KHK Kitty Hawk

Kitty Hawk, Inc. (AMEX:KHK), the parent company of Kitty Hawk Cargo, Inc., Kitty Hawk Ground, Inc. and Kitty Hawk Aircargo, Inc., today reported results for the third quarter of 2006. Revenue for the third quarter of 2006 was $57.9 million, an increase of 42.3% as compared to the $40.7 million reported for the third quarter of 2005. Approximately $1.2 million of the increase in revenue for the third quarter was attributable to the Company�s expedited air freight product and $14.2 million of the increase was attributable to the expedited ground freight product. Kitty Hawk introduced its expedited ground freight product in October 2005. Kitty Hawk generated a net loss allocable to common stockholders for the third quarter of 2006 of $6.3 million, or a loss of $0.12 per diluted common share, 29% less than the loss reported for the second quarter of 2006. For the third quarter of 2005, Kitty Hawk reported a net loss of $409,000 or a loss of $0.01 per diluted common share. �During the third quarter we made progress toward our goal of diversifying our product offering and revenue,� said Robert W. Zoller. �Ground product revenue accounted for approximately 24% of third quarter revenue as compared to no revenue from this product offering during the third quarter of 2005. �We have worked toward developing new marketing and sales synergies, scheduling efficiencies and improved cost controls. We continued to emphasize optimizing our ground transportation services, including matching customer service requirements and available capacity as well as transitioning to a higher percentage of owner-operator, in-house and lower-cost regional contract trucks. While we have more work to do, we are now effectively cross selling to the customers of the ACT operations that we acquired in late June as well as attracting new domestic and international customers to the Kitty Hawk brand as demonstrated by a year-over-year chargeable weight increase of 319%. In addition, the number of active ground customer accounts has nearly doubled since the first of the year,� Mr. Zoller added. �We are also beginning the initial integration of our new information technology system for improved customer booking, tracking, communications, billings and collection. This new system is designed to transform our information technology into a competitive advantage for the Company and provide our customers with ease of use that is as good as or better than, other scheduled freight network systems. We expect to begin generating benefits from the installation during the first quarter of 2007,� Mr. Zoller said. �Our traditional seasonal upswing appears to be weaker than historic levels. However, we are continuing to position the company for improved performance in the future. We expect business development efforts to generate results during the fourth quarter, and are continuing to focus on high-level customer service, yield improvement, capacity management and cost control,� concluded Mr. Zoller. Scheduled freight revenue for the third quarter of 2006 was $55.1 million, an increase of 38.7% compared to the third quarter of 2005. Third quarter 2006 system chargeable weight (accounting for associated oversize and special handling requirements) increased 319% as compared to the third quarter of 2005 and average yield decreased 65%, both resulting from the launch of the Company's new expedited ground product which has significantly greater volumes and lower yields than the Company's expedited air products. Expedited ground product revenues during the third quarter of 2006 were $14.2 million. Transportation expense for the second quarter increased $13.5 million or 398.8% from the quarter ended September 30, 2005. This increase is primarily due to a $12.6 million increase related to our network trucking expense including purchased transportation costs and owner operator expenses due to providing our expedited ground freight product, higher fuel surcharges charged by the third party truck carriers and costs to operate the assets acquired from ACT. Kitty Hawk�s aircraft fuel averaged $2.32�per gallon as compared to $2.01 per gallon for the quarter ended September 30, 2005, an increase of 15.7%. Aircraft fuel expense increased $1.2 million. The increase resulted from an increase in the average cost of aircraft fuel of $2.0 million partially offset by a $0.8 million decrease in fuel consumption. Operating the trucks acquired from ACT in the network during the third quarter of 2006 contributed $0.8 million to the increase in reported total fuel expense. Important information about the Company�s results from operations and other subsequent events that should be read in conjunction with this release, including an update of a previously disclosed proposed daytime network for portions of November and December and a recent amendment to the Company�s credit facility are included in the Form 10-Q for the period ended September 30, 2006 filed by the Company earlier today. Conference Call Information Management will host a conference call on Tuesday, November 14, 2006 at 5:00 p.m. Eastern time to review the financial results. To access the call, dial 800-257-7063, or 303-205-0044 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 call's conclusion and through midnight ET November 22 by dialing 800-405-2236 for domestic callers or 303-590-3000 for international callers, both using the passcode 11075445#. About Kitty Hawk, Inc. www.kittyhawkcompanies.com As a recognized leader in customer service, Kitty Hawk is the premier provider of guaranteed, mission-critical, scheduled overnight air and scheduled time-definite expedited ground freight transportation to major business centers and surrounding communities throughout North America, including, Alaska, Hawaii, Toronto, Canada, and San Juan, Puerto Rico. 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, logistics companies and major airlines with its extensive integrated air and ground network, fleet of Boeing 737-300SF and 727-200 cargo aircraft, as well as a 239,000 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. Kitty Hawk's scheduled freight network and award-winning, guaranteed overnight time-definite service are ideal for heavy-weight shipments (over 150 lbs.), special goods with unique dimensions, perishables, animals and other valuable shipments. 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; our inability to successfully operate and integrate the Air Container Transport operation and to retain their customers; failure of key suppliers and vendors to perform; our inability to attract sufficient customers at economical prices for our expanded ground network; unforeseen increases in liquidity and working capital requirements related to our expanded 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 credit 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 report to conform them to actual results. � KITTY HAWK, INC. AND SUBSIDIARIES STATEMENTS OF OPERATIONS � Three months ended September 30, Nine months ended September 30, 2006� 2006� 2006� 2005� (in thousands, except share and per share data) Revenue: Scheduled freight network $ 55,093� $ 39,724� $ 139,443� $ 108,028� ACMI 19� 400� 949� 932� Miscellaneous 2,809� 566� 3,084� 1,810� Total revenue 57,921� 40,690� 143,476� 110,770� Cost of revenue: Flight expense 8,465� 8,134� 25,222� 21,415� Transportation expense 16,863� 3,381� 38,678� 10,226� Fuel expense 15,869� 13,874� 43,223� 39,059� Maintenance expense 4,136� 3,219� 11,747� 8,271� Freight handling expense 9,718� 6,472� 26,671� 19,277� Depreciation and amortization 1,041� 966� 2,570� 2,791� Operating overhead expense 5,001� 3,152� 11,320� 8,974� Total cost of revenue 61,093� 39,198� 159,431� 110,013� Gross profit (loss) (3,172) 1,492� (15,955) 757� General and administrative expense 2,713� 1,898� 7,291� 5,974� Operating loss (5,885) (406) (23,246) (5,217) Other (income) expense: Interest expense 169� 66� 311� 209� Other, net (28) (63) (510) (750) Net loss (6,026) (409) (23,047) (4,676) Preferred stock dividends 291� �� 881� �� Net loss allocable to common stockholders $ (6,317) $ (409) $ (23,928) $ (4,676) Basic loss per share $ (0.12) $ (0.01) $ (0.46) $ (0.09) Diluted loss per share $ (0.12) $ (0.01) $ (0.46) $ (0.09) Weighted average common shares outstanding - basic 53,853,833� 51,582,032� 52,517,887� 51,403,186� Weighted average diluted common shares outstanding - diluted 53,853,833� 51,582,032� 52,517,887� 51,403,186� � KITTY HAWK, INC. AND SUBSIDIARIES BALANCE SHEET � September 30, 2006 December 31, 2005 (in thousands) Cash and cash equivalents $ 2,395� $ 26,650� Total assets 48,573� 56,934� Notes payable and long-term obligations 10,373� 2,304� Stockholders' equity $ 6,091� $ 27,407� Kitty Hawk, Inc. (AMEX:KHK), the parent company of Kitty Hawk Cargo, Inc., Kitty Hawk Ground, Inc. and Kitty Hawk Aircargo, Inc., today reported results for the third quarter of 2006. Revenue for the third quarter of 2006 was $57.9 million, an increase of 42.3% as compared to the $40.7 million reported for the third quarter of 2005. Approximately $1.2 million of the increase in revenue for the third quarter was attributable to the Company's expedited air freight product and $14.2 million of the increase was attributable to the expedited ground freight product. Kitty Hawk introduced its expedited ground freight product in October 2005. Kitty Hawk generated a net loss allocable to common stockholders for the third quarter of 2006 of $6.3 million, or a loss of $0.12 per diluted common share, 29% less than the loss reported for the second quarter of 2006. For the third quarter of 2005, Kitty Hawk reported a net loss of $409,000 or a loss of $0.01 per diluted common share. "During the third quarter we made progress toward our goal of diversifying our product offering and revenue," said Robert W. Zoller. "Ground product revenue accounted for approximately 24% of third quarter revenue as compared to no revenue from this product offering during the third quarter of 2005. "We have worked toward developing new marketing and sales synergies, scheduling efficiencies and improved cost controls. We continued to emphasize optimizing our ground transportation services, including matching customer service requirements and available capacity as well as transitioning to a higher percentage of owner-operator, in-house and lower-cost regional contract trucks. While we have more work to do, we are now effectively cross selling to the customers of the ACT operations that we acquired in late June as well as attracting new domestic and international customers to the Kitty Hawk brand as demonstrated by a year-over-year chargeable weight increase of 319%. In addition, the number of active ground customer accounts has nearly doubled since the first of the year," Mr. Zoller added. "We are also beginning the initial integration of our new information technology system for improved customer booking, tracking, communications, billings and collection. This new system is designed to transform our information technology into a competitive advantage for the Company and provide our customers with ease of use that is as good as or better than, other scheduled freight network systems. We expect to begin generating benefits from the installation during the first quarter of 2007," Mr. Zoller said. "Our traditional seasonal upswing appears to be weaker than historic levels. However, we are continuing to position the company for improved performance in the future. We expect business development efforts to generate results during the fourth quarter, and are continuing to focus on high-level customer service, yield improvement, capacity management and cost control," concluded Mr. Zoller. Scheduled freight revenue for the third quarter of 2006 was $55.1 million, an increase of 38.7% compared to the third quarter of 2005. Third quarter 2006 system chargeable weight (accounting for associated oversize and special handling requirements) increased 319% as compared to the third quarter of 2005 and average yield decreased 65%, both resulting from the launch of the Company's new expedited ground product which has significantly greater volumes and lower yields than the Company's expedited air products. Expedited ground product revenues during the third quarter of 2006 were $14.2 million. Transportation expense for the second quarter increased $13.5 million or 398.8% from the quarter ended September 30, 2005. This increase is primarily due to a $12.6 million increase related to our network trucking expense including purchased transportation costs and owner operator expenses due to providing our expedited ground freight product, higher fuel surcharges charged by the third party truck carriers and costs to operate the assets acquired from ACT. Kitty Hawk's aircraft fuel averaged $2.32 per gallon as compared to $2.01 per gallon for the quarter ended September 30, 2005, an increase of 15.7%. Aircraft fuel expense increased $1.2 million. The increase resulted from an increase in the average cost of aircraft fuel of $2.0 million partially offset by a $0.8 million decrease in fuel consumption. Operating the trucks acquired from ACT in the network during the third quarter of 2006 contributed $0.8 million to the increase in reported total fuel expense. Important information about the Company's results from operations and other subsequent events that should be read in conjunction with this release, including an update of a previously disclosed proposed daytime network for portions of November and December and a recent amendment to the Company's credit facility are included in the Form 10-Q for the period ended September 30, 2006 filed by the Company earlier today. Conference Call Information Management will host a conference call on Tuesday, November 14, 2006 at 5:00 p.m. Eastern time to review the financial results. To access the call, dial 800-257-7063, or 303-205-0044 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 call's conclusion and through midnight ET November 22 by dialing 800-405-2236 for domestic callers or 303-590-3000 for international callers, both using the passcode 11075445#. About Kitty Hawk, Inc. www.kittyhawkcompanies.com As a recognized leader in customer service, Kitty Hawk is the premier provider of guaranteed, mission-critical, scheduled overnight air and scheduled time-definite expedited ground freight transportation to major business centers and surrounding communities throughout North America, including, Alaska, Hawaii, Toronto, Canada, and San Juan, Puerto Rico. 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, logistics companies and major airlines with its extensive integrated air and ground network, fleet of Boeing 737-300SF and 727-200 cargo aircraft, as well as a 239,000 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. Kitty Hawk's scheduled freight network and award-winning, guaranteed overnight time-definite service are ideal for heavy-weight shipments (over 150 lbs.), special goods with unique dimensions, perishables, animals and other valuable shipments. 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; our inability to successfully operate and integrate the Air Container Transport operation and to retain their customers; failure of key suppliers and vendors to perform; our inability to attract sufficient customers at economical prices for our expanded ground network; unforeseen increases in liquidity and working capital requirements related to our expanded 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 credit 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 report to conform them to actual results. -0- *T KITTY HAWK, INC. AND SUBSIDIARIES STATEMENTS OF OPERATIONS Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 2006 2006 2006 2005 ----------- ----------- ----------- ----------- (in thousands, except share and per share data) Revenue: Scheduled freight network $55,093 $39,724 $139,443 $108,028 ACMI 19 400 949 932 Miscellaneous 2,809 566 3,084 1,810 ----------- ----------- ----------- ----------- Total revenue 57,921 40,690 143,476 110,770 Cost of revenue: Flight expense 8,465 8,134 25,222 21,415 Transportation expense 16,863 3,381 38,678 10,226 Fuel expense 15,869 13,874 43,223 39,059 Maintenance expense 4,136 3,219 11,747 8,271 Freight handling expense 9,718 6,472 26,671 19,277 Depreciation and amortization 1,041 966 2,570 2,791 Operating overhead expense 5,001 3,152 11,320 8,974 ----------- ----------- ----------- ----------- Total cost of revenue 61,093 39,198 159,431 110,013 ----------- ----------- ----------- ----------- Gross profit (loss) (3,172) 1,492 (15,955) 757 General and administrative expense 2,713 1,898 7,291 5,974 ----------- ----------- ----------- ----------- Operating loss (5,885) (406) (23,246) (5,217) Other (income) expense: Interest expense 169 66 311 209 Other, net (28) (63) (510) (750) ----------- ----------- ----------- ----------- Net loss (6,026) (409) (23,047) (4,676) Preferred stock dividends 291 -- 881 -- ----------- ----------- ----------- ----------- Net loss allocable to common stockholders $(6,317) $(409) $(23,928) $(4,676) =========== =========== =========== =========== Basic loss per share $(0.12) $(0.01) $(0.46) $(0.09) =========== =========== =========== =========== Diluted loss per share $(0.12) $(0.01) $(0.46) $(0.09) =========== =========== =========== =========== Weighted average common shares outstanding - basic 53,853,833 51,582,032 52,517,887 51,403,186 =========== =========== =========== =========== Weighted average diluted common shares outstanding - diluted 53,853,833 51,582,032 52,517,887 51,403,186 =========== =========== =========== =========== *T -0- *T KITTY HAWK, INC. AND SUBSIDIARIES BALANCE SHEET September 30, December 31, 2006 2005 ------------- ------------ (in thousands) Cash and cash equivalents $ 2,395 $ 26,650 Total assets 48,573 56,934 Notes payable and long-term obligations 10,373 2,304 Stockholders' equity $6,091 $27,407 *T