense -- 16,736 48 -- 16,784 ----- --------- -------- ------- --------- Total costs of revenues -- 117,008 13,615 (8,234) 122,387 ----- --------- -------- ------- --------- Gross profit -- 14,682 1,548 (112) 16,118 General and administrative expenses 670 7,381 471 (112) 8,410 Non-qualified employee profit sharing expense -- -- -- -- -- ----- --------- -------- ------- --------- Operating income (670) 7,301 1,077 -- 7,708 Other income (expense): Interest expense 432 (12,465) (149) -- (12,182) Other, net 107 1,186 43 -- 1,336 ----- --------- -------- ------- --------- Income (loss) before minority interest and income taxes (131) (3,978) 971 -- (3,138) Minority interest in AIC -- -- -- 196 196 ----- --------- -------- ------- --------- Loss before income taxes (131) (3,978) 971 (196) (3,334) Income tax benefit (52) (1,473) 192 -- (1,333) ----- --------- -------- ------- --------- Net loss $ (79) $ (2,505) $ 779 $ (196) $ (2,001) ===== ========= ======== ======= =========
Kitty Hawk, Inc. Supplemental Consolidating Statement of Cash Flows Condensed Financial Information For the quarter ended March 31, 1999
Kitty Hawk, Subsidiaries AIC Inc. (Parent) (Guarantors) (Non-Guarantor) Eliminations Total ------------- ------------ --------------- ------------ ----- Cash provided by operating activities $ 9,216 $ 33,410 $ 1,390 $ -- $ 44,016 Investing activities: Capital expenditures (603) (25,742) (2) -- (26,347) Proceeds from sale of assets -- 1,226 8 -- 1,234 -------- -------- ------- ------- -------- Net cash used in investing activities (603) (24,516) 6 -- (25,113) Financing activities Proceeds from issuance of long-term debt, net -- 2,965 -- -- 2,965 Repayments of debt -- (8,282) -- -- (8,282) Paydown on revolving credit facility (15,000) -- -- -- (15,000) -------- -------- ------- ------- -------- Net cash used in investing activities (15,000) (5,317) -- -- (20,317) -------- -------- ------- ------- -------- Increase (decrease) in cash (6,387) 4,973 1,396 -- (1,414) Cash and cash equivalents, beginning of period 14,317 (4,739) 5,499 -- 15,077 -------- -------- ------- ------- -------- Cash and cash equivalents, end of period $ 7,930 $ (1,162) $ 6,895 $ -- $ 13,663 ======== ======== ======= ======= ========
10 11 Kitty Hawk, Inc. Supplemental Consolidating Balance Sheets Condensed Financial Information December 31, 1998
ASSETS Kitty Hawk, Subsidiaries AIC Inc excluding AIC (Non- (Parent) (Guarantors) Guarantor) Eliminations Total --------- --------- --------- --------- --------- Cash and cash equivalents........................ $ 14,317 $ (4,739) $ 5,499 $ -- $ 15,077 Restricted cash and short-term investments ................................... -- 1,964 -- -- 1,964 Trade accounts receivable ....................... -- 129,938 10,618 (542) 140,014 Deferred income taxes ........................... -- 16,088 -- -- 16,088 Inventory and aircraft supplies ................. -- 50,135 -- -- 50,135 Prepaid expenses and other current assets ....... 3,955 18,852 64 -- 22,871 --------- --------- --------- --------- --------- Total current assets ......................... 18,272 212,238 16,181 (542) 246,149 Property and equipment, net ..................... 211 719,697 900 -- 720,808 Intercompany receivable ......................... 423,295 4,261 -- (427,556) -- Investment in Guarantors ........................ 84,242 -- -- (84,242) -- Investment in AIC ............................... -- 8,024 -- (8,024) -- Other assets, net ............................... 11,687 3,941 -- -- 15,628 --------- --------- --------- --------- --------- Total assets ................................. $ 537,707 $ 948,161 $ 17,081 $(520,364) $ 982,585 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable ................................ $ 528 $ 50,992 $ 2,989 $ (542) $ 53,967 Accrued expenses ................................ 5,276 98,283 719 -- 104,278 Intercompany payables ........................... 4,261 423,295 -- (427,556) -- Accrued maintenance reserves .................... -- 22,382 -- -- 22,382 Current maturities of long-term debt ............ -- 20,564 -- -- 20,564 --------- --------- --------- --------- --------- Total current liabilities .................... 10,065 615,516 3,708 (428,098) 201,191 Revolving credit facility ....................... 86,900 -- -- -- 86,900 Long-term debt .................................. 340,000 42,287 -- -- 382,287 Deferred income taxes ........................... -- 113,261 -- -- 113,261 --------- --------- --------- --------- --------- Total liabilities ............................ 436,965 771,064 3,708 (428,098) 783,639 Minority interest in AIC ........................ -- -- -- 4,749 4,749 Stockholders' equity Preferred stock .............................. -- -- -- -- -- Common stock ................................. 169 -- -- -- 169 Additional capital ........................... 133,166 84,242 5,857 (90,099) 133,166 Retained earnings ............................ (32,593) 92,855 7,516 (6,916) 60,862 --------- --------- --------- --------- --------- Total stockholders' equity ................. 100,742 177,097 13,373 (94,748) 194,197 --------- --------- --------- --------- --------- Total liabilities and stockholders' equity ...................... $ 537,707 $ 948,161 $ 17,081 $(520,364) $ 982,585 ========= ========= ========= ========= =========
11 12 Kitty Hawk, Inc. Supplemental Consolidating Statements of Operations Condensed Financial Information For the quarter ended March 31, 1998
Kitty Hawk, Subsidiaries AIC Inc. Excluding AIC (Non- (Parent) (Guarantors) Guarantor) Eliminations Total --------- ------------- ---------- ------------ -------- Revenues: Air freight carrier............... $ -- $ 79,490 $ -- $ (7,066) $ 72,424 Air logistics..................... -- 27,691 -- -- 27,691 Scheduled freight................. -- 21,835 14,346 -- 36,181 Maintenance and other............. -- 8,718 -- -- 8,718 --------- ------------- ---------- ------------ -------- Total revenues................ -- 137,734 14,346 (7,066) 145,014 Costs of revenues: Flight expense.................... -- 64,290 11,966 (7,066) 69,190 Maintenance expense............... -- 34,208 -- -- 34,208 Aircraft fuel expense............. -- 15,450 -- -- 15,450 Depreciation expense.............. -- 10,881 -- -- 10,881 --------- ------------- ---------- ------------ -------- Total costs of revenues....... -- 124,829 11,966 (7,066) 129,729 --------- ------------- ---------- ------------ -------- Gross profit......................... -- 12,905 2,380 -- 15,285 General and administrative expenses.. (314) 7,726 389 -- 7,801 Non-qualified employee profit sharing expense................... 530 -- -- -- 530 --------- ------------- ---------- ------------ -------- Operating income (loss).............. (216) 5,179 1,991 -- 6,954 Other income (expense): Interest expense.................. (159) (9,540) -- -- (9,699) Other, net........................ 99 538 38 -- 675 --------- ------------- ---------- ------------ -------- Income (loss) before minority interest and income taxes......... (276) (3,823) 2,029 -- (2,070) Minority interest in AIC............. -- -- -- 812 812 --------- ------------- ---------- ------------ -------- Income (loss) before income taxes.... (276) (3,823) 2,029 (812) (2,882) Income tax benefit................... (110) (1,043) -- -- (1,153) --------- ------------- ---------- ------------ -------- Net income (loss).................... $ (166) $ (2,780) $ 2,029 $ (812) $ (1,729) ========= ============= ========== ============ ========
12 13 Kitty Hawk, Inc. Supplemental Consolidating Statement of Cash Flows Condensed Financial Information For the quarter ended March 31, 1998
Kitty Hawk, Subsidiaries AIC Inc. excluding AIC (Non- (Parent) (Guarantors) Guarantor) Eliminations Total ------------ ------------- ---------- ------------ ---------- Cash provided by (used in) operating activities........... $ (36,476) $ 50,538 $ 2,687 $ (812) $ 15,937 Investing activities: Capital expenditures.......... -- (61,888) (19) -- (61,907) Redemption of short term 43,321 474 -- -- 43,795 investments.................... Investment in AIC............. -- 388 -- (388) -- Proceeds from sale of assets.. -- 1,832 -- -- 1,832 ---------- ---------- ---------- ---------- ---------- Net cash provided by (used in) investing activities............. 43,321 (59,194) (19) (388) (16,280) Financing activities Repayments of debt............ -- (575) -- -- (575) Net borrowings................ 5,000 -- -- -- 5,000 Distributions to minority -- -- (2,000) 1,200 (800) interest....................... Note receivable from shareholder................. -- 41 -- -- 41 ---------- ---------- ---------- ---------- ---------- Net cash provided by (used in) investing activities............. 5,000 (534) (2,000) 1,200 3,666 ---------- ---------- ---------- ---------- ---------- Increase (decrease) in cash...... 11,845 (9,190) 668 -- 3,323 Cash and cash equivalents, beginning of period............ 6,620 10,004 1,282 -- 17,907 ---------- ---------- ---------- ---------- ---------- Cash and cash equivalents, end of period......................... $ 18,465 $ 814 $ 1,950 $ -- $ 21,230 ========== ========== ========== ========== ==========
13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Revenues. The Company's revenues are derived from four related businesses: (i) an air freight carrier, (ii) an air logistics service provider, (iii) a scheduled freight service provider and (iv) a maintenance operation. Air freight carrier revenues are derived substantially from aircraft, crew, maintenance, and insurance ("ACMI") contract charters. In addition, revenues from the Company's passenger charter service (which was eliminated in January 1999) 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 as well as the Company's own fleet of small jet and prop aircraft and the fleet of the air freight carrier. Scheduled freight service revenues are generated through an overnight airport-to-airport freight service to approximately 46 U.S. cities and an international service between Los Angeles and Honolulu, among the Hawaiian islands and once a week through Melbourne, Hong Kong and other Pacific Rim locations. Maintenance revenue was previously generated from third party maintenance work performed on engines and airframes. During the fourth quarter of 1998, the Company stopped providing third party airframe repairs and engine overhaul services, other than on JT3 engines used on Douglas DC-8s and JT8 engines used on Boeing 727s and Douglas DC-9s. The principal factors that have contributed to revenue growth over the past several years have been increases in the Company's fleet from 10 aircraft at December 31, 1993 to 102 aircraft at March 31, 1999, the general U.S. economic expansion and increased global demand for time sensitive air freight services. Costs of Revenues. The principal components of the costs of revenues are flight expense, maintenance expense, aircraft fuel expense and depreciation expense. Flight expense includes the salaries and expenses for pilots and flight operations personnel, insurance, sub-charter costs paid to third party air freight carriers and costs paid for ground handling and transportation. Maintenance expense includes salaries and expenses for maintenance personnel and maintenance on the aircraft. Aircraft fuel expense is generally applicable only to the air logistics service provider and the scheduled freight services provider because fuel for the ACMI contract charters is generally provided by the customer or billed to the customer on a direct pass-through basis. Depreciation expense includes depreciation on airframes and engines and all other property and equipment associated with the operation of the each business segment. 14 15 RESULTS OF OPERATIONS 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, ------------------------------ 1999 1998 ------- ------- Revenues: Air freight carrier................. 47.0% 49.9% Air logistics....................... 19.0 19.1 Scheduled freight service........... 31.0 25.0 Maintenance and other............... 3.0 6.0 ------- ------- Total revenues ................. 100.0 100.0 Costs of revenues: Flight expense...................... 42.8 47.7 Maintenance expense................. 25.0 23.6 Aircraft fuel expense............... 8.5 10.7 Depreciation expense................ 12.1 7.5 ------- ------- Total costs of revenues.......... 88.4 89.5 ------- ------- Gross profit............................. 11.6 10.5 General and administrative expenses...... 6.1 5.4 Non-qualified employee profit sharing expense................................ -- 0.3 ------- ------- Operating income ........................ 5.5 4.8 Interest expense......................... (8.8) (6.7) Other income............................. 1.0 0.5 ------- ------- Loss before minority interest and (2.3) (1.4) income taxes........................... Minority interest........................ 0.1 0.6 ------- ------- Loss before income taxes................. (2.4) (2.0) Income tax (benefit)..................... (1.0) (0.8) ------- ------- Net loss................................. (1.4)% (1.2)% ======= =======
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998 Revenues - Air Freight Carrier. Air freight carrier revenues decreased $7.4 million, or 10.2%, to $65.1 million in the quarter ended March 31, 1999, from $72.4 million in the quarter ended March 31, 1998. This decrease was primarily attributable to the elimination of the Company's passenger charter division which contributed $13.8 million of revenue in the quarter ended March 31, 1998. This decrease was partially offset by placing four additional Boeing 727s and two Boeing 747s into cargo service during mid to late 1998 and increased utilization of aircraft during non-peak cargo hours. The Company has also implemented selective price increases for its ACMI contract charters. Revenues - Air Logistics. Air logistics revenues decreased $1.3 million, or 4.9%, to $26.3 million in the quarter ended March 31, 1999, from $27.7 million in the quarter ended March 31, 1998. This decrease was primarily due to a decrease in average revenue per trip resulting from a decrease in the average size aircraft used in the trip. The number of trips managed increased slightly from 4,408 in the quarter ended March 31, 1998 to 4,910 in the quarter ended March 31, 1999. Prices for the Company's air logistics services remained relatively constant. Revenues - Scheduled Freight. Scheduled freight revenues increased $6.8 million, or 18.8%, to $43 million in the quarter ended March 31, 1999, from $36.2 million in the quarter ended March 31, 1998. This increase was primarily due to a 5% price increase effective March 1, 1998, as well as additional flight days in the quarter ended March 31, 1999 as compared to the quarter ended March 31, 1998. Freight volumes in scheduled freight operation decreased approximately 1.2% from the quarter ended March 31, 1998 as compared to the quarter ended March 31, 1999. Revenues - Maintenance and Other. Maintenance and other revenues decreased $4.6 million, or 52.8%, to $4.1 million in the quarter ended March 31, 1999, from $8.7 million in the quarter ended March 31, 1998. This decrease was primarily due the Company's decision to stop providing third party airframe repairs and engine overhaul services, other than on JT3 engines used on Douglas DC-8s and JT8 engines used on Boeing 727s and Douglas DC-9s. 15 16 Costs of Revenues - Flight Expense. Flight expense decreased $10 million, or 14.4%, to $59.2 million in the quarter ended March 31, 1999, from $69.2 million in the quarter ended March 31, 1998. As a percent of revenues, flight expense decreased to 42.8% for the quarter ended March 31, 1999 as compared to 47.7% for the quarter ended March 31, 1998. This decrease was primarily due to the elimination of the passenger charter division (which resulted in reduced wages and ground handling costs, a savings of $1.3 million), a general reduction in crew travel costs, and an overall reduction in subcharter expense as more Company aircraft were available in the quarter ended March 31, 1999 versus the quarter ended March 31, 1998 due to less downtime for maintenance activities. Costs of Revenues - Maintenance Expense. Maintenance expense increased $0.4 million, or 1.1%, to $34.6 million in the quarter ended March 31, 1999, from $34.2 million in the quarter ended March 31, 1998. The increase is primarily due to the increased parts expense and labor costs associated with operating an aging fleet. Costs of Revenues - Aircraft Fuel Expense. Aircraft fuel expense decreased $3.7 million, or 23.7%, to $11.8 million in the quarter ended March 31, 1999, from $15.5 million in the quarter ended March 31, 1998. As a percent of revenues, aircraft fuel expense decreased from 10.7% for the quarter ended March 31, 1998 to 8.5% for the quarter ended March 31, 1999 is primarily due to a 16% decline in fuel prices from an average price of $0.64 per gallon for the quarter ended March 31, 1998 as compared to an average price of $0.54 per gallon for the quarter ended March 31, 1999. Additionally, the Company is no longer incurring aircraft fuel expense from its passenger charter business, which resulted in a savings of $2 million. Costs of Revenues - Depreciation Expense. Depreciation expense increased $5.9 million, or 54.2%, to $16.8 million in the quarter ended March 31, 1999, from $10.9 million in the quarter ended March 31, 1998. As a percent of revenues, depreciation expense decreased from 7.5% for the quarter ended March 31, 1998 to 12.1% for the quarter ended March 31, 1999 is primarily due to the depreciation of capital expenditures of $185.3 million since March 31, 1998, consisting principally of cargo modifications to two Boeing 747s and two Boeing 727s, engine overhauls and noise abatement modifications to nine Boeing 727s and one Douglas DC-9 aircraft. General and Administrative Expenses. General and administrative expenses increased $0.6 million, or 7.8%, to $8.4 million in the quarter ended March 31, 1999, from $7.8 million in the quarter ended March 31, 1998. This increase was primarily due to an increase in support functions and administrative costs associated with the growth in the aircraft fleet. As a percentage of total revenues, general and administrative expenses increased to 6.1% in the quarter ended March 31, 1999, as compared to 5.4% for the quarter ended March 31, 1998, principally reflecting a decrease in revenues. Operating Income. As a result of the above, operating income increased $0.8 million to $7.7 million in the quarter ended March 31, 1999, from $6.9 million in the quarter ended March 31, 1998. Operating income margin increased to 5.5% in the quarter ended March 31, 1999, from 4.8% in the quarter ended March 31, 1998. Interest Expense. Interest expense increased to $12.2 million for the quarter ended March 31, 1999, from $9.7 million for the quarter ended March 31, 1998, a 25.6% increase. The increase was primarily the result of increased borrowings on the Company's Revolving Credit Facility, an increase of $56.9 million from March 31, 1998 and an overall increase in the interest rate under the December 10, 1998 amendment to the Revolving Credit Facility. Additionally, approximately $0.7 million of interest expense was capitalized during the quarter ended March 31, 1998 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 remained consistent at 40% for the quarters ended March 31, 1999 and 1998. Net Loss. As a result of the above, the Company's net loss increased to $2 million in the quarter ended March 31, 1999, compared to a net loss of $1.7 million in the quarter ended March 31, 1998. Net loss as a percentage of total revenues increased to (1.4)% in the quarter ended March 31, 1999, from (1.2)% in the prior year period. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily for the acquisition and modification of aircraft and working 16 17 capital. 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 in the fourth calendar quarter and lower revenue in the first calendar quarter. 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 November 1997, the Company issued $340 million of 9.95% Senior Secured Notes (the "Notes"), resulting in net proceeds to the Company of approximately $329.1 million. 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 747s, eight Lockheed L-1011s and 13 Boeing 727s. The Notes are guaranteed by all of the Company's subsidiaries. The Company has a $43.7 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. Except as noted below, 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 0.5%. As of March 31, 1999, the interest rate was 8.25%. Except as provided below, the Term Loan is secured by accounts receivable, all spare parts (including rotables), inventory, intangibles and contract rights, cash, 15 Boeing 727s and related engines and the stock of each of the Company's subsidiaries. The Term Loan is guaranteed by all of the Company's subsidiaries. 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 $92.2 million, including an increase of $30 million to the borrowing base as a result of an amendment to the Credit Facility (the "Amendment") on December 10, 1998) that is secured by the same collateral as the Term Loan. Except as provided below, the Credit Facility 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 0.5%. 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, 1999, the Company had a balance of $71.9 million outstanding under the Credit Facility bearing interest at 9.5% and available borrowings under the Credit Facility of approximately $20.8 million. Borrowings under the Credit Facility and Term Loan are subject to certain financial covenants. As of March 31, 1999, the Company was in compliance with all financial covenants. In connection with the Amendment, the Company pledged 11 Douglas DC-8-60s and eight Douglas DC-8-50s under the Credit Facility and the Term Loan. The Company can request WFB to release its liens on the Douglas DC-8-50 aircraft at any time in connection with a sale of the aircraft for full and fair consideration. With respect to the Douglas DC-8-60 aircraft, the Company can request WFB to release its liens on the Douglas DC-8-60s after first repaying the amount borrowed, if any, under the Amendment's $30 million increase to the borrowing base. Prior to December 31, 1999, WFB is not obligated to release its liens on the Douglas DC-8-60s except in connection with a sale of the aircraft for full and fair consideration. After December 31, 1999, WFB is not obligated to release its liens on the Douglas DC-8-60s unless the Company meets specified financial criteria. The Amendment's increase in the borrowing base is available through January 1, 2000, subject to earlier termination by the Company (the "Loan Pricing Increase Period"). During the Loan Pricing Increase Period, the interest rate of the Term Loan and the Credit Facility is either the Prime Rate of WFB plus 1.75% or LIBOR plus 3.25%, regardless of financial covenant performance. Upon termination of this borrowing base increase, the interest rates on the Term Loan and the Credit Facility revert to those stated above. Capital expenditures were $26.3 million and $61.9 million for three months ended March 31, 1999 and 1998, respectively. Capital expenditures for the first quarter of 1999 were primarily for (i) modification of one Boeing 727 to cargo configuration, (ii) noise abatement modifications for one Boeing 727 and (iii) engine overhauls. Capital expenditures for the first quarter of 1998 were primarily for (i) the purchase of 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 17 18 at Dallas/Fort Worth International Airport and (vii) purchase of rotable aircraft parts. During the remainder of 1999, the Company estimates that capital expenditures will aggregate approximately $80 million and that it will make substantial capital expenditures thereafter. During the remainder of 1999, the Company anticipates capital expenditures of $15 million for noise abatement modifications to one Douglas DC-9 and seven Boeing 727 aircraft currently owned. The entire fleet must comply with Federal Aviation Administration ("FAA") noise regulations 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/or structural inspections and modifications to address problems of corrosion and structural fatigue, among other things. Directives applicable to the Company's fleet can be issued at any time. The cost of complying with such potential future directives cannot currently be estimated, but could be substantial. The Company operates a fleet of 31 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 Directive which limits the cargo capacity of these Boeing 727s from approximately 8,000 pounds per cargo position to 4,000 pounds per cargo position until certain modifications are made.. Recently, the Company received approval from the FAA to modify its fleet of Boeing 727s to increase their cargo capacity to approximately 6,000 pounds per cargo position. The modifications are expected to take from three to four days to complete and to cost between $25,000 and $50,000 per aircraft, not including aircraft downtime. The Company believes that available funds, bank borrowings and cash flows expected to be generated by operations and through asset sales 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 Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in normal business activities. Based on recent assessments, the Company determined that it will be required to modify or replace portions of its software so that those systems will properly utilize dates beyond December 31, 1999. The Company presently believes that with modifications or replacements of existing software the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Company. The Company's plan to resolve the Year 2000 issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Company has nearly completed its assessment of all systems that could be significantly affected by the Year 2000. The assessment completed to date indicates that most of the Company's significant information technology systems could be affected. The Company has determined that most of the services it has sold and will continue to sell do not require remediation to be Year 2000 compliant. Accordingly, the Company does not believe that the Year 2000 presents a material exposure as it relates to the Company's services. In addition, the Company has plans to gather information about the Year 2000 compliance status of its significant suppliers and subcontractors and will continue to monitor their compliance. 18 19 With regard to the Company's information technology exposure, to date the Company is approximately 95% complete on the assessment phase and expects to complete software reprogramming and replacement (remediation) no later than May 31, 1999. Once software is reprogrammed or replaced, the Company will begin testing and implementation. These phases will run concurrently for different systems. Completion of the testing phase for all significant systems is expected by July 31, 1999, with all remediated systems fully tested and implemented by August 31, 1999, with 100% completion targeted for September 30, 1999. The Company is in the process of working with third party vendors to ensure that any of the Company's systems that interface directly with third parties are Year 2000 compliant by May 31, 1999. The Company has launched a program to query its significant suppliers and subcontractors that do not share information systems with the Company ("external agents"). To date, the Company is not aware of any external agent with a Year 2000 issue that would materially impact the Company's results of operations, liquidity, or capital resources although the Company understands that certain fuel refiners may be particularly susceptible to disruption caused by non-compliant embedded chips, and that certain electrical power suppliers may be similarly affected. The Company has no means of ensuring that external agents will be Year 2000 ready. The inability of certain external agents, such as the FAA, fuel refiners and suppliers generally, and electrical power suppliers, to complete their Year 2000 resolution process in a timely fashion could materially impact the Company. The effect of non-compliance by external agents is not determinable. The Company is utilizing both internal and external resources to reprogram or replace, test, and implement the software and operating equipment for Year 2000 modifications. The total cost of the Year 2000 project is estimated at less than $0.5 million and is being funded through operating cash flows. As of April 30, 1999, the Company has incurred approximately $250,000 related to all phases of the Year 2000 project. The remaining project costs relate to repair of hardware and software and will be expensed as incurred. Management of the Company believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. However, it is possible that the Company's or third parties' systems and equipment could fail and result in the reduction or suspension of the Company's operations. As noted above, the Company has not yet completed all necessary phases of the Year 2000 program. Disruptions in the economy generally resulting from Year 2000 also issues could materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. The Company currently has no contingency plans in place in the event it does not complete all phases of the Year 2000 program. The Company plans to evaluate the status of completion in May 1999 and determine whether such a plan is necessary. If the Company's expectations or assessments of the impact of the Year 2000 issue prove to be incorrect, the Company's business may be materially affected. 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 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. FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of forward looking terminology, such as "may," "will," "expect," "could," "anticipate," "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those referred to in the forward-looking statements. Factors that might cause such a difference 19 20 include, but are not limited to, those discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results" of the Company's 1998 Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For the period ended March 31, 1999, the Company did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in the Company's 1998 Annual Report on Form 10-K. 20 21 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.(4) 3.3 - Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 4.1 - Specimen Common Stock Certificate.(3) 4.3 - Specimen Global Note in respect of 9.95% Senior Secured Notes due 2004.(4) 4.4 - Indenture, dated November 17, 1997, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 4.5 - First Supplemental Indenture, dated February 5, 1998, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 21.1 - Subsidiaries of the Registrant.(4) 27.1 - Financial Data Schedule.(1) 21 22 - ---------- (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, 1999. KITTY HAWK, INC. By: /s/ Richard R. Wadsworth ------------------------------------------ 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.(4) 3.3 - Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 4.1 - Specimen Common Stock Certificate.(3) 4.3 - Specimen Global Note in respect of 9.95% Senior Secured Notes due 2004.(4) 4.4 - Indenture, dated November 17, 1997, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 4.5 - First Supplemental Indenture, dated February 5, 1998, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 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-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 13,633 0 73,007 0 49,390 175,432 831,924 96,946 927,921 169,202 452,626 0 0 170 192,662 927,921 138,505 138,505 122,387 122,387 0 0 12,182 (3,334) (1,333) (2,001) 0 0 0 (2,001) (0.12) (0.12)
-----END PRIVACY-ENHANCED MESSAGE-----