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 March 31, 1997
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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 No X
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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 April 30, 1997
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Common stock, no par value 2,394,780
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KENAN TRANSPORT COMPANY
INDEX
Page
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Part I - Financial Information
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 1
Consolidated Statements of Income for the three months
ended March 31, 1997 and 1996 2
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 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)
March 31, December 31,
1997 1996
ASSETS (Unaudited) (Note 1)
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Current Assets
Cash and cash equivalents $12,838 $11,181
Accounts receivable 4,265 4,988
Operating supplies and parts 551 413
Prepayments
Tires 880 1,033
Insurance, licenses and other 1,223 698
Deferred income taxes 1,563 1,741
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Total Current Assets 21,320 20,054
Operating Property
Land 3,531 3,531
Buildings and leasehold improvements 9,643 9,279
Revenue equipment 55,437 56,015
Other equipment 3,996 3,923
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72,607 72,748
Accumulated depreciation (29,926) (28,615)
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Net Operating Property 42,681 44,133
Other Assets 1,139 857
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$65,140 $65,044
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 1,063 $ 1,257
Wages and employee benefits payable 4,440 5,136
Claims payable 3,180 3,409
Other accrued expenses 116 166
Income taxes payable 564 52
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Total Current Liabilities 9,363 10,020
Deferred Income Taxes 9,020 9,181
Stockholders' Equity
Common stock; no par; 20,000,000 shares
authorized; 2,394,780 and 2,389,497
shares issued and outstanding 3,096 2,996
Retained earnings 43,661 42,847
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46,757 45,843
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$65,140 $65,044
========================
The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
Page 1<PAGE>
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KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1997 and 1996
(Unaudited and dollars in thousands except per share amounts)
1997 1996
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Operating Revenue $17,746 $17,587
Operating Expenses
Wages and employee benefits 8,950 8,926
Fuel, parts, tires and other 3,499 3,298
Taxes and licenses 1,094 1,124
Claims and insurance 644 601
Communications, utilities and rent 363 429
Depreciation 1,655 1,561
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16,205 15,939
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Operating Income 1,541 1,648
Interest income and other expenses, net 46 70
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Income before Provision for Income Taxes 1,587 1,718
Provision for income taxes 611 678
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Net Income $ 976 $ 1,040
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Weighted average number of shares
outstanding (in thousands) 2,390 2,389
Earnings per share $ .41 $ .44
Operating ratio 91.3% 90.6%
Dividends paid per share $ .0675 $ .0650
The Notes to Consolidated Financial Statements are an integral part of
these statements.
Page 2<PAGE>
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KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996
(Unaudited and dollars in thousands)
1997 1996
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Cash Provided by (Applied to):
Operations $ 2,022 $ 2,782
Purchases of operating property, net (203) (2,508)
Sales of short-term investments, net -- 6,076
Dividends (162) (155)
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Net Increase in Cash and Cash Equivalents 1,657 6,195
Beginning Cash and Cash Equivalents 11,181 3,220
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Ending Cash and Cash Equivalents $12,838 $ 9,415
========================
The Notes to Consolidated Financial Statements are an integral part of
these statements.
Page 3<PAGE>
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KENAN TRANSPORT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
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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, 1996 has been taken from the
audited financial statements at that date.
The results of operations for the three months ended March 31, 1997
and 1996 are not necessarily indicative of the results to be expected for
the full year.
2. Effects of Recent Accounting Pronouncements
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The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", in
February 1997. The Company is required to adopt SFAS No. 128 for the year
ended December 31, 1997. This statement establishes standards for
computing and presenting earnings per share (EPS) and makes them
comparable to international EPS standards. The statement requires dual
presentation of basic and diluted EPS on the face of the income statement
and requires a reconciliation of the numerator and denominator of the
basic EPS calculation to the numerator and denominator of the diluted EPS
calculation. Basic and diluted EPS will not be materially different from
previously reported EPS.
Page 4<PAGE>
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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 first quarter of 1997 was $17,746,000 compared to
$17,587,000 for the first quarter of 1996. Net income was $976,000
compared to $1,040,000 in 1996. Earnings per share were $.41 compared to
$.44 during the same period last year. Miles operated decreased 1% from
the first quarter of 1996.
First quarter revenue and earnings were impacted by unusually warm
winter weather which was significantly warmer than the first quarter last
year. Demand for heating fuels that the Company transports was affected
negatively by the warmer weather.
Operating expenses for the first quarter of 1997 increased $266,000
or 2% over 1996 levels, due primarily to higher fuel prices and
depreciation expense. Although fuel prices for the quarter were higher,
we were able to obtain substantial relief from fuel surcharges that are
included in revenue. The increase in depreciation expense was largely due
to new terminal facilities and computer equipment placed in service
during the past twelve months. Our operating ratio for the quarter was
91.3% compared to 90.6% in 1996.
Liquidity and Capital Resources
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The Company's liquidity and capital resources are adequate. At March
31, 1997, working capital was $11,957,000 compared to $10,034,000 at
December 31, 1996, and the current ratios were 2.28 and 2.00,
respectively. Cash and cash equivalents totaled $12,838,000 at March 31,
1997, and the Company had no debt outstanding under its $7,000,000 bank
line of credit.
The Company has second quarter cash commitments of approximately
$5,000,000 for tractor replacements. Management believes that cash flows
from operations and the Company's bank line of credit will be sufficient
to fund these planned expenditures as well as 1997 working capital
requirements, expansion opportunities and other corporate needs.
The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. The Company has a
program to maintain its fuel storage facilities in compliance with
environmental regulation. 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 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
March 31, 1997.
Page 6<PAGE>
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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: May 9, 1997 BY:/s/ William L. Boone
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Vice President-Finance and
Chief Financial Officer
Page 7<PAGE>
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INDEX TO EXHIBITS
The exhibits filed as part of this report are listed below:
Exhibit
Number Description
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27 Financial Data Schedule for the quarter ending March 31,
1997.
Page 8<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,838
<SECURITIES> 0
<RECEIVABLES> 4,265
<ALLOWANCES> 0
<INVENTORY> 551
<CURRENT-ASSETS> 21,320
<PP&E> 72,607
<DEPRECIATION> 29,926
<TOTAL-ASSETS> 65,140
<CURRENT-LIABILITIES> 9,363
<BONDS> 0
0
0
<COMMON> 3,096
<OTHER-SE> 43,661
<TOTAL-LIABILITY-AND-EQUITY> 65,140
<SALES> 0
<TOTAL-REVENUES> 17,746
<CGS> 0
<TOTAL-COSTS> 16,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,587
<INCOME-TAX> 611
<INCOME-CONTINUING> 976
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 976
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
