KHK Kitty Hawk

Kitty Hawk, Inc. (AMEX:KHK) today reported second quarter 2005 gross revenues of $36.5 million, a decrease of $1.4 million, or 3.8%, from second quarter 2004 and a second quarter 2005 net loss of $2.2 million, or $0.04 loss per diluted share, compared to net income of $0.6 million, or $0.01 income per diluted share, for the second quarter of 2004. In addition, Kitty Hawk reported gross revenues of $70.1 million for the first six months of 2005, a decrease of $1.5 million, or 2.1%, from the first six months of 2004 and a net loss for the six months ended June 30, 2005 of $4.3 million, or $0.08 loss per diluted share, compared to a net loss of $1.2 million, or $0.02 loss per diluted share, for the same period in 2004. Second quarter 2005 results were impacted by, among other things, $1.0 million in overhead expense for the Company's planned induction of seven (7) new generation fuel-efficient Boeing 737-300SF cargo aircraft. Second quarter 2004 results were impacted by, among other things, the following items: -- $0.5 million in incremental lease return expenses to meet the lease return conditions of four (4) Boeing 727-200F cargo aircraft upon expiration of their leases in May 2004; and -- $0.4 million in initial costs for the induction of the seven (7) Boeing 737-300SF cargo aircraft. Results for the six months ended June 30, 2005 were also impacted by, among other things, $0.5 million in expense during the first quarter of 2005 for the induction of the seven (7) Boeing 737-300SF cargo aircraft, $0.4 million cash benefit related to the recovery of retroactive adjustments on a worker's compensation policy and $0.1 million cash benefit from the recovery of a customer accounts receivable balance. Results for the six months ended June 30, 2004 were also impacted by, among other things, an additional $1.2 million charge in the first quarter of 2004 incurred for incremental lease return expenses to meet the lease return conditions on four (4) Boeing 727-200F cargo aircraft in anticipation of their return to the lessor in May 2004 and a $0.5 million reversal of expense in the first quarter of 2004 related to excess airframe maintenance reserves on one Boeing 727-200F cargo aircraft that completed a heavy maintenance check. Second quarter 2005 average yield (revenue per unit of chargeable weight) increased 11.3% and chargeable weight (accounting for associated oversize and special handling requirements) decreased 14.2% over the same period last year. For the six months ended June 30, 2005, average yield increased 8.6% and chargeable weight decreased 10.6% over the same period last year on reduced capacity. The increase in average yield is due to an increase in fuel and security surcharges implemented to help defray the rising costs of these items as well as a revised pricing structure, all of which were partially offset by competitive pricing pressures in selected markets and a higher proportion of chargeable weight from markets with lower yields. Volumes for the higher-priced expedited freight were down as the effects of higher fuel prices contributed to a shift by customers to lower-priced non-expedited services. The decrease in chargeable weight for 2005 resulting from these factors was partially offset by an improvement in chargeable weight for operations in San Juan, Puerto Rico, which initially started during the second quarter of 2004. The Company has taken delivery of six (6) more fuel-efficient Boeing 737-300SF cargo aircraft, of which five (5) are currently in revenue service. Kitty Hawk expects the last aircraft to be delivered and placed into revenue service during September 2005. During the remainder of 2005, the Company expects to spend approximately $0.8 million on additional Boeing 737-300SF cargo aircraft introduction-related charges, investments in inventory and lease deposits. "Challenged by continuing and unprecedented high fuel costs as well as planned Boeing 737-300SF cargo aircraft integration costs, Kitty Hawk team members responded by minimizing underutilized capacity, more efficiently allocating the available Boeing 737-300SF flight hours and reducing other expenses in light of reduced demand for our award-winning "mission-critical" expedited freight service," said Robert W. Zoller, president and CEO. "Kitty Hawk is already exploring ways to further accelerate improvements to our product and service offerings, technology, and to retire older aircraft and/or introduce more modern and fuel-efficient aircraft in response to changes in our industry." About Kitty Hawk As a recognized leader in air cargo customer service, Kitty Hawk is the premier provider of guaranteed, mission-critical, scheduled overnight air freight transportation to major business centers throughout North America including, Alaska, Hawaii, Canada, Puerto Rico and Mexico. With more than 30 years experience in the aviation and airfreight industries, Kitty Hawk plays a key-connecting role in the global supply chain. Kitty Hawk serves the logistics needs of more than 500 freight forwarders, integrated carriers, logistics companies and major airlines with its fleet of B737-300SF and B727 freighter aircraft, its ground truck network, as well as its 239,000 square-foot cargo warehouse, US Customs clearance and sort facility at its Fort Wayne, Indiana hub. Kitty Hawk is the North American launch customer for the fuel-efficient and environmentally friendly B737-300SF aircraft. Kitty Hawk's extensive air-ground cargo network and award winning, guaranteed overnight express service is ideal for heavyweight shipments, special goods with unique dimensions, perishables, animals and other valuable shipments. 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 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," "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 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; liability and other claims asserted against the Company; labor disputes; the Company's ability to attract and retain qualified personnel; inflation; and costs, delays and problems integrating the last Boeing 737-300SF cargo aircraft into our fleet. For a discussion of these and other risk factors, see Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2004. 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 report to conform them to actual results. -0- *T KITTY HAWK, INC. AND SUBSIDIARIES STATEMENTS OF OPERATIONS Three months ended Six months ended June 30, June 30, ----------------------- ----------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- (in thousands, except share and per share data) Revenue: Scheduled freight $35,462 $37,164 $68,304 $70,388 ACMI 12 640 532 640 Miscellaneous 977 71 1,244 589 ---------- ----------- ----------- ----------- Total revenue 36,451 37,875 70,080 71,617 Cost of revenue: Flight expense 6,675 7,381 13,281 14,570 Transportation expense 3,917 3,424 6,845 6,249 Fuel expense 13,244 10,876 25,185 20,079 Maintenance expense 2,505 2,797 5,052 6,177 Freight handling expense 6,546 6,862 12,805 13,350 Depreciation and amortization 1,002 688 1,825 1,500 Operating overhead expense 2,873 2,842 5,822 5,497 ---------- ----------- ----------- ----------- Total cost of revenue 36,762 34,870 70,815 67,422 ---------- ----------- ----------- ----------- Gross profit (loss) (311) 3,005 (735) 4,195 General and administrative expense 1,856 2,433 4,076 5,354 ---------- ----------- ----------- ----------- Operating income (loss) (2,167) 572 (4,811) (1,159) Other (income) expense: Interest expense 73 72 143 167 Other, net (85) (85) (687) (123) ---------- ----------- ----------- ----------- Net income (loss) $(2,155) $585 $(4,267) $(1,203) ========== =========== =========== =========== Basic income (loss) per share $(0.04) $0.01 $(0.08) $(0.02) ========== =========== =========== =========== Weighted average common shares outstanding 51,439,964 50,698,234 51,313,764 50,636,602 =========== =========== =========== =========== Diluted income (loss) per share $(0.04) $0.01 $(0.08) $(0.02) =========== =========== =========== =========== Weighted average diluted common shares outstanding 51,439,964 53,994,513 51,313,764 50,636,602 =========== =========== =========== =========== *T