<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Kitty Hawk, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
KITTY HAWK, INC.
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Kitty Hawk, Inc. on Friday, May 29, 1998, at 10:00 a.m., local time. The
meeting will be held at the offices of the Company at 1535 West 20th Street,
Dallas/Fort Worth International Airport, Texas 75261.
At the meeting, you will be asked to consider and elect two directors to
serve until the 2001 Annual Meeting of Stockholders. Your Board of Directors has
unanimously nominated these persons for election as directors. You are also
being asked to ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for 1998. Information about the business of the
meeting is set forth in the accompanying proxy statement, which you are urged to
read carefully. During the meeting, I will review with you the affairs and
progress of the Company during and since 1997. Officers of the Company will be
present to respond to questions from stockholders.
The Board of Directors appreciates and encourages stockholder participation
in the Company's affairs. Whether or not you plan to attend the meeting, please
sign, date and return the enclosed proxy promptly in the envelope provided. Your
shares will then be represented at the meeting. If you attend the meeting, you
may, at your discretion, withdraw your proxy and vote in person.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
/s/ M. TOM CHRISTOPHER
M. TOM CHRISTOPHER
Chairman and Chief Executive Officer
April 30, 1998
<PAGE> 3
KITTY HAWK, INC.
1515 West 20th Street
Dallas/Fort Worth International Airport, Texas 75261
Telephone (972) 456-2200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1998
The Annual Meeting of Stockholders of Kitty Hawk, Inc., a Delaware
corporation (the "Company"), will be held at the offices of the Company at 1535
West 20th Street, Dallas/Fort Worth International Airport, Texas 75261, on
Friday, May 29, 1998 at 10:00 a.m., local time, for the following purposes:
(1) To elect two persons to serve as Class I directors until the 2001
Annual Meeting of Stockholders and until their successors are duly
elected and qualified;
(2) To ratify the appointment of Ernst & Young LLP as independent public
accountants of the Company for 1998; and
(3) To transact such other business as may properly come before the meeting
or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on April 3, 1998, as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting or any adjournment(s) thereof. Only stockholders of
record at the close of business on April 3, 1998 are entitled to notice of, and
to vote at, such meeting. A complete list of stockholders entitled to vote at
the meeting will be available for examination at 1515 West 20th Street,
Dallas/Fort Worth International Airport, Texas 75261, for ten days prior to and
during the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE ENCOURAGED
TO FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PROXIES
FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ RICHARD R. WADSWORTH
RICHARD R. WADSWORTH
Senior Vice President -- Finance,
Chief Financial Officer and Secretary
Dallas/Fort Worth International Airport, Texas
April 30, 1998
<PAGE> 4
KITTY HAWK, INC.
1515 West 20th Street
Dallas/Fort Worth International Airport, Texas 75261
Telephone (972) 456-2200
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1998
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Kitty Hawk, Inc. (the "Company") for use at
the Annual Meeting of Stockholders of the Company to be held on May 29, 1998
(the "Annual Meeting") and at any and all adjournments thereof. The approximate
date on which this Proxy Statement and accompanying proxy card are first being
sent or given to stockholders is April 30, 1998.
Shares represented by each proxy, if properly executed and returned to the
Company prior to the Annual Meeting, will be voted as directed, but if not
otherwise specified, will be voted for the election of the two Class I directors
and to ratify the appointment of Ernst & Young LLP as independent public
accountants, all as recommended by the Board of Directors. A stockholder
executing the proxy may revoke it at any time before it is voted (i) by giving
written notice to the Secretary of the Company, (ii) by subsequently executing
and delivering a proxy or (iii) by voting in person at the Annual Meeting
(although attending the Annual Meeting without executing a ballot or executing a
subsequent proxy will not constitute revocation of a proxy).
OUTSTANDING VOTING SECURITIES OF THE COMPANY
On April 3, 1998, the record date for determining stockholders entitled to
vote at the Annual Meeting, there were outstanding 16,766,881 shares of Common
Stock, par value $.01 per share ("Common Stock"). Each share of Common Stock is
entitled to one vote for each director to be elected and upon all other matters
to be brought to a vote by the stockholders at the Annual Meeting. The
affirmative vote of a plurality of the shares of Common Stock present or
represented at the Annual Meeting is required to elect the Class I directors,
and the affirmative vote of a majority of the shares of Common Stock present or
represented at the Annual Meeting is required to ratify the appointment of Ernst
& Young LLP.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on the proposal to ratify the
appointment of the independent public accountants and will be counted as present
for such purpose, but will have the effect of a negative vote on that proposal
because that proposal requires the affirmative vote of holders of a majority of
shares present in person or by proxy and entitled to vote. Brokers who hold
shares in street name for customers may vote on certain items when they have not
received instructions from beneficial owners. Brokers that do not receive such
instructions may vote on the election of directors and the proposal to ratify
the appointment of the independent public accountants. Under applicable Delaware
law, a broker non-vote will have no effect on the outcome of the election of
directors or the proposal to ratify the appointment of the independent public
accountants.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 20, 1998 certain information
with regard to the beneficial ownership of the Common Stock by (i) all persons
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director and nominee for director of the
Company, (iii) each executive officer of the Company and (iv) all directors and
executive officers of the Company as a group. Unless otherwise indicated, all
shares shown in the table below are held with sole voting and investment power
by the person or entity indicated.
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
---------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ---------- -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
M. Tom Christopher (1).................................... 5,948,436 35.5%
Tilmon J. Reeves (1)...................................... 128,174 (2)
EXECUTIVE OFFICERS:
Richard R. Wadsworth (1)(3)............................... 53,390 (2)
James R. Craig (1)........................................ 1,710 (2)
DIRECTORS:
Ted J. Coonfield (1)...................................... 2,310 (2)
Conrad A. Kalitta (1)(4).................................. 4,099,150 24.4%
George W. Kelsey (1)...................................... -- --
Philip J. Sauder (1)...................................... -- --
Lewis S. White (1)........................................ 1,710 (2)
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (9
PERSONS).................................................. 10,234,880 61.0%
</TABLE>
- ---------------
(1) The address for this stockholder is 1515 West 20th Street, Dallas/Fort Worth
International Airport, Texas 75261.
(2) Less than 1%.
(3) Mr. Wadsworth is a nominee for election as a director of the Company.
(4) Of these 4,099,150 shares of Common Stock, 650,000 shares are held in escrow
until May 19, 2001 to satisfy certain indemnification obligations of Mr.
Kalitta to the Company. Mr. Kalitta retains the right to vote such shares
while they are being held in escrow.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation divides the Board of Directors
into three classes. The term of office of the Class I directors expires at the
Annual Meeting. The Class II directors will serve until the 1999 Annual Meeting
of Stockholders, and the Class III directors will serve until the 2000 Annual
Meeting of Stockholders.
It is intended that the names of the nominees listed below will be placed
in nomination and that the persons named in the proxy will vote for their
election. Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any nominee becomes unavailable for any reason, the
shares represented by the proxies will be voted for such person, if any, as may
be designated by the Board of Directors. However, management has no reason to
believe that any nominee will be unavailable.
2
<PAGE> 6
NOMINEES
CLASS I -- TERM TO EXPIRE IN 2001
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Ted J. Coonfield.......................... 49 Director
Richard R. Wadsworth...................... 51 Senior Vice President -- Finance, Chief
Financial Officer and Secretary
</TABLE>
CURRENT CLASS I DIRECTORS -- TERM TO EXPIRE AT ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Ted J. Coonfield.......................... 49 Director
George W. Kelsey.......................... 57 Director
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS II -- TERM TO EXPIRE IN 1999
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Tilmon J. Reeves.......................... 58 Chief Operating Officer, President and
Director
Philip J. Sauder.......................... 44 Director
</TABLE>
CLASS III -- TERM TO EXPIRE IN 2000
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
M. Tom Christopher........................ 51 Chairman of the Board of Directors and Chief
Executive Officer
Conrad A. Kalitta......................... 60 Director
Lewis S. White............................ 58 Director
</TABLE>
Set forth below is a description of the background of each of the directors
and nominees for director of the Company.
M. TOM CHRISTOPHER has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since its inception in 1985 and serves in
the class of directors whose terms expire at the 2000 Annual Meeting of
Stockholders. He has over 20 years of experience in the air freight industry.
CONRAD A. KALITTA serves in the class of directors whose terms expire at
the 2000 Annual Meeting of Stockholders. Mr. Kalitta founded American
International Airways, Inc., American International Travel, Inc., Flight One
Logistics, Inc., Kalitta Flying Service, Inc. and O.K. Turbines, Inc. (the
"Kalitta Companies"), each of which were acquired by the Company in November
1997. Mr. Kalitta is also a professional drag racer in the "top-fuel" class and
has won three national championships.
TILMON J. REEVES serves as President and Chief Operating Officer of the
Company and has over 30 years of aviation experience. Mr. Reeves became a
director in October 1994 and serves in the class of directors whose terms expire
at the 1999 Annual Meeting of Stockholders.
TED J. COONFIELD became a director of the Company in October 1994 and
serves in the class of directors whose terms expire at the Annual Meeting. Since
January 1998, Mr. Coonfield has served as a Vice President of the Company. Since
October 1997, Mr. Coonfield has been in private consulting practice. From April
1996 to October 1997, Mr. Coonfield was a consultant with Performance Consulting
Group, a firm specializing in change management consulting primarily in the
banking and insurance industry. From January 1993 to April 1996, Mr. Coonfield
was a consultant with the Richard-Rogers Group, a consulting firm specializing
in total quality issues, where he primarily engaged in consulting for firms in
the transportation
3
<PAGE> 7
industry. Since 1985, Mr. Coonfield has been the President of Oregon Wine
Designs, Inc., a wine production and marketing firm.
GEORGE W. KELSEY became a director of the Company in November 1997 and
serves in the class of directors whose terms expire at the Annual Meeting. Mr.
Kelsey is currently the owner of Kelsey Law Offices, P.C., a law firm located in
Ann Arbor, Michigan. Mr. Kelsey has practiced law in Michigan for over 25 years,
and has been the principal outside counsel for the Kalitta Companies. Mr. Kelsey
currently specializes in commercial transactions and commercial litigation with
emphasis in aviation law.
RICHARD R. WADSWORTH has served as Senior Vice President -- Finance since
October 1992, Chief Financial Officer since September 1994 and Secretary since
October 1994. Mr. Wadsworth served as a director of the Company from October
1994 through November 19, 1997, the date of the acquisition of the Kalitta
Companies.
PHILIP J. SAUDER became a director of the Company in November 1997 and
serves in the class of directors whose terms expire at the 1999 Annual Meeting
of Stockholders. Mr. Sauder is currently a limited partner of Carlisle
Enterprises, L.P. which acquires manufacturers of engineered products and the
Chairman and Chief Executive Officer of Alpha Technologies, U.S., L.P., which
manufactures high tech instrumentation for the polymer and rubber industries.
From 1989 through 1994, Mr. Sauder was employed by Abex, Inc., first as the
general manager of its Cleveland Pneumatic Division and then as the group Vice
President of its Aerospace Division.
LEWIS S. WHITE became a director of the Company in October 1994 and serves
in the class of directors whose terms expire at the 2000 Annual Meeting of
Stockholders. Since 1988, Mr. White has been President of L. S. White & Co., a
firm engaged in business planning and corporate finance. Prior to 1988, he held
senior management positions with Paramount Communications Inc. and Union Carbide
Corporation. Mr. White is also a director of Whitehall Corporation, a company
principally involved in aircraft maintenance.
The affirmative vote of a plurality of the shares of Common Stock present
in person or represented by proxy at the Annual Meeting is required to elect the
nominees for director named above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR NAMED ABOVE.
MEETINGS OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board meets to review significant developments affecting the
Company and to act on matters requiring Board approval. It also holds special
meetings when an important matter requires Board action between scheduled
meetings. The Board of Directors met five times during 1997. During 1997, each
member of the Board participated in at least 75% of all Board and applicable
committee meetings held during the period.
The Board of Directors has established audit and compensation committees to
devote attention to specific subjects and to assist it in the discharge of its
responsibilities. The functions of those committees, their current members and
the number of meetings held during 1997 are described below. The Board of
Directors does not have a standing nominating committee.
Audit Committee. The Board of Directors has a standing Audit Committee
which provides the opportunity for direct communications between the independent
public accountants and the Board of Directors. The Audit Committee meets with
the certified public accountants periodically to review their effectiveness
during the annual audit program and to discuss the Company's internal control
policies and procedures. The members of the Audit Committee are currently
Messrs. Sauder and White. From January 1, 1997 through November 19, 1997, the
members of the audit committee were Messrs. Coonfield and White. The Audit
Committee met one time during 1997.
Compensation Committee. The Board of Directors also has a standing
Compensation Committee (the "Compensation Committee") that provides
recommendations to the Board of Directors regarding salaries and other
compensation of executive officers of the Company. From January 1, 1997 through
November 19, 1997,
4
<PAGE> 8
Messrs. Coonfield and White comprised the Compensation Committee. Subsequent to
November 19, 1997, Messrs. Sauder and White comprised the Compensation
Committee. The Compensation Committee met three times during 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Act"), requires the Company's directors, executive officers and beneficial
owners of more than 10% of the Common Stock to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Based solely upon its review of the copies of such forms received by it
and its knowledge that no Form 5s were required from reporting persons, the
Company believes that all such reports were submitted on a timely basis during
1997.
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long-term
compensation for services in all capacities to the Company for fiscal years
1995, 1996 and 1997 and during the four months ended December 31, 1996, with
respect to those persons who were during 1997 (i) the Chief Executive Officer
and (ii) the other two executive officers of the Company (collectively, with the
Chief Executive Officer, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ---------------------------- ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
M. Tom Christopher 1995 $120,000 $898,731 -- -- $352,163(1)
Chairman of the Board of 1996 190,000 719,419 -- -- 376,844(2)
Directors and Chief 1996(3) 80,000 -- -- -- 81,250(4)
Executive Officer 1997 240,000 130,000 -- -- 369,020(5)
Tilmon J. Reeves 1995 125,000 108,335 -- 245,708(6) 2,310(7)
Chief Operating Officer
and 1996 125,000 85,000 $3,726,182(8) 390,707 2,375(7)
President 1996(3) 41,667 15,000 -- -- --
1997 128,541 117,500 -- -- 2,375(7)
Richard R. Wadsworth 1995 110,000 70,000 -- 92,140(6) 2,262(7)
Senior Vice President -- 1996 110,000 70,000 $1,464,572(8) 153,567 2,375(7)
Finance, Chief Financial 1996(3) 36,664 15,000 -- -- 583(7)
Officer and Secretary 1997 $113,117 $255,000 -- -- $ 2,375(7)
</TABLE>
- ---------------
(1) Consists of (i) contingent payments in the amount of $325,000 received by
Mr. Christopher under settlement of litigation (the "ANET Litigation")
during fiscal year 1995, (ii) life insurance premiums of $25,500 paid on Mr.
Christopher's behalf and (iii) matching contributions of $1,663 to the
Company's 401(k) Savings Plan for Mr. Christopher.
(2) Consists of (i) contingent payments in the amount of $325,000 received by
Mr. Christopher under the ANET Litigation during fiscal year 1996, (ii) life
insurance premiums of $48,397 paid on Mr. Christopher's behalf and (iii)
matching contributions of $3,447 to the Company's 401(k) Savings Plan for
Mr. Christopher.
(3) Represents the four months ended December 31, 1996. In December 1996, the
Company changed its fiscal year end from August 31 to December 31.
(4) Consists of contingent payments received by Mr. Christopher under the ANET
Litigation during the four months ended December 31, 1996.
5
<PAGE> 9
(5) Consists of (i) contingent payments in the amount of $325,000 received by
Mr. Christopher under the ANET Litigation during 1997, (ii) life insurance
premiums of $41,645 paid on Mr. Christopher's behalf and (iii) matching
contributions of $2,375 to the Company's 401(k) Savings Plan for Mr.
Christopher.
(6) The option covering these shares was rescinded on June 12, 1996.
(7) Consists of matching contributions to the Company's 401(k) Savings Plan.
(8) Represents the difference between the exercise price and the fair market
value of the Common Stock underlying the stock options on June 26, 1996, the
date of exercise, of the stock options granted in fiscal year 1996.
Employment Contracts
Mr. Christopher. Mr. Christopher has an employment agreement with the
Company that provides for an initial annual base salary of at least $125,000 and
bonuses determined by the Compensation Committee pursuant to the Kitty Hawk,
Inc. Amended and Restated Annual Incentive Compensation Plan and otherwise. Mr.
Christopher's employment agreement contains (i) a confidentiality provision that
prohibits disclosure of the Company's proprietary information and (ii) a
covenant not to compete that provides upon Mr. Christopher's termination of
employment with the Company for any reason, Mr. Christopher shall not engage,
directly or indirectly, in the air logistics, charter brokerage, on-demand, or
scheduled carriage business under an FAR Part 121 (now Part 119) or Part 135
certificate for five years following such termination. The employment agreement
may be terminated by either party with or without cause. If the employment
agreement is terminated by the Company without a material breach by Mr.
Christopher, he is entitled to six months of compensation at his then-current
salary.
Messrs. Reeves and Wadsworth. Messrs. Reeves and Wadsworth have employment
agreements with the Company that provide for an annual base salary of at least
$115,000 and $110,000, respectively, and annual bonuses determined by the
Compensation Committee pursuant to the Kitty Hawk, Inc. Amended and Restated
Annual Incentive Compensation Plan and otherwise. These employment agreements
provide that Mr. Reeves and Mr. Wadsworth are prohibited from engaging in the
air logistics, charter brokerage, on-demand, or scheduled carriage business
under an FAR Part 121 (now Part 119) or Part 135 certificate for three and two
years, respectively, following termination of employment. These employment
agreements also contain a confidentiality provision that prohibits disclosure of
the Company's proprietary information. These employment agreements may be
terminated by either party thereto with or without cause. Mr. Reeves' employment
agreement provides that if he is terminated by the Company without material
breach by Mr. Reeves, he shall be entitled to 100% of his then-current salary in
the year following termination and 50% of such annual compensation in both the
second and third year following termination. Mr. Wadsworth's employment
agreement provides that if he is terminated by the Company without material
breach by Mr. Wadsworth, he shall be entitled to 100% of his then-current salary
in the year following termination and 50% of such annual compensation in the
second and third year following termination.
Compensation of Directors
Pursuant to the Company's Bylaws, the members of the Board of Directors may
be compensated in a manner and at a rate determined from time to time by the
Board of Directors. Directors who are employees of the Company do not receive
additional compensation for service as a director. Under the Kitty Hawk, Inc.
Amended and Restated Omnibus Securities Plan, directors who are not employees of
the Company may receive shares of Common Stock in an amount equal to their net
annual retainer (which is currently $14,000).
6
<PAGE> 10
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock over the period commencing October 10, 1996 (the first day after the
effective date of the Offering) and ending December 31, 1997, with the Nasdaq
Market Value Index and the Media General Air Freight Industry Group Index. Each
index assumes $100 invested at the close of trading on October 10, 1996 and
reinvestment of dividends.
COMPARE CUMULATIVE TOTAL RETURN
AMONG KITTY HAWK, INC.,
NASDAQ MARKET INDEX AND MG GROUP INDEX
<TABLE>
<CAPTION>
Measurement Period Nasdaq Market
(Fiscal Year Covered) Kitty Hawk, Inc. MG Group Index Index
<S> <C> <C> <C>
10/10/96 100 100 100
12/31/96 74.07 112.38 104.71
3/31/97 88.89 119.59 99.38
6/30/97 111.11 140.08 117.57
9/30/97 144.44 186.66 137.08
12/31/97 142.59 154.46 128.44
</TABLE>
ASSUMES $100 INVESTED ON OCTOBER 10, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1997
REPORT ON EXECUTIVE COMPENSATION
General. The Compensation Committee is composed of two independent
directors who are not employees of the Company and who qualify as "non-employee
directors" as defined in Rule 16b-3 of the Act. The Compensation Committee is
responsible for (i) oversight and administration of executive compensation, (ii)
review of the Company's overall compensation program and (iii) administering the
Kitty Hawk, Inc. Amended and Restated Omnibus Securities Plan, the Kitty Hawk,
Inc. Amended and Restated Annual Incentive Compensation Plan and the Kitty Hawk,
Inc. Employee Stock Purchase Plan.
Compensation Process and Philosophy. There are four major components to the
Company's executive officer compensation: (i) base salary, (ii) profit sharing
bonuses, (iii) performance bonuses and (iv) long-term incentive awards. The
process used by the Compensation Committee in determining executive compensation
levels for these components has been based upon the Compensation Committee's
subjective judgment of qualitative and quantitative factors. No specific weights
have been previously assigned to the qualitative and quantitative factors in
determining the compensation levels for these components, and bonuses and
long-term incentive awards are not issued each year. The Compensation Committee
considers the recommendation of the Company's Chief Executive Officer with
respect the compensation level of the Company's executive officers, including
the Chief Executive Officer. The Compensation Committee ultimately determines
the level of compensation for each of the Company's executive officers.
The Compensation Committee believes that compensation for the Company's
employees, including the executive officers, must be in amounts sufficient to
attract, retain and motivate key employees, while at the same time maintaining a
close relationship to the Company's financial performance. The Compensation
Committee believes compensation decisions should be tied to individual
performance and designed to
7
<PAGE> 11
encourage and reward employees for creating stockholder value. In addition,
executive officers should have a significant portion of their total compensation
opportunity at risk, to be earned only if specific goals are achieved. The
Company's compensation philosophy is based on the following general principles:
- Employee compensation should reflect the financial success of the overall
Company, the success of the particular business unit and individual
performance.
- Achieve "above market" compensation levels for executive officers through
base salary, profit sharing and at-risk bonuses based on individual
performance and Company performance.
- Encourage all employees to invest in the Company's common stock to align
their interests with the stockholders' interests in maximizing value.
Bonuses. In prior years, the Company has frequently set aside a percentage
of pretax profits to be shared with employees based on individual performance
and the performance of each business unit. In 1997, the Company paid profit
sharing bonuses to employees of the Kitty Hawk business units equal to 10% of
the combined pre-tax profits of such business units. No such bonuses were paid
to employees of the Kalitta Companies because those business units, taken as a
whole, were not profitable for 1997. Without committing to continue the
practice, generally, the Kitty Hawk companies have distributed these funds (i)
50% to the overall employee base, excluding management and executive officers,
(ii) 25% to the management group, (iii) 15% to the executive officers and (iv)
10% on a discretionary basis. In 1998, the Compensation Committee is overseeing
an effort to implement formal annual performance reviews of executive officers
and management level employees to closely match profit sharing bonuses with
six-month reviews of individual goals and objectives. The Company expects to
implement reviews of goals and objectives with all employees in 1999.
1998 is recognized as a transition period during which executive officers
will be rewarded based on their success in achieving the strategic and financial
benefits from integrating the operations of Kitty Hawk and the Kalitta
Companies. 1998 bonuses for executive officers will be determined solely based
upon the Company achieving pre-determined levels of profitability and earnings
per share. If the Company substantially meets or exceeds these goals bonuses
will be paid to the executive officers in relation to their individual
contribution. If the Company fails to achieve at least 90% of these
pre-determined levels, no bonuses will be paid to the executive officers. The
Compensation Committee will implement a system of awarding cash-based and
stock-based long-term incentive compensation based on achieving specific
strategic and financial goals to further align the interests of executive
officers and stockholders.
Compensation of Chairman of the Board and Chief Executive Officer. The
major components of Mr. Christopher's 1997 compensation are base salary and
bonus. Mr. Christopher's base salary for 1997 was $240,000, an increase of
$50,000 from fiscal year 1996 in recognition of his expanded responsibilities.
Mr. Christopher received a $130,000 profit sharing bonus in 1997. Mr.
Christopher has an employment agreement with the Company that provides for a
minimum base salary and bonuses determined by the Compensation Committee.
Because Mr. Christopher owns approximately 35.5% of the Company's
outstanding common stock, the Compensation Committee believes Mr. Christopher's
interests are highly aligned with the interests of the Company's stockholders.
For this reason, the Compensation Committee does not believe long-term stock-
based incentive compensation is a necessary component of Mr. Christopher's
compensation package.
Compensation of Other Named Executive Officers. The major components of the
compensation of Messrs. Reeves and Wadsworth are base salary and bonus. Each of
Messrs. Reeves and Wadsworth have entered into employment agreements with the
Company that provide for a minimum base salary and bonuses determined by the
Compensation Committee. These employment agreements were entered into prior to
the Company's October 1996 initial public offering, and the base salaries were
determined by Mr. Christopher based upon subjective factors. The base salaries
of Messrs. Reeves and Wadsworth have remained relatively unchanged over the past
three fiscal years.
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At the recommendation of Mr. Christopher, the Compensation Committee
approved the following:
- Award to Mr. Reeves of a profit sharing bonus of $117,500 in 1997.
Because specific performance criteria had not been established at the
beginning of 1997, this bonus was based on subjective factors including
the continued growth in the operations and financial performance of the
Company's business units prior to the acquisition of the Kalitta
Companies.
- Award to Mr. Wadsworth of bonuses in the amount of $255,000 in 1997. Of
this amount, $105,000 was based on profit sharing and $150,000 was a
performance bonus in recognition of his individual contribution to the
successful funding for the acquisition of the Kalitta Companies.
- Approval of increases in the base salaries of Messrs. Reeves and
Wadsworth from $125,000 and $110,000 to $210,000 and $185,000,
respectively, in recognition of their significantly expanded
responsibilities resulting from the acquisition of the Kalitta Companies.
Each of Messrs. Reeves and Wadsworth own significant amounts of the
Company's common stock, and the Compensation Committee believes their interests
are aligned with those of the Company's stockholders.
The Company's policy with respect to executive compensation is to have all
compensation qualify for deductibility under the provisions of the Internal
Revenue Code.
Philip J. Sauder
Lewis S. White
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
There were no reportable business relationships between the Company and the
members of the Compensation Committee in 1997.
CERTAIN TRANSACTIONS
Separation Agreement. On April 17, 1998, following the execution of a
Separation Agreement (the "Separation Agreement") by the Company, Mr. Kalitta
and certain other affiliated parties, the Company announced the resignation of
Mr. Kalitta from his position as Vice Chairman of the Company and from all other
officer and employee positions of the Company, including his position as Chief
Executive Officer and President of American International Airways, Inc. In light
of Mr. Kalitta's resignation, the Separation Agreement terminates or modifies
various contractual and other relationships between the Company and Mr. Kalitta
(other than Mr. Kalitta's position as a director of the Company and certain
other contractual rights).
Pursuant to the Separation Agreement, the Company and Mr. Kalitta have
terminated all voting and other agreements that ensured Messrs. Christopher and
Kalitta of certain rights to hold and fill officer and director positions within
the Company and its subsidiaries. Further, the Company granted Mr. Kalitta
certain demand registration rights (i) to register once no less than 2,300,000
shares of the Company's common stock prior to December 31, 1998 and (ii) to
register once any shares not sold in such first offering, if any, at any time
prior to June 30, 1998. Any such offering must be on a firm commitment
underwritten basis. Also, until the earlier of December 31, 1998 or the
consummation of such an underwritten offering, Mr. Kalitta has irrevocably
agreed to vote all shares of the Company's common stock beneficially owned by
him in the manner recommended by the Board of Directors. In addition, Mr.
Kalitta's current non-competition and confidentiality agreements with the
Company were broadened, and Mr. Kalitta agreed to abide by certain customary
standstill provisions for a three year period.
In addition to the foregoing, the Separation Agreement (i) reduced the rent
on an office building leased by the Company from Kalitta, L.L.C. from
approximately $59,000 per month to $25,000 per month and made
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the lease for such building terminable upon 180 days written notice by either
party, (ii) assigned all rights to recoveries in certain litigation between the
Company (as successor to the Kalitta Companies) and GATX-Airlog Company to Mr.
Kalitta in return for Mr. Kalitta's agreement to pay all future legal fees and
costs incurred in connection with such litigation, (iii) committed the Company
to sublease approximately 8,000 square feet of offices and work shops to Kalitta
Motorsports, L.L.C. for $1.00 per month until December 31, 1998, which amount is
lower than market rates, (iv) committed the Company to sell certain residential
real property owned by the Company (as successor to the Kalitta Companies) to
Kalitta Motorsports, L.L.C. for $80,000, which the Company believes represents
the fair market value of such residential real property, (v) acknowledged that
Mr. Kalitta owes the Company (as successor to the Kalitta Companies) $500,000
for loans made to Mr. Kalitta prior to the Company's acquisition of the Kalitta
Companies and (vi) made certain amendments to the merger agreement entered into
by the Company, Mr. Kalitta and other parties in connection with the Company's
acquisition of the Kalitta Companies in November 1997.
Transactions with a Relative of Mr. Kalitta. During the period November 19,
1997 to December 31, 1997, the Company (as successor to the Kalitta Companies)
dry leased one Douglas DC-8-50 aircraft to Trans Continental Airlines, Inc.
("Trans Continental"), a corporation owned solely by Scott Kalitta, Mr.
Kalitta's son. The lease rate was $1,000 per flight hour for the first 80 hours
per month and $800 for each flight hour per month thereafter, which the Company
believes represented market rates. In March 1998, Trans Continental purchased
this Douglas DC-8-50 aircraft for approximately $1.0 million. The Company and
Trans Continental arrived at this purchase price through arm's length
negotiations, and the Company believes the purchase price represented the fair
market value of the aircraft.
The Company also has three service contracts with Trans Continental,
including an airframe maintenance agreement, an engine maintenance agreement and
a parts exchange agreement pursuant to which the Company repairs and replaces
parts for Trans Continental at the Company's cost plus 10%. The Company believes
that the labor rates provided for in these agreements are more favorable than
market rates. The Company and Trans Continental also have a parts master lease
agreement pursuant to which Trans Continental leases aircraft parts from the
Company at favorable rates. Other than the engine maintenance agreement which
expires on December 31, 1998, either party may terminate any of these agreements
at any time upon 30 days' notice to the other. During the period November 19,
1997 through December 31, 1997, Trans Continental paid the Company (as successor
to the Kalitta Companies) approximately $379,000 for aircraft and parts leases,
maintenance and parts.
In addition to providing services to unrelated third parties, Trans
Continental is part of the Company's "contractor team" for U.S. Miliary charters
and was hired by the Company to provide airlift capacity during the Company's
1997 "Christmas Network" contract with the U.S. Postal Service. During 1997, the
Company paid Trans Continental approximately $1.8 million for such airlift
capacity, which the Company believes represented market rates.
Lease of Facility from Affiliate of Mr. Kalitta. The Company (as successor
to the Kalitta Companies) leases an office building from Kalitta, L.L.C., a
Michigan limited liability company that is 20% owned by Mr. Kalitta. The
remaining 80% of Kalitta, L.L.C. is separately owned in equal shares by Mr.
Kalitta's son, Scott Kalitta, and Mr. Kalitta's nephew, Doug Kalitta. During the
period November 19, 1997 through December 31, 1997, the Company (as successor to
the Kalitta Companies) paid approximately $81,000 to Kalitta, L.L.C. in lease
payments.
Promotional Activities. The Kalitta Companies have historically sponsored
and provided all of the financial support for the racing activities of Mr.
Kalitta, Scott Kalitta and Doug Kalitta, including the costs to build, maintain
and transport the race cars. In return, the Kalitta Companies have received
promotional benefits including placement of the names of the Kalitta Companies
on the vehicles and related promotional items, as well as the opportunity to
entertain customers at racing events. In connection with the acquisition of the
Kalitta Companies, Mr. Kalitta formed Kalitta Motorsports, L.L.C., which
purchased the racing-related assets owned by the Kalitta Companies for $350,000.
The Company has no ownership interest in this entity. The Company has agreed,
however, to sponsor the racing activities of Kalitta Motorsports, L.L.C. for a
period of two years in an amount of up to $2 million per year. Consequently, the
Company has the same promotional
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<PAGE> 14
opportunities as those previously used by the Kalitta Companies. During the
period November 19, 1997 through December 31, 1997, the Company (as successor to
the Kalitta Companies) paid Kalitta Motorsports, L.L.C. approximately $333,000
for promotional activities.
Legal Fees. Mr. Kelsey, a director of the Company, is currently the owner
of Kelsey Law Offices, P.C. During the period November 19, 1997 through December
31, 1997, the Company (as successor to the Kalitta Companies) paid Kelsey Law
Offices, P.C. approximately $172,000 for legal services rendered. During 1997,
Mr. Craig, an executive officer of the Company, was of counsel to Burke, Wright
& Keiffer, P.C., counsel to the Company. During 1997, the Company paid
approximately $295,000 to Burke, Wright & Keiffer, P.C. for legal services
rendered. The Company has retained both the Kelsey Law Offices, P.C. and Burke,
Wright & Keiffer, P.C. in 1998.
Purchase of Aircraft. In February 1998, Mr. Kalitta purchased a Hawker
Siddeley HS-125 aircraft from the Company for $1.8 million, which represented
the aircraft's appraised value.
Employment Arrangements. Beginning in January 1998, the Company hired Mr.
Coonfield, a director of the Company, as a Vice President. In connection
therewith, Mr. Coonfield is paid $10,000 per month.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP as the independent public accountants of the Company
for 1998, subject to stockholder ratification. Representatives of Ernst & Young
LLP are expected to be present at the Annual Meeting with the opportunity to
make a statement if they so desire and to be available to respond to appropriate
questions.
The affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting and entitled to vote is
required to ratify the appointment of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP.
STOCKHOLDER PROPOSALS
Pursuant to the rules of the Commission, in order for stockholder proposals
to receive consideration for inclusion in the Company's Proxy Statement for the
1999 Annual Meeting of Stockholders, such proposals must be received by the
Company at its principal executive offices no later than December 31, 1998. Such
proposals should be directed to Kitty Hawk, Inc., 1515 West 20th Street,
Dallas/Fort Worth International Airport, Texas 75261, Attention: Chief Executive
Officer.
GENERAL
The 1997 Annual Report to Stockholders, which includes the Company's Annual
Report on Form 10-K, has been mailed to the Company's stockholders with this
mailing. The 1997 Annual Report to Stockholders does not form any part of the
material for the solicitation of proxies.
The expense of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies personally or by telephone or telegram. The Company
may request brokers, dealers or other nominees to send proxy materials to and
obtain proxies from their principals and the Company may reimburse such persons
for their reasonable expenses.
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<PAGE> 15
Management knows of no other matter that will come before the Annual
Meeting. However, if other matters do come before the Annual Meeting, the proxy
holders will vote in accordance with their best judgment.
BY ORDER OF THE BOARD OF
DIRECTORS,
/s/ M. TOM CHRISTOPHER
M. TOM CHRISTOPHER
Chairman and Chief Executive Officer
April 30, 1998
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<PAGE> 16
REVOCABLE PROXY
KITTY HAWK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) M. Tom Christopher and Richard R.
Wadsworth, or either of them, with full power of substitution and
resubstitution, as proxies of the undersigned, with all the powers that the
undersigned would possess if personally present, to cast all votes that the
undersigned would be entitled to vote at the Annual Meeting of Stockholders of
Kitty Hawk, Inc. (the "Company") to be held on May 29, 1998 at the offices of
the Company at 1535 West 20th Street, Dallas/Fort Worth International Airport,
Texas 75261 at 10:00 a.m., local time, and any and all adjournments,
continuations and postponements thereof (the "Annual Meeting"), including
(without limiting the generality of the foregoing) to vote and act as follows
on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
FOR DIRECTOR AND FOR THE RATIFICATION OF ENRST & YOUNG LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR 1998. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
IN THE MANNER DIRECTED HEREIN, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS PRESENTED.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
-------------
SEE REVERSE
SIDE
-------------
o FOLD AND DETACH HERE o
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Please mark
your votes as [X]
indicated in
this example
ELECTION OF TWO CLASS I DIRECTORS.
FOR all nominees WITHHOLD NOMINEES: Ted J. Coonfield and Richard R. Wadsworth MARK HERE
listed to the right AUTHORITY FOR ADDRESS
(except as marked to the to vote for all nominees CHANGE AND
contrary) listed to the right NOTE BELOW
----------------------------------------------------------
In the event the undersigned wishes to withhold authority
to vote for any particular nominee listed above, please so
indicate by clearly writing the name of any such nominee
on the line above.
2. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP 3. In their discretion, the proxies are authorized to
AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 1997. vote upon such other business as may properly come
before the meeting or any adjournment thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] PLEASE COMPLETE, SIGN, DATE AND RETURN THE
PROXY FORM PROMPTLY USING THE ENCLOSED SELF-
ADDRESS ENVELOPE. NO POSTAGE IS REQUIRED
FOR MAILING IN THE UNITED STATES.
Please sign exactly as your name appears on
your stock certificate. If shares are held by
joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
If shares are held of record by a corporation,
please sign in full corporate name by
president or other authorized officer. If
shares are held of record by a partnership,
please sign in full partnership name by an
authorized signatory.
Signature _____________________________________________ Signature ________________________________________________ Date ________
o FOLD AND DETACH HERE o
</TABLE>
Dear Stockholder(s):
Enclosed you will find material relative to the Company's 1998 Annual Meeting of
Stockholders. The Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting, as summarized on the attached
proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a Stockholder, please
remember that your vote is important to us. We look forward to hearing from you.
KITTY HAWK, INC.
