FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-12058
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KENAN TRANSPORT COMPANY
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(Exact name of registrant as specified in its charter)
North Carolina 56-0516485
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
University Square - West, 143 W. Franklin Street
Chapel Hill, North Carolina, 27516-3910
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(Address of principal executive offices, including Zip Code)
(919) 967-8221
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(Registrant's telephone number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1995
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Common stock, no par value 2,389,497
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KENAN TRANSPORT COMPANY
INDEX
Page
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Part I - Financial Information
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 1
Consolidated Statements of Income for the three
and nine months ended September 30, 1995 and 1994 2
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and 1994 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 6
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 7
Signatures 8
Index to Exhibits 9
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PART I - FINANCIAL INFORMATION
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30, December 31,
1995 1994
ASSETS (Unaudited) (Note 1)
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Current Assets
Cash and cash equivalents $ 7,152 $12,759
Short-term investments 5,446 1,000
Accounts receivable 3,706 4,249
Operating supplies and parts 533 574
Prepayments --
Tires 1,307 1,295
Insurance, licenses and other 878 602
Deferred income taxes 1,720 1,660
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Total Current Assets 20,742 22,139
Operating Property
Land 3,384 3,201
Buildings and leasehold improvements 5,659 4,972
Revenue equipment 51,624 47,434
Other equipment 3,493 3,667
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64,160 59,274
Accumulated depreciation (25,804) (24,259)
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Net Operating Property 38,356 35,015
Other Assets 476 471
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$59,574 $57,625
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 1,020 $ 1,257
Wages and employee benefits payable 4,317 4,603
Claims payable 3,899 3,866
Other accrued expenses 188 153
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Total Current Liabilities 9,424 9,879
Deferred Income Taxes 8,327 7,975
Stockholders' Equity
Common stock; no par; 20,000,000 shares
authorized; 2,389,497 and 2,378,339
shares issued and outstanding 2,996 2,798
Retained earnings 38,827 36,973
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41,823 39,771
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$59,574 $57,625
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The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
Page 1
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KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and dollars in thousands except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
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1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Operating Revenue $15,128 $14,229 $45,015 $43,867
Operating Expenses
Wages and employee benefits 7,886 7,199 23,235 22,216
Fuel, parts, tires and other 2,921 2,531 8,419 8,048
Taxes and licenses 934 915 2,869 2,900
Claims and insurance 614 654 1,772 1,811
Communications, utilities and rent 430 300 1,113 876
Depreciation 1,419 1,351 4,115 3,940
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14,204 12,950 41,523 39,791
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Operating Income 924 1,279 3,492 4,076
Interest income and other expenses, net 48 62 365 276
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Income before Provision for Income Taxes
and Extraordinary Item 972 1,341 3,857 4,352
Provision for income taxes 389 540 1,543 1,757
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Income before Extraordinary Item 583 801 2,314 2,595
Extraordinary item -- write off
intrastate operating rights, net
of tax -- (823) -- (823)
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Net Income $ 583 $ (22) $ 2,314 $ 1,772
===========================================
Weighted average number of shares
outstanding (in thousands) 2,389 2,378 2,387 2,376
Earnings Per Share:
Before extraordinary item $ .24 $ .34 $ .97 $ 1.09
Extraordinary item -- (.35) -- (.35)
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$ .24 $ (.01) $ .97 $ .74
===========================================
Operating ratio 93.9% 91.0% 92.2% 90.7%
Dividends paid per share $ .0650 $ .0625 $ .1900 $ .1825
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
Page 2
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KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited and dollars in thousands)
1995 1994
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Cash Provided by (Applied to):
Operations $ 6,755 $ 7,725
Purchases of operating property, net (7,456) (5,600)
Short-term investments, net (4,446) 500
Dividends (460) (440)
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Net Increase (Decrease) in Cash
and Cash Equivalents (5,607) 2,185
Beginning Cash and Cash Equivalents 12,759 9,046
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Ending Cash and Cash Equivalents $ 7,152 $ 11,231
========================
The Notes to Consolidated Financial Statements are an integral part of
these statements.
Page 3
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KENAN TRANSPORT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The financial information included herein is unaudited; however,
such information reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date.
The results of operations for the three and nine months ended
September 30, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
2. Purchase of Assets
On June 29, 1995, the Company purchased the transportation assets
of Cary Oil Company, Inc. for cash and entered into a long-term contract
to provide transportation services to Cary Oil.
Page 4
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KENAN TRANSPORT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected the Company's financial position and
operating results during the periods included in the accompanying financial
statements.
Results of Operations
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Revenue for the third quarter of 1995 was $15,128,000, an increase of
$899,000 and 6% over the third quarter of 1994. Net income was $583,000 ($.24
per share) compared to a $22,000 loss ($.01 per share) in the third quarter of
1994. The 1994 third quarter net loss includes an extraordinary charge of
$823,000 ($.35 per share) for the write-off of intrastate operating rights.
Miles operated increased 5% to 9,987,000 in comparison to the third quarter of
1994.
The increase in third quarter revenue reflects the effect of the Company's
program to take advantage of growth opportunities provided by intrastate
deregulation of trucking in 1995 and growth in transportation contract
relationships. Our entry into new markets in Alabama and Tennessee and the
implementation of transportation services to Cary Oil Company under a long-term
contract provided the growth in revenue for the quarter.
Revenue for the nine months ended September 30, 1995 was $45,015,000, an
increase of $1,148,000 and 3% over 1994. Net income was $2,314,000 ($.97 per
share) compared to $1,772,000 ($.74 per share) in 1994. The 1994 nine-month
earnings include an extraordinary charge of $823,000 ($.35 per share). Miles
operated increased 2% to 29,987,000 in 1995.
Operating expenses for the third quarter of 1995 totaled $14,204,000, an
increase of $1,254,000 and 10% over the third quarter of 1994. Operating
expenses increased due to increased driver wages as we continue our program to
enhance driver pay to attract and retain highly qualified professional drivers
and added fixed costs incurred for the expansion program and costs associated
with the start-up of the Cary Oil operation. Our operating ratio of 93.9% for
the quarter, though higher than historical performance, still compares
favorably with the trucking industry.
Operating expenses for the nine months ended September 30, 1995 totaled
$41,523,000, an increase of $1,732,000 and 4% over the first nine months of
1994. The operating ratio was 92.2% compared to 90.7% in 1994. The increase in
operating expenses that lead to the decrease in margins in 1995 was due to the
items discussed above. Increased costs to expand our markets may continue to
impact profits during the fourth quarter of 1995.
Page 5<PAGE>
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KENAN TRANSPORT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Liquidity and Capital Resources
- -------------------------------
The Company's financial condition at September 30, 1995 was strong.
Working capital was $11,318,000 and the current ratios were 2.2 at September
30, 1995 and December 31, 1994. The Company had no debt outstanding under its
$7,000,000 bank line of credit.
Cash equivalents together with short-term investments totaled $12,598,000
at September 30, 1995. Cash flows from operations for the first nine months
of 1995 were down $970,000 from 1994 levels due largely to the timing of
payments made for operating property and expenses. Net purchases of operating
property in 1995 were up $1,856,000 over 1994 levels due primarily to the
purchase of assets from Cary Oil and tractors purchased under the Company's
equipment replacement program.
The cash dividend was increased 4% to an annual rate of $.26 per share
effective with the quarterly payment in July. This was the seventeenth
consecutive annual increase in the dividend.
The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. Beginning in 1989, the
Company began a program to upgrade its fuel storage facilities. Under the
program, the Company incurs costs to replace tanks, remediate soil
contamination resulting from overfills, spills and leaks and monitor facilities
on an ongoing basis. These costs are recorded when it is probable that a
liability has been incurred and the related amount can be reasonably estimated.
Such costs have not been and are not expected to be material to the Company's
operations or liquidity.
Page 6
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) The Exhibits on this Form 10-Q are listed on the accompanying Index
to Exhibits
(b) No reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
Page 7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KENAN TRANSPORT COMPANY
(Registrant)
DATE: November 8, 1995 BY: /s/ William L. Boone
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Vice President-Finance and
Chief Financial Officer
Page 8
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INDEX TO EXHIBITS
The exhibits filed as part of this report are listed below:
Exhibit
Number Description
--------- -----------------------------------------------------------
27 Financial Data Schedule for the 3rd Quarter 10-Q.
Page 9
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000745379
<NAME> KENAN TRANSPORT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,152
<SECURITIES> 0
<RECEIVABLES> 3,706
<ALLOWANCES> 0
<INVENTORY> 533
<CURRENT-ASSETS> 20,742
<PP&E> 64,160
<DEPRECIATION> 25,804
<TOTAL-ASSETS> 59,574
<CURRENT-LIABILITIES> 9,424
<BONDS> 0
<COMMON> 2,996
0
0
<OTHER-SE> 38,827
<TOTAL-LIABILITY-AND-EQUITY> 59,574
<SALES> 0
<TOTAL-REVENUES> 45,015
<CGS> 0
<TOTAL-COSTS> 41,523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,857
<INCOME-TAX> 1,543
<INCOME-CONTINUING> 2,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,314
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
</TABLE>
