Kitty Hawk (AMEX:KHK)
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Kitty Hawk, Inc. (AMEX: KHK), the parent company of Kitty Hawk Cargo,
Inc., Kitty Hawk Ground, Inc. and Kitty Hawk Aircargo, Inc., today
reported a strong financial performance for the fourth quarter of 2006.
Revenue for the fourth quarter of 2006 was $86.2 million, an increase of
87.8% from the $45.9 million reported for the fourth quarter of 2005.
$26.4 million of the increase was the result of work performed in
managing the Christmas Network for the United States Postal Service
(USPS) during 2006 – no similar work was
performed in the fourth quarter of 2005. In addition, the Company
reported strong growth in expedited ground freight, reflecting the
contribution from the June 2006 acquisition of Air Container Transport
(ACT) operating assets.
Revenue from the Company’s expedited ground
freight product was $16.0 million in the fourth quarter of 2006 compared
with $1.1 million in the fourth quarter of 2005. Revenue from the Company’s
expedited air freight product decreased 8.9% in the fourth quarter of
2006 to $39.0 million compared with the fourth quarter of 2005. ACMI
revenue was $4.8 million in the fourth quarter of 2006 which included
ACMI contracts relating to USPS Christmas Network as compared to $0.9
million in the fourth quarter of 2005.
Kitty Hawk generated net income of $8.3 million, or $0.15 per diluted
share allocable to common stockholders, in the fourth quarter of 2006
compared with a net loss of $4.1 million, or $0.08 per share allocable
to common stockholders, for the fourth quarter of 2005.
Revenue for 2006 totaled $229.6 million, an increase of $73.0 million or
46.6% compared with total revenue in 2005. The increase was largely the
result of the revenues derived from the Company’s
first full year of a scheduled freight ground network, combined with the
$26.4 million in revenue generated from the operation and management of
the USPS network in 2006. In total, scheduled freight network revenue
increased $39.7 million in 2006 due to a 190.1% increase in chargeable
weight partially offset by a 54.9% decrease in average yield compared to
the prior year. Our average yield decrease was primarily due to a change
in the mix of our products because the expedited ground freight product
has substantially higher volumes at lower yields than our expedited air
freight product.
The Company reported a net loss allocable to common stockholders for
2006 of $15.6 million compared with a net loss allocable to common
stockholders in 2005 of $8.8 million. The net loss allocable to common
stockholders was $0.30 per share in 2006 compared with $0.17 per share
in 2005.
Additional Fourth Quarter 2006 Operating Results
Scheduled freight revenue for the fourth quarter of 2006 was $49.4
million, an increase of 12.5% compared to the fourth quarter of 2005.
Fourth quarter 2006 system chargeable weight increased 266.1% as
compared to the fourth quarter of 2005 and average yield decreased
65.8%. The increase in chargeable weight and decrease in yield reflected
the fourth quarter of 2005 launch of the Company's new expedited ground
freight product, which has substantially higher volumes at lower yields
than the expedited air freight product. Expedited ground freight product
revenue during the fourth quarter of 2006 was $16.0 million including
$10.4 million of scheduled ground freight product revenue and $5.6
million of revenue related to other ground freight services.
Transportation expense for the fourth quarter of 2006 increased $11.0
million or 159.7% from the quarter ended December 31, 2005. This
increase is primarily due to increased network trucking expense
including purchased transportation costs and owner operator expenses,
which reflect the expansion of the expedited ground freight product.
Kitty Hawk’s aircraft fuel cost averaged $2.01
per gallon as compared to $2.15 per gallon for the fourth quarter of
2005, a decrease of 6.5%. Total aircraft fuel expense increased $2.0
million in the fourth quarter of 2006. The increase resulted from a $3.3
million increase in fuel consumption, primarily related to USPS contract
operations, partially offset by a $1.3 million decrease in the average
cost of aircraft fuel. In addition, maintenance expense for the fourth
quarter of 2006 included a $0.8 million net adjustment for our aircraft
parts and supplies as compared to a $2.4 million net adjustment in the
fourth quarter of 2005.
Recent Developments
The Company also today announced that it recently entered into a new,
more flexible $25 million revolving facility with Laurus Master Fund,
Ltd. (Laurus). The facility replaces the Company’s
prior facility and increases the size of the facility up to $25 million
from $20 million, subject to a borrowing base calculation. The Company
plans to use funds from the facility principally for working capital.
Over the next few weeks, the Company is scheduled to introduce to its
air and ground customers a new website and start the roll-out of a new
cargo operations information technology system. The new website and
cargo operations system significantly improves on-line customer booking,
shipment tracking, customer communications, billing and account
management capabilities.
Robert W. Zoller, President and Chief Executive Officer of Kitty Hawk
commented, “Operations performed during the
fourth quarter on behalf of the USPS were a very significant undertaking
this year, encompassing a complex coordination of air and ground
operations across multiple states and under tight deadlines and exacting
performance standards. We are grateful for the opportunity to serve the
USPS and its customers during one of their busiest times of the year. We
were also pleased with the performance of our industry partners and
believe our success in operating and managing this program demonstrates
Kitty Hawk’s growing operational and logistics
strength.”
“The new facility with Laurus represents
another major milestone for Kitty Hawk, providing the increased
financial flexibility that we believe will allow us to achieve our
business goals in 2007. In addition, the new enhancements in technology
will provide our customers with expanded and more efficient access to
our products and services as well as a significant new competitive
advantage for the Company. Kitty Hawk expects to see real benefits from
the new technology beginning in the second quarter of 2007,”
continued Mr. Zoller.
2007 Outlook
Due to the seasonality of the business and the softness in demand that
the industry has experienced throughout the latter part of 2006, the
Company is cautious in its outlook for 2007. “As
with others in our industry softness in demand for our products has
persisted into the first quarter of 2007. As a result, the Company is
focused on various revenue generation and cost and capacity control
programs for both its air and ground operations. We remain committed to
providing superior customer service while at the same time seeking to
achieve operational efficiencies, prudent cost controls and an
appropriate balance between demand, capacity and growth. Achieving
financial targets for 2007 will depend on the Company’s
ability to improve financial performance for its air and ground
products, the trends for aviation and diesel fuel prices, carefully
managing under-utilized capacity as well as minimizing its overall cost
of operation. The Company expects its capital expenditures for the full
year 2007 will be approximately $2.0 million,”
concluded Mr. Zoller.
Important information about the Company’s
results from operations, the new Laurus facility and other subsequent
events that should be read in conjunction with this release are included
in the Form 10-K for the period ended December 31, 2006 filed by the
Company on April 2, 2007.
Conference Call Information
Management will host a conference call on Tuesday, April 3, 2007 at 8:30
a.m. Eastern time to review the financial results. To access the call,
dial 800-240-2134, or 303-262-2130 for international callers. To listen
to the live web cast go to www.kittyhawkcompanies.com
under the Investor Relations area of the web site. A replay of the
conference call will be available approximately one hour after the
conclusion of the call and through midnight ET April 10, 2007 by dialing
800-405-2236 for domestic callers or 303-590-3000 for international
callers, both using the passcode 11087077#.
About Kitty Hawk, Inc.
www.kittyhawkcompanies.com
As a recognized leader in customer service, Kitty Hawk is the premier
provider of guaranteed, mission-critical, overnight air, second
morning-air and expedited ground freight transportation to major
business centers, international freight gateways and surrounding
communities throughout North America, including, Alaska; Hawaii;
Toronto, Canada; and San Juan, Puerto Rico. Kitty Hawk’s
scheduled freight network and award-winning guaranteed overnight air or
expedited ground products are ideal for heavy-weight (over 150 lbs.),
high-value or high-security, special goods with unique dimensions,
perishables, animals and/or other shipments requiring special handling.
With more than 30 years experience in the aviation and air freight
industries, Kitty Hawk plays a key connecting role in the global supply
chain. Kitty Hawk serves the logistics needs of more than 550 freight
forwarders, integrated carriers, domestic and international airlines and
logistics companies with its extensive integrated air and ground
network, fleet of Boeing 737-300SF and 727-200 cargo aircraft, as well
as a 240,000 square-foot cargo warehouse, U.S. Customs clearance and
sort facility at its Fort Wayne, Indiana hub.
In 2005, Kitty Hawk became the North American launch customer for the
fuel-efficient and environmentally-friendly Boeing 737-300SF cargo
aircraft. In late 2005 Kitty Hawk launched its new coast-to-coast and
border-to-border expedited ground network reaching key business centers
throughout the U.S., Canada and Mexico. In early 2006 to manage the
growing demand for its high customer service ground freight product
Kitty Hawk formed Kitty Hawk Ground, Inc. In June 2006 Kitty Hawk Ground
acquired and began integrating the majority of the assets of 20-year-old
Air Container Transport (ACT), the dominant expedited airport-to-airport
freight trucking company operating from southwestern Canada to San Diego
as well as additional cities as far east as Texas and Illinois.
Statement under the Private Securities Litigation Reform Act:
This report may contain forward-looking statements that are intended to
be subject to the safe harbor protection provided by Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements relate to future events or future financial and
operating performance and involve known and unknown risks and
uncertainties that may cause actual results or performance to be
materially different from those indicated by any forward-looking
statements. In some cases, you can identify forward-looking statements
by terminology such as "forecast," "may," "will," "could," "should,"
"expect," "intends," "plan," "believe," "potential" or other similar
words indicating future events or contingencies. Some of the things that
could cause actual results to differ from expectations are: economic
conditions; the impact of high fuel prices; our inability to
successfully implement and operate our expanded scheduled
airport-to-airport expedited ground freight network; failure of key
suppliers and vendors to perform; our inability to attract sufficient
customers at economical prices for our air network or ground network;
unforeseen increases in liquidity and working capital requirements
related to our air and ground network; potential competitive responses
from other operators of nationwide airport-to-airport ground freight
networks; the continued impact of terrorist attacks, global instability
and potential U.S. military involvement; the Company's significant lease
obligations and indebtedness; the competitive environment and other
trends in the Company's industry; changes in laws and regulations;
changes in the Company's operating costs including fuel; changes in the
Company's business plans; interest rates and the availability of
financing; limitations upon financial and operating flexibility due to
the terms of our revolving facility; liability and other claims asserted
against the Company; labor disputes; the Company's ability to attract
and retain qualified personnel; and inflation. For a discussion of these
and other risk factors, see the Company's most recent Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities
and Exchange Commission. All of the forward-looking statements are
qualified in their entirety by reference to the risk factors discussed
therein. These risk factors may not be exhaustive. The Company operates
in a continually changing business environment, and new risk factors
emerge from time to time. Management cannot predict such new risk
factors, nor can it assess the impact, if any, of such new risk factors
on the Company's business or events described in any forward-looking
statements. The Company disclaims any obligation to publicly update or
revise any forward-looking statements after the date of this release to
conform them to actual results.
KITTY HAWK, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
Three months ended
Year ended
December 31,
December 31,
2006
2005
2006
2005
(in thousands, except share and per share data)
Revenue:
Scheduled freight network
$ 49,380
$ 43,882
$ 191,579
$ 151,910
Network management
26,442
—
26,442
—
ACMI
4,765
893
5,713
2,431
Miscellaneous
5,579
1,091
5,908
2,296
Total revenue
86,166
45,866
229,642
156,637
Cost of revenue:
Flight expense
8,431
8,826
33,653
30,241
Transportation expense
17,865
6,880
56,543
17,106
Fuel expense
18,307
15,597
61,530
54,656
Maintenance expense
5,070
5,936
16,817
14,207
Freight handling expense
19,520
7,438
46,191
26,715
Depreciation and amortization
898
902
3,468
3,693
Operating overhead expense
4,768
2,171
16,088
11,146
Total cost of revenue
74,859
47,750
234,290
157,764
Gross profit (loss)
11,307
(1,884)
(4,648)
(1,127)
General and administrative expense
2,820
2,078
9,904
8,052
Operating income (loss)
8,487
(3,962)
(14,552)
(9,179)
Other (income) expense:
Interest expense
247
78
559
287
Other, net
(375)
(206)
(678)
(956)
Net income (loss)
8,615
(3,834)
(14,433)
(8,510)
Preferred stock dividends
291
313
1,172
313
Net income (loss) allocable to common stockholders
$ 8,324
$ (4,147)
$ (15,605)
$ (8,823)
Basic income (loss) per share
$ 0.16
$ (0.08)
$ (0.30)
$ (0.17)
Diluted income (loss) per share
$ 0.15
$ (0.08)
$ (0.30)
$ (0.17)
Weighted average common shares outstanding - basic
51,582,032
51,582,032
52,854,459
51,447,898
Weighted average diluted common shares outstanding - diluted
53,840,086
51,582,032
52,854,459
51,447,898
KITTY HAWK, INC. AND SUBSIDIARIES
BALANCE SHEET
December 31, 2006
December 31, 2005
(in thousands)
Cash and cash equivalents
$ 9,589
$ 26,650
Total assets
53,823
56,934
Notes payable and long-term obligations
392
2,304
Stockholders' equity
$ 14,898
$ 27,407