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, 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 September 30, 1996
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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, 1996
and December 31, 1995 1
Consolidated Statements of Income for the three
and nine months ended September 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the
nine months ended September 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 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>
September 30, December 31,
1996 1995
ASSETS (Unaudited) (Note 1)
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ 9,540 $ 3,220
Short-term investments -- 6,886
Accounts receivable 4,499 4,945
Operating supplies and parts 463 506
Prepayments -
Tires 1,141 1,238
Insurance, licenses and other 929 639
Deferred income taxes 1,805 1,878
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Total Current Assets 18,377 19,312
Operating Property
Land 3,531 3,398
Buildings and leasehold improvements 8,309 7,159
Revenue equipment 56,685 54,379
Other equipment 4,431 3,492
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72,956 68,428
Accumulated depreciation (28,119) (27,163)
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Net Operating Property 44,837 41,265
Other Assets 1,123 611
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$64,337 $61,188
=======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 1,203 $ 975
Wages and employee benefits payable 5,246 4,148
Claims payable 3,837 4,153
Other accrued expenses 219 160
Income taxes payable -- 308
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Total Current Liabilities 10,505 9,744
Deferred Income Taxes 9,114 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 41,722 39,681
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44,718 42,677
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$64,337 $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>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Operating Revenue $16,638 $15,128 $50,862 $45,015
Operating Expenses
Wages and employee benefits 8,408 7,886 25,940 23,235
Fuel, parts, tires and other 3,190 2,921 9,610 8,419
Taxes and licenses 1,020 934 3,190 2,869
Claims and insurance 699 614 1,896 1,772
Communications, utilities and rent 346 430 1,132 1,113
Depreciation 1,704 1,419 4,954 4,115
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15,367 14,204 46,722 41,523
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Operating Income 1,271 924 4,140 3,492
Interest income and other expenses, net (97) 48 6 365
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Income before Provision for Income Taxes 1,174 972 4,146 3,857
Provision for income taxes 458 389 1,627 1,543
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Net Income $ 716 $ 583 $ 2,519 $ 2,314
=========================================================================================
Weighted average number of shares
outstanding (in thousands) 2,389 2,389 2,389 2,387
Earnings per share $ .30 $ .24 $ 1.05 $ .97
Operating ratio 92.4% 93.9% 91.9% 92.2%
Dividends paid per share $ .0675 $ .0650 $ .1975 $ .1900
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, 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 $ 8,438 $ 6,755
Purchases of operating property, net (8,526) (7,456)
Short-term investments, net 6,886 (4,446)
Dividends (478) (460)
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Net Increase (Decrease) in Cash
and Cash Equivalents 6,320 (5,607)
Beginning Cash and Cash Equivalents 3,220 12,759
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Ending Cash and Cash Equivalents $ 9,540 $ 7,152
=======================================================================
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
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 nine months ended
September 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
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Revenue for the third quarter of 1996 was $16,638,000, an increase of
$1,510,000 and 10% over the third quarter of 1995. The growth in third quarter
revenue is primarily the result of increased demand for transportation
services. Miles operated increased 6% over 1995. Net income was $716,000, an
increase of $133,000 and 23% over the third quarter of 1995. Earnings per share
were $.30 compared to $.24 in 1995.
Revenue for the nine months ended September 30, 1996 was $50,862,000, an
increase of $5,847,000 and 13% over 1995. The increase in revenue primarily
reflects the effect of increased demand, the acquisition of Cary Oil Company
in June of 1995 and expansion into Alabama and Tennessee markets. Miles
operated increased 9% over 1995. Net income was $2,519,000, an increase of
$205,000 and 9% over the first nine months of 1995. Earnings per share were
$1.05 compared to $.97 in 1995.
Operating expenses for the third quarter of 1996 totaled $15,367,000, an
increase of $1,163,000 and 8% over the third quarter of 1995. Operating
expenses increased due to an increase in the volume of business and higher fuel
prices. Diesel fuel prices began rising again during the quarter and suppliers
are predicting that they will continue to increase through the winter heating
season. The Company has fuel surcharge programs in effect that management
expects will enable the Company to obtain price adjustments as costs increase
due to higher fuel prices. Our operating ratio improved to 92.4% for the
quarter from last year's ratio of 93.9%.
Operating expenses for the nine months ended September 30, 1996 totaled
$46,722,000, an increase of $5,199,000 and 13% over the first nine months of
1995. The operating ratio was 91.9% compared to 92.2% in 1995.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity and capital resources are sufficient for the
foreseeable future. Working capital at September 30, 1996 was $7,872,000
compared to $9,568,000 at December 31, 1995, and the current ratios were 1.75
and 1.98, respectively. Cash and cash equivalents totaled $9,540,000 at
September 30, 1996, and the Company had no debt outstanding under its
$7,000,000 bank line of credit.
Cash flows for the nine months ended September 30, 1996 totaled $6,320,000
compared to a decrease in cash of $5,607,000 during the same period last year.
Cash provided from the sale of short-term investments was $11,332,000 over the
first nine months 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 to 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 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
September 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: November 10, 1996 BY: /s/ William L. Boone
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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 3rd Quarter 10-Q.
Page 8
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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 SPETEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,540
<SECURITIES> 0
<RECEIVABLES> 4,499
<ALLOWANCES> 0
<INVENTORY> 463
<CURRENT-ASSETS> 18,377
<PP&E> 72,956
<DEPRECIATION> 28,119
<TOTAL-ASSETS> 64,337
<CURRENT-LIABILITIES> 10,505
<BONDS> 0
0
0
<COMMON> 2,996
<OTHER-SE> 41,722
<TOTAL-LIABILITY-AND-EQUITY> 64,337
<SALES> 0
<TOTAL-REVENUES> 50,862
<CGS> 0
<TOTAL-COSTS> 46,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,146
<INCOME-TAX> 1,627
<INCOME-CONTINUING> 2,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,519
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
</TABLE>
