FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-12058
-------
KENAN TRANSPORT COMPANY
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(Exact name of registrant as specified in its charter)
North Carolina 56-0516485
- ------------------------------------ ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
University Square - West, 143 W. Franklin Street
Chapel Hill, North Carolina, 27516-3910
------------------------------------------------------------
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including Area Code: (919) 967-8221
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
(Title of Class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Based on the closing sales price of February 26, 1996, the aggregate
market value of the voting stock held by persons other than those who may
be deemed affiliates of the registrant was $20,098,692.
------------
The number of shares outstanding of the registrant's common stock was
2,389,497 at February 26, 1996.
<PAGE>
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K Incorporated Document
- --------------------------- -------------------------------------
Part III
Items 10, 11, 12 and 13 Portions of the Company's Proxy
Statement dated March 29, 1996 in
connection with its Annual Meeting to
be held on May 6, 1996.
Page 2<PAGE>
<PAGE>
PART I
Item 1. Business
- -------------------------------------------------------------------------
Kenan Transport Company (the Company), a North Carolina
corporation, was incorporated in 1949. It ranks among the twenty largest
tank truck carriers in the country.
The Company is engaged in the transportation of bulk commodities in
intrastate and interstate commerce. The Company primarily serves the
petroleum, propane gas and chemical industries. Operations are
concentrated in Alabama, Florida, Georgia, North Carolina, South
Carolina, Tennessee and Virginia. Interstate operations between these
states and points throughout the United States are served.
The Company provides transportation services to meet its customers'
daily requirements through a network of terminals and a fleet of 437
tractors and 668 specialized trailers. The Company's terminals are
strategically located in Alabama, Florida, Georgia, North Carolina, South
Carolina, Tennessee and Virginia, near the major pipeline terminals,
chemical production centers and major ports serving the Southeast.
The Company's terminals operate as "profit centers" staffed with
experienced terminal managers, trained dispatchers, maintenance personnel
and professional drivers. The Company has 810 employees.
The Company has a large number of competitors with no single
competitor being dominant in the industry. The Company competes with the
trucking operations of the major oil and chemical companies as well as
with independent carriers. Competition is primarily based on price and
customer service. The Company considers its business to be somewhat
seasonal with the winter heating season providing the highest demand
levels.
In addition to transportation of petroleum and chemical products,
Company operations include storage of fuel in underground storage tanks
for use in its operations. Management is committed to the protection of
the environment and has procedures in place to ensure compliance with
federal and state regulations and to provide appropriate response to
spills and leaks that occur. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Company is involved in various claims and legal actions arising
in the normal course of business. It is the opinion of management that
these matters will have no significant impact on the financial statements
of the Company.
Item 2. Properties
- -------------------------------------------------------------------------
The Company owns twenty real properties located in five states. At
December 31, 1995, these properties had a net book value of $6,145,000.
Additionally, the Company leases ten real properties under leases
generally for terms of one to five years. The properties are used for
offices, terminals and vehicle maintenance facilities in the operations
of the Company.
The Company transports freight using over-the-road tractors and
trailers which it owns. At December 31, 1995, revenue equipment owned by
the Company, less accumulated depreciation, totaled $31,439,000.
Page 3<PAGE>
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Item 3. Legal Proceedings
- -------------------------------------------------------------------------
There are no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------------------
No matters were submitted during the fourth quarter of 1995 to a
vote of security holders, through the solicitation of proxies or
otherwise.
Item 4(a). Executive Officers of the Registrant
- -------------------------------------------------------------------------
Information concerning the executive officers of the Company
follows:
Name Age Position
- -------------------- ---- --------------------------------------
Frank H. Kenan 83 Chairman of the Board of Directors,
Chief Executive Officer and Treasurer
of the Company since 1975.
Lee P. Shaffer 57 Director, President and Chief Operating
Officer of the Company since 1975.
William L. Boone 56 Vice President-Finance and Secretary of
the Company since 1974. Assistant
Treasurer of the Company since 1981.
L. Avery Corning 38 Vice President-Operations and Sales
beginning in 1994; President (1990-
1994), Redwing Carriers, Inc., Tampa,
Florida.
Gary J. Knutson 45 Vice President-Marketing of the Company
beginning in 1994. Vice President-Sales
of the Company (1990-1993).
John E. Krovic 40 Vice President-Human Resources and
Safety of the Company since 1993.
General Manager, Safety Management
Incorporated (1992-1993), Norfolk, VA.
Vice President-Human Resources (1988-
1992), Southland Industries, Inc.
Norfolk, VA.
Lee P. Shaffer, III (1) 36 Vice President-Operations Services of
the Company beginning in 1994. Director
of Operations Services of the Company
(1992-1993). Director of Operations of
the Company (1988-1992)
(1) Lee P. Shaffer, III is the son of Lee P. Shaffer, President and
Chief Operating Officer of the Company.
Page 4<PAGE>
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
- -------------------------------------------------------------------------
On October 21, 1986, the Registrant's stock began trading on the
NASDAQ Stock Market under the symbol KTCO. The Company had approximately
605 shareholders of record, including holders whose shares are held in
street names, on December 31, 1995.
The high and low sale prices and the cash dividends paid per share
for each quarter in the last two fiscal years are shown below:
1995 1994
--------------------------- ---------------------------
Quarter High Low Dividend High Low Dividend
- -------- -------- ------- -------- -------- ------- --------
First $20 $17.50 $.0625 $19 $16.50 $.0600
Second 21 19.25 .0625 19.50 17.50 .0600
Third 22 20 .0650 20.50 19 .0625
Fourth 22.25 20.25 .0650 19.50 17.50 .0625
Page 5<PAGE>
<PAGE>
<TABLE>
Item 6. Selected Financial Data
- -------------------------------------------------------------------------
Selected financial data for the past five years is presented below:
<CAPTION>
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations (in thousands)
- ---------------------------------
Operating revenue $61,717 $59,100 $57,063 $53,750 $49,175
Operating income 5,124 5,787 5,421 4,702 3,794
Net income (1) 3,323 3,682 3,435 3,054 2,553
Per Share
- ---------------------------------
Earnings (1) $ 1.39 $ 1.55 $ 1.45 $ 1.29 $ 1.08
Dividends declared .2575 .2475 .2375 .2275 .2175
Book value 17.86 16.72 15.76 14.56 13.49
Market value 20.75 17.50 17.38 14.00 12.75
Financial Position (in thousands)
- ---------------------------------
Cash, cash equivalents and
short-term investments $10,106 $13,759 $11,996 $10,816 $ 9,147
Working capital 9,568 12,260 10,766 9,044 8,378
Net operating property 41,265 35,015 32,747 29,577 27,900
Total assets 61,188 57,625 54,727 48,568 44,640
Total debt -- -- -- -- --
Stockholders' equity 42,677 39,771 37,363 34,348 31,767
Ratios and Statistics
- ---------------------------------
Operating ratio 91.7% 90.2% 90.5% 91.3% 92.3%
Return on equity (1) 8% 9% 10% 9% 8%
Current ratio 1.98 2.24 2.07 2.02 2.14
Debt equity ratio -- -- -- -- --
Average shares outstanding
(in thousands) 2,387 2,377 2,368 2,359 2,355
<FN>
<F1>
(1) Before the effect of an extraordinary charge in 1994 of $823,000 ($.35 per
share).
</FN>
</TABLE>
Page 6<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
Results of Operations - 1995 Compared to 1994
- ---------------------------------------------
Revenue increased 4% from 1994 to $61,717,000. The $2,617,000
increase in revenue reflects implementation of transportation services
under a long-term contract with Cary Oil Company, Inc. in July and the
expansion into Tennessee and Alabama during the year. Miles operated
increased 3% to 40,972,000 in 1995.
Operating expenses increased 6% in 1995 to $56,593,000. The
$3,280,000 increase was due primarily to the 3% increase in miles
operated, added fixed costs incurred in connection with the expansion of
our markets into Tennessee and Alabama, start-up costs associated with
new business and enhanced driver pay and benefit programs. Wages and
employee benefits increased to 50.9% of revenue from 50.1% in 1994,
largely as a result of the enhancements to driver pay and benefits. The
increase in fuel, parts, tires and other operating expenses from 18.3% to
18.7% of revenue in 1995, was due to a 2% increase in average fuel prices
and added costs incurred to place operating personnel and equipment in
the Tennessee and Alabama expansion areas. Continued control over
accident claims and insurance costs resulted in a reduction from 4.3% of
revenue to 4.2% in 1995. The increase in communication, utilities and
rent expense to 2.5% of revenue from 2.0% in 1994 resulted from an
increase in equipment and facilities rent and additional communication
costs to operate our new on-line dispatch system. Depreciation expense
remained unchanged at 9.0% of revenue.
Results of Operations - 1994 Compared to 1993
- ---------------------------------------------
Revenue increased 4% from 1993 to $59,100,000. The increase reflects
growth in demand for transportation services, changes in revenue yield
and rates necessary to cover inflationary cost increases. Miles operated
increased 1% to 39,671,000 in 1994.
Operating expenses increased 3% from 1993 to $53,313,000 due
primarily to inflationary cost increases. Wages and employee benefits
expense remained virtually unchanged at 50.1% of revenue compared to
50.2% in 1993. An increase in driver pay rates was offset by a reduction
in employee health insurance claims expense. Fuel, parts, tires and other
operating expenses decreased from 18.9% to 18.3% of revenue in 1994 as a
result of a 6% decline in average fuel prices. Accident claims and
insurance expense was generally flat, decreasing from 4.5% to 4.3% of
revenue in 1994. A new computerized dispatch system caused
communications, utilities and rent expense to increase from 1.9% of
revenue to 2.0% in 1994. Depreciation expense increased to 9.0% of
revenue in 1994 from 8.6% due primarily to new equipment purchases.
Federal legislation was enacted during 1994 which generally preempts
state regulation of intrastate trucking rates, routes and entry.
Accordingly, intrastate operating rights of $823,000 (net of tax) were
written off as an extraordinary item in 1994.
Page 7<PAGE>
<PAGE>
Liquidity and Capital Resources
- ---------------------------------------------
The financial condition of the Company is strong. At December 31,
1995, working capital was $9,568,000 compared to $12,260,000 at December
31, 1994 and the current ratios were 1.98 and 2.24, respectively. The
decrease in working capital reflects the Company's additional investment
in operating property during the year. Cash, cash equivalents and short-
term investments totaled $10,106,000 at December 31, 1995 and the Company
had no debt outstanding under its $7,000,000 bank line of credit.
Net capital expenditures for 1996, which include the cost of
replacing tractors and tank trailers and constructing terminal
facilities, are expected to be $11,700,000. Management expects that
capital expenditures and working capital requirements in 1996 will be
satisfied by internal cash resources.
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 8<PAGE>
<PAGE>
Item 8. Financial Statements and Supplementary Data
- -------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Kenan Transport Company:
We have audited the accompanying consolidated balance sheets of Kenan
Transport Company (a North Carolina corporation) and subsidiary as of
December 31, 1995 and 1994, and the related consolidated statements of
income and retained earnings and cash flows for each of the three years
in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Kenan
Transport Company and subsidiary as of December 31, 1995 and 1994, and
the results of their operations and cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Raleigh, North Carolina,
February 9, 1996.
Page 9<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31
-------------------------
1995 1994
- -------------------------------------------------------------------------
ASSETS
- ---------------------------------------------
Current Assets
Cash and cash equivalents $ 3,220 $12,759
Short-term investments 6,886 1,000
Accounts receivable 4,945 4,249
Operating supplies and parts 506 574
Prepayments -
Tires 1,238 1,295
Insurance, licenses and other 639 602
Deferred income taxes 1,878 1,660
-----------------------
Total Current Assets 19,312 22,139
Operating Property
Land 3,398 3,201
Buildings and leasehold improvements 7,159 4,972
Revenue equipment 54,379 47,434
Other equipment 3,492 3,667
-----------------------
68,428 59,274
Accumulated depreciation (27,163) (24,259)
-----------------------
Net Operating Property 41,265 35,015
Other Assets 611 471
-----------------------
$61,188 $57,625
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------
Current Liabilities
Accounts payable $ 975 $ 1,257
Wages and employee benefits payable 4,148 4,603
Claims payable 4,153 3,866
Other accrued expenses 160 153
Income taxes currently payable 308 --
-----------------------
Total Current Liabilities 9,744 9,879
Deferred Income Taxes 8,767 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 39,681 36,973
-----------------------
42,677 39,771
-----------------------
$61,188 $57,625
=======================
The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
Page 10<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenue $61,717 $59,100 $57,063
Operating Expenses
Wages and employee benefits 31,412 29,588 28,624
Fuel, parts, tires and other 11,566 10,834 10,776
Taxes and licenses 3,926 3,852 3,638
Claims and insurance 2,567 2,521 2,586
Communications, utilities and rent 1,544 1,205 1,086
Depreciation 5,578 5,313 4,932
---------------------------------
56,593 53,313 51,642
---------------------------------
Operating Income 5,124 5,787 5,421
Interest income and other expenses, net 415 334 357
---------------------------------
Income before Provision for Income Taxes
and Extraordinary Item 5,539 6,121 5,778
Provision for income taxes 2,216 2,439 2,343
---------------------------------
Income before Extraordinary Item 3,323 3,682 3,435
Extraordinary Item - write off intrastate
operating rights, net of tax -- (823) --
---------------------------------
Net Income 3,323 2,859 3,435
Retained earnings, beginning of the year 36,973 34,703 31,831
Cash dividends (615) (589) (563)
---------------------------------
Retained earnings, end of the year $39,681 $36,973 $34,703
=================================
Earnings Per Share
Before extraordinary item $ 1.39 $ 1.55 $ 1.45
Extraordinary item -- (.35) --
---------------------------------
$ 1.39 $ 1.20 $ 1.45
=================================
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
Page 11<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 3,323 $ 2,859 $ 3,435
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item -- 823 --
Depreciation 5,578 5,313 4,932
Deferred income taxes 574 747 186
Changes in current assets and current liabilities (743) 229 1,191
Common stock issued under incentive plan 198 138 143
Other (140) (176) (42)
---------------------------------
Net cash provided by operating activities 8,790 9,933 9,845
Cash Flows From Investing Activities:
Purchases of operating property, net (11,828) (7,581) (8,102)
Sales (purchases) of short-term investments, net (5,886) 1,950 22
---------------------------------
Net cash used by investing activities (17,714) (5,631) (8,080)
Cash Flows From Financing Activities:
Dividends (615) (589) (563)
---------------------------------
Net Increase (Decrease) In Cash And Cash Equivalents (9,539) 3,713 1,202
Cash and Cash Equivalents at Beginning of Year 12,759 9,046 7,844
---------------------------------
Cash and Cash Equivalents at End of Year $ 3,220 $12,759 $ 9,046
=================================
Supplemental Schedule Of Changes In Current Assets
And Current Liabilities:
(Increase) decrease in:
Accounts receivable $ (696) $ (93) $ 1
Operating supplies and parts 68 114 30
Prepayments 20 394 (98)
Increase (decrease) in:
Accounts payable (282) 216 111
Wages and employee benefits payable (455) 494 644
Claims payable 287 (676) 494
Other accrued expenses 7 22 (9)
Income taxes currently payable 308 (242) 18
---------------------------------
$ (743) $ 229 $ 1,191
=================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for income taxes $ 1,334 $ 1,934 $ 2,139
=================================
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
Page 12<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Significant Accounting Policies
- ---------------------------------------------------------------
Preparation of Financial Statements
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles and include the accounts of
Kenan Transport Company and its wholly-owned subsidiary. All
significant intercompany accounts and transactions have been
eliminated.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash Equivalents and Short-Term Investments
The Company classifies all investments maturing within three months
from the date of purchase as cash equivalents. All other investments
maturing within twelve months of the balance sheet date are
classified as short-term investments. At December 31, 1995 and 1994,
the Company had short-term investments in municipal bonds totaling
$6,886,000 and $1,000,000, respectively. The bonds have been
classified as held-to-maturity investments and were recorded at cost,
which approximates market value.
Tires
The cost of replacement tires is included in operating supplies and
parts in the accompanying Consolidated Balance Sheets. When installed
on revenue equipment, tire costs are included in prepayments and
amortized over their useful life based on mileage.
Operating Property
Operating property is recorded at cost, net of tires. Maintenance and
repairs are charged to operating expenses as incurred; renewals and
improvements are capitalized. Depreciation is computed on the
straight-line method using lives of 5 to 15 years for revenue
equipment, 15 to 40 years for buildings, remaining life of leases for
leasehold improvements, and 2 to 10 years for other equipment.
Claims Payable
Claims payable represents the estimated cost of open claims that is
retained and paid by the Company under its insurance programs for
workers' compensation, bodily injury and property damage. These
estimates are based on historical information along with certain
assumptions about future cash flows. Changes in assumptions for such
things as medical costs, environmental hazards, and legal actions, as
well as changes in actual experience could cause these estimates to
change. In the accompanying Consolidated Statements of Income and
Retained Earnings, workers' compensation costs are included in wages
and employee benefits expenses, and other claims costs are included
in claims and insurance expenses.
Page 13<PAGE>
<PAGE>
Environmental Expenditures
The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. 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.
Income Taxes
The provision for income taxes includes federal and state income
taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets
and liabilities.
Earnings Per Share
Earnings per share are based upon the weighted average number of
shares outstanding. The weighted average number of shares outstanding
was 2,387,265 (1995), 2,376,765 (1994) and 2,368,298 (1993).
Note 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.
Note 3 - Extraordinary Item
- ---------------------------------------------------------------
On August 23, 1994, the Federal Aviation Authorization Act of 1994
was enacted. Among other matters, the Act generally prohibits states from
regulating rates, routes and entry of motor carriers beginning January 1,
1995. As a result of this legislation, the Company wrote off the recorded
value of intrastate operating rights as an extraordinary charge of
$823,000 (net of $31,000 in deferred income tax benefits) during the
third quarter of 1994.
Note 4 - Bank Line of Credit
- ---------------------------------------------------------------
A Bank Credit Agreement provides a $7,000,000 line of credit at the
prime interest rate. The agreement is subject to renewal annually on May
1, and in the event it is not renewed, the outstanding balance at
termination is payable over 60 months. The agreement has been renewed
through May 1998. Restrictive covenants related to current ratio, net
worth and funded debt, among others, were met at December 31, 1995. There
have been no amounts outstanding under the agreement since 1988.
Page 14<PAGE>
<PAGE>
Note 5 - Income Taxes
- ---------------------------------------------------------------
Deferred income taxes reflect the net tax effect of temporary
differences between the financial statement and tax bases of assets and
liabilities. The tax effects of temporary differences that give rise to
significant portions of the deferred tax liabilities and assets at
December 31, 1995 and 1994 were as follows (dollars in thousands):
1995 1994
---------------------
Liabilities
Depreciation $8,384 $7,697
Prepaid tires 470 492
Other 405 312
---------------------
Deferred tax liabilities 9,259 8,501
Assets
Claims payable 1,577 1,467
Employee benefits 569 505
Other 224 214
---------------------
Deferred tax assets 2,370 2,186
---------------------
Net deferred tax liability $6,889 $6,315
=====================
The provisions for income taxes consist of the following (dollars in
thousands):
1995 1994 1993
--------------------------------
Currently payable
Federal $1,387 $1,428 $1,833
State 255 264 324
--------------------------------
1,642 1,692 2,157
Deferred 574 747 186
--------------------------------
$2,216 $2,439 $2,343
================================
The statutory federal income tax rates differ from the effective
income tax rates as follows:
1995 1994 1993
-------------------------------
Statutory federal income tax rate 34.0% 34.0% 34.0%
Increase in tax rate resulting from:
State income taxes, net of federal
tax benefit 4.0 4.0 4.1
Other items, net 2.0 1.8 2.5
-------------------------------
Effective income tax rate 40.0% 39.8% 40.6%
===============================
Page 15<PAGE>
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Note 6 - Incentive Plans
- ---------------------------------------------------------------
In 1985, the Company implemented a stock incentive plan for certain
key employees. The Plan provided an opportunity for these employees to
earn up to 50,000 shares of common stock over a ten year period if
targeted increases in net income were attained. The total number of
shares issued under the Plan as of December 31, 1994 was 43,619. There
were 7,870 shares of stock earned in 1993 and issued in March 1994,
increasing common stock by $138,000 in 1994.
The 1985 Stock Bonus Plan was terminated upon adoption of the 1994
Stock Bonus Plan that became effective January 1, 1994. The new plan
enables the Company to continue providing long-term incentives for key
employees while encouraging optimum growth in Company profits. Over a ten
year period, up to 56,600 shares of common stock may be earned if
targeted increases in net income are attained. Employees may elect to
receive up to half of the value of their incentive bonuses in cash. There
were 11,158 shares of stock earned in 1994 and issued in March 1995,
increasing common stock by $198,000 in 1995. No shares were earned in
1995. Compensation expense related to the Plan is recognized in the year
earned.
Note 7 - Retirement Plans
- ---------------------------------------------------------------
The Company has a Profit Sharing Retirement Plan covering all
employees. Contributions are determined annually by the Board of
Directors. The Plan is funded currently and contributions expensed were
$980,000 (1995), $1,285,000 (1994) and $1,269,000 (1993).
The Company has a Supplemental Executive Retirement Plan (SERP) to
replace retirement benefits lost by certain officers under the Tax Reform
Act of 1986. The SERP is an unfunded, deferred compensation plan with
benefits payable upon retirement, death or other termination of
employment under provisions similar to those of the Profit Sharing
Retirement Plan. Net amounts expensed under the SERP were $109,000
(1995), $56,000 (1994) and $80,000 (1993).
Note 8 - Lease and Other Commitments
- ---------------------------------------------------------------
Certain terminal facilities, office space and equipment, and revenue
equipment are rented under operating leases expiring at various dates
through 1999. At December 31, 1995, total future minimum rental payments
required under leases having initial or remaining noncancellable lease
terms in excess of one year are:
1996 $513,000
1997 425,000
1998 346,000
1999 306,000
A bank letter of credit of $3,250,000 is outstanding on the Company's
behalf in connection with its insurance program.
The Company is involved in various claims and legal actions arising
in the normal course of business. It is the opinion of management that
these matters will have no significant impact on the financial statements
of the Company.
Page 16<PAGE>
<PAGE>
Note 9 - Nature of Business
- ---------------------------------------------------------------
The Company transports commodities in bulk for the petroleum and
chemical industries in the southeastern United States, and its customers
include international corporations in these industries. One customer
accounted for 12% of the Company's revenue in 1995 and 11% of the
Company's revenue in 1994 and 1993. Concentration of credit risks to the
Company consists primarily of trade receivables from petroleum and
chemical companies. The Company maintains an allowance for doubtful
accounts which totaled $261,000 and $248,000 at December 31, 1995 and
1994, respectively, to cover estimated credit losses.
Note 10 - Summary of Quarterly Financial Information (Unaudited)
- ---------------------------------------------------------------
(Dollars in thousands)
---------------------------------
Operating Operating Net Earnings
Quarter Revenue Income Income Per Share
- -------------------------------------------------------------------------
1995
First $15,397 $1,536 $1,024 $.43
Second 14,490 1,032 707 .30
Third 15,128 924 583 .24
Fourth 16,702 1,632 1,009 .42
1994
First $15,550 $1,640 $1,020 $.43
Second 14,088 1,157 774 .33
Third (1) 14,229 1,279 801 .34
Fourth 15,233 1,711 1,087 .45
(1) Net income and earnings per share are shown before an
extraordinary charge of $823,000, or $.35 per share.
Page 17<PAGE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
- -------------------------------------------------------------------------
None
Page 18<PAGE>
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------------------------------------------------------------------------
Information with respect to directors required by Items 401 and 405
of Regulation S-K, appearing under the heading "Election of Directors" in
the Registrant's proxy statement dated March 29, 1996 for the Annual
Meeting of Shareholders to be held May 6, 1996, is incorporated herein by
reference. Information regarding executive officers is included as Item
4(a) in Part I.
Item 11. Executive Compensation
- -------------------------------------------------------------------------
Information with respect to executive compensation required by Item
402 of Regulation S-K, appearing under the heading "Compensation and
Related Matters" in the Registrant's proxy statement dated March 29, 1996
for the Annual Meeting of Shareholders to be held May 6, 1996, is
incorporated herein by reference.
Item 12. Securities Ownership of Certain Beneficial Owners and
Management
- -------------------------------------------------------------------------
Information with respect to securities ownership of certain
beneficial owners and management required by Item 403 of Regulation S-K,
appearing under the headings "Principal Shareholders" and "Security
Ownership of Management" in the Registrant's proxy statement dated March
29, 1996 for the Annual Meeting of Shareholders to be held May 6, 1996,
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------------------------
Information with respect to certain relationships and related
transactions required by Item 404 of Regulation S-K, appearing under the
heading "Compensation Committee Interlocks and Insider Participation" in
the Registrant's proxy statement dated March 29, 1996, for the Annual
Meeting of Shareholders to be held May 6, 1996, is incorporated herein by
reference.
Page 19<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a)(1) Financial Statements
--------------------
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this Annual Report on
Consolidated Form 10-K.
(2) Schedules
---------
None
(3) Exhibits
--------
Exhibits to this report are listed in the accompanying Index to
Exhibits.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed by the Registrant during
the last quarter of the period covered by this report.
Page 20<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Lee P. Shaffer
-----------------------------------------------------
Lee P. Shaffer, President and Chief Operating Officer
Date: March 14, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
- ------------------------ --------------------------- --------------
Principal Executive Officer:
/s/ Frank H. Kenan Chairman of the Board March 14, 1996
- ------------------------ and Chief Executive Officer
Frank H. Kenan
Chief Operating Officer:
/s/ Lee P. Shaffer President, Chief Operating March 14, 1996
- ------------------------ Officer and Director
Lee P. Shaffer
Principal Financial Officer:
/s/ William L. Boone Vice President-Finance March 14, 1996
- ------------------------ and Secretary
William L. Boone
Page 21<PAGE>
<PAGE>
Signature Title Date
- ------------------------ -------------------------- ---------------
Controller or Principal
Accounting Officer:
/s/ J. Earl Cowan Controller March 14, 1996
- ------------------------
J. Earl Cowan
Directors:
/S/ Owen G. Kenan Director March 14, 1996
- ------------------------
Owen G. Kenan
/S/ Thomas S. Kenan, III Director March 14, 1996
- ------------------------
Thomas S. Kenan, III
/S/ Braxton Schell Director March 14, 1996
- ------------------------
Braxton Schell
/S/ Paul Wright, Jr. Director March 14, 1996
- ------------------------
Paul Wright, Jr.
/S/ William C. Friday Director March 14, 1996
- ------------------------
William C. Friday
Page 22<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Financial Statements in Form 10-K
- ------------------------------------------------------- ------------
Report of Independent Public Accountants relating to the
Consolidated Financial Statements and Notes thereto 9
Consolidated Balance Sheets - December 31, 1995 and 1994 10
Consolidated Statements of Income and Retained Earnings - For
the Years Ended December 31, 1995, 1994 and 1993 11
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 1995, 1994 and 1993 12
Notes to Consolidated Financial Statements 13-17
Page 23<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- ---------------------------------------------------------
3(a) Charter Documents filed as Exhibit 3(a) to the
Registrant's Form 10 Registration of Securities, filed
April 27, 1984, which is incorporated herein by reference
to such Form 10.
3(b) Articles of Amendment dated May 1987, filed as Exhibit
4(b) to the Registrant's Form 10-Q Quarterly Report for
the quarter ended June 30, 1987, which is incorporated
herein by reference to such Form 10-Q.
3(c) Articles of Amendment dated May 1988, filed as Exhibit
4(f) to the Registrant's Form 10-Q Quarterly Report for
the quarter ended June 30, 1988, which is incorporated
herein by reference to such Form 10-Q.
3(d) Bylaws filed as Exhibit 3(b) to the Registrant's Form 10
Registration of Securities, filed April 27, 1984, which
is incorporated herein by reference to such Form 10.
3(e) Amendments to the Bylaws of the Registrant adopted March
15, 1985, March 2, 1987 and March 1, 1990, filed as
Exhibit 4(e) to the Registrant's Form 10-K for the year
ended December 31, 1989, which is incorporated herein by
reference to such Form 10-K.
3(f) Amended and Restated Bylaws of the Registrant adopted
September 26, 1990, filed as Exhibit 4(d) to the
Registrant's Form 10-Q Quarterly Report for the quarter
ended June 30, 1991, which is incorporated herein by
reference to such Form 10-Q.
3(g) Amendment to the Bylaws of the Registrant adopted May 6,
1991, filed as Exhibit 4(e) to the Registrant's Form 10-Q
Quarterly Report for the quarter ended June 30, 1991,
which is incorporated herein by reference to such Form
10-Q.
3(h) Amendment to the Bylaws of the Registrant adopted October
7, 1991, filed as Exhibit 4(f) to the Registrant's Form
10-Q Quarterly Report for the quarter ended September 30,
1991, which is incorporated herein by reference to such
Form 10-Q.
4(a) Specimen Stock Certificate filed as Exhibit 4(a) to the
Registrant's Form 10 Registration of Securities, filed
April 27, 1984, which is incorporated herein by reference
to such Form 10.
4(b) Credit Agreement between First Union National Bank and
the Registrant dated May 22, 1984, filed as Exhibit 4(b)
to the Registrant's Form 10-Q Quarterly Report for the
quarter ended June 30, 1984, which is incorporated herein
by reference to such Form 10-Q.
Page 24<PAGE>
<PAGE>
Exhibit No. Description
- ----------- ---------------------------------------------------------
Management contracts or compensatory plans or arrangements
Exhibits 10(a) - 10(d)
10(a) Employee Stock Bonus Plan effective January 1, 1985,
filed as Exhibit 10(c) to the Registrant's Form 10-K for
the year ended December 31, 1984, which is incorporated
herein by reference to such Form 10-K.
10(b) Amendment to Employee Stock Bonus Plan dated January 6,
1987, filed as Exhibit 10(d) to the Registrant's Form 10-
K for the year ended December 31, 1986, which is
incorporated herein by reference to such Form 10-K.
10(c) Supplemental Executive Retirement Plan, effective January
1, 1990, filed as Exhibit 10(e) to the Registrant's Form
10-K for the year ended December 31, 1990, which is
incorporated herein by reference to such Form 10-K.
10(d) 1994 Stock Bonus Plan effective January 1, 1994, filed as
Exhibit 10(b) to the Registrant's Form 10-Q Quarterly
Report for the quarter ended June 30, 1994, which is
incorporated herein by reference to such Form 10-Q.
21 Subsidiaries of the Registrant.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule for the year ended December 31,
1995.
Page 25 <PAGE>
Exhibit 21
SUBSIDIARIES
Subsidiaries of the Registrant at December 31, 1995 include:
- Kenan Transport Company (Virginia)
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kenan Transport Company:
As Independent Public Accountants, we hereby consent to the
incorporation of our report, dated February 9, 1996, included
in this Form 10-K, into the Company's previously filed Registration
Statement No. 33-2494 on Form S-8, dated January 23,
1986.
Arthur Andersen LLP
Raleigh, North Carolina,
March 28, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000745379
<NAME> KENAN TRANSPORT COMPANY
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