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 June 30, 1996
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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 July 31, 1996
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Common stock, no par value 2,389,497
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KENAN TRANSPORT COMPANY
INDEX
Page
----
Part I - Financial Information
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 1
Consolidated Statements of Income for the three
and six months ended June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 6
Item 6 - Exhibits and Reports on Form 8-K 6
Signatures 7
Index to Exhibits 8
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PART I - FINANCIAL INFORMATION
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
ASSETS (Unaudited) (Note 1)
- -----------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 6,591 $ 3,220
Short-term investments 810 6,886
Accounts receivable 5,310 4,945
Operating supplies and parts 450 506
Prepayments -
Tires 1,239 1,238
Insurance, licenses and other 880 639
Deferred income taxes 1,714 1,878
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Total Current Assets 16,994 19,312
Operating Property
Land 3,408 3,398
Buildings and leasehold improvements 7,789 7,159
Revenue equipment 56,118 54,379
Other equipment 4,450 3,492
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71,765 68,428
Accumulated depreciation (26,506) (27,163)
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Net Operating Property 45,259 41,265
Other Assets 1,222 611
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$63,475 $61,188
=======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------
Current Liabilities
Accounts payable $ 2,191 $ 975
Wages and employee benefits payable 4,121 4,148
Claims payable 3,772 4,153
Other accrued expenses 163 160
Income taxes payable -- 308
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Total Current Liabilities 10,247 9,744
Deferred Income Taxes 9,065 8,767
Stockholders' Equity
Common stock; no par; 20,000,000 shares
authorized; 2,389,497 shares issued
and outstanding 2,996 2,996
Retained earnings 41,167 39,681
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44,163 42,677
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$63,475 $61,188
=======================================================================
The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
</TABLE>
Page 1<PAGE>
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KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and dollars in thousands except per share amounts)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Operating Revenue $16,637 $14,490 $34,224 $29,887
Operating Expenses
Wages and employee benefits 8,606 7,433 17,532 15,349
Fuel, parts, tires and other 3,122 2,759 6,420 5,498
Taxes and licenses 1,046 948 2,170 1,935
Claims and insurance 596 636 1,197 1,158
Communications, utilities and rent 357 335 786 683
Depreciation 1,689 1,347 3,250 2,696
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15,416 13,458 31,355 27,319
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Operating Income 1,221 1,032 2,869 2,568
Interest income and other expenses, net 33 146 103 317
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Income before Provision for Income Taxes 1,254 1,178 2,972 2,885
Provision for income taxes 491 471 1,169 1,154
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Net Income $ 763 $ 707 $ 1,803 $ 1,731
=========================================================================================
Weighted average number of shares
outstanding (in thousands) 2,389 2,389 2,389 2,385
Earnings per share $ .32 $ .30 $ .76 $ .73
Operating ratio 92.7% 92.9% 91.6% 91.4%
Dividends paid per share $ .0650 $ .0625 $ .1300 $ .1250
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 Six Months Ended June 30, 1996 and 1995
(Unaudited and dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash Provided by (Applied to):
Operations $ 4,856 $ 3,553
Purchases of operating property, net (7,244) (5,556)
Short-term investments, net 6,076 (2,061)
Dividends (317) (305)
- -----------------------------------------------------------------------
Net Increase (Decrease) in Cash
and Cash Equivalents 3,371 (4,369)
Beginning Cash and Cash Equivalents 3,220 12,759
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Ending Cash and Cash Equivalents $ 6,591 $ 8,390
=======================================================================
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 (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary
for a fair statement of results for the interim periods.
The balance sheet at December 31, 1995 has been taken from the
audited financial statements at that date.
The results of operations for the three and six months ended June
30, 1996 and 1995 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
- -------------------------------
Revenue for the second quarter of 1996 was $16,637,000, an increase of
$2,147,000 and 15% over the second quarter of 1995. Net income was $763,000,
an increase of $56,000 and 8% over the second quarter of 1995. Earnings per
share were $.32 compared to $.30 in 1995. Miles operated increased 11% in
comparison to the second quarter of 1995.
Revenue for the six months ended June 30, 1996 was $34,224,000, an
increase of $4,337,000 and 15% over the first half of 1995. Net income was
$1,803,000, an increase of $72,000 and 4% over the first half of 1995. Earnings
per share were $.76 compared to $.73 in 1995. Miles operated increased 11% in
comparison to the first half of 1995.
Operating expenses for the second quarter of 1996 totaled $15,416,000, an
increase of $1,958,000 and 15% over the second quarter of 1995. The increase
was primarily the result of additional volume and to a lesser extent, higher
fuel prices, depreciation and drivers' pay. The operating ratio decreased to
92.7% from 92.9% in 1995.
Operating expenses for the six months ended June 30, 1996 totaled
$31,355,000, an increase of $4,036,000 and 15% over the first half of 1996. The
operating ratio increased slightly to 91.6% from 91.4% in 1995.
Liquidity and Capital Resources
- -------------------------------
The Company believes its liquidity and capital resources are sufficient
for the foreseeable future. Working capital was $6,747,000 compared to
$9,568,000 at December 31, 1995, and the current ratios were 1.66 and 1.98,
respectively. Cash and cash equivalents totaled $6,591,000 at June 30, 1996,
and the Company had no debt outstanding under its $7,000,000 bank line of
credit.
Cash flows for the first half of 1996 totaled $3,371,000 compared to a
decrease in cash of $4,369,000 during the same period last year. Cash flows
from operations were $4,856,000 compared to $3,553,000 in 1995. Construction
of new terminal facilities in Ft. Lauderdale and Atlanta caused net capital
expenditures in 1996 to be up $1,688,000 over 1995 levels. Cash provided from
the sale of short-term investments was $8,137,000 over the first half of 1995
as short-term investments matured and were reinvested in cash equivalents.
The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. In 1989 the Company
implemented 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 5<PAGE>
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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The Registrant's Annual Meeting of Stockholders was held on May 6,
1996 for the purpose of electing a board of directors and to
transact other business as came before the meeting. Proxies for the
meeting were solicited pursuant to Section 14(a) of the Securities
Act of 1934 and there was no solicitation in opposition to
management's solicitations. The proposals voted upon and the
results of voting were as follows:
(1) Nominees for directors as listed in the proxy statement were
elected for a one year term with the following vote:
Votes Votes Broker
For Withheld Non-votes
--------- -------- ---------
Frank H. Kenan 1,974,920 -0- 386,356
Lee P. Shaffer 1,974,920 -0- 384,916
William C. Friday 1,974,080 -0- 384,916
Owen G. Kenan 1,974,920 -0- 384,916
Thomas S. Kenan, III 1,974,920 -0- 384,916
Braxton Schell 1,974,520 -0- 384,916
Paul Wright, Jr. 1,974,920 -0- 384,916
Item 6. Exhibits and Reports on Form 8-K
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(a) The Exhibits to 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
June 30, 1996.
Page 6
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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: August 8, 1996 BY: /s/ William L. Boone
----------------------------
Vice President-Finance and
Chief Financial Officer
Page 7
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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 2nd Quarter 10-Q.
Page 8
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,591
<SECURITIES> 810
<RECEIVABLES> 5,310
<ALLOWANCES> 0
<INVENTORY> 450
<CURRENT-ASSETS> 16,994
<PP&E> 71,765
<DEPRECIATION> 26,506
<TOTAL-ASSETS> 63,475
<CURRENT-LIABILITIES> 10,247
<BONDS> 0
0
0
<COMMON> 2,996
<OTHER-SE> 41,167
<TOTAL-LIABILITY-AND-EQUITY> 63,475
<SALES> 0
<TOTAL-REVENUES> 34,224
<CGS> 0
<TOTAL-COSTS> 31,355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,972
<INCOME-TAX> 1,169
<INCOME-CONTINUING> 1,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,803
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
