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, 1996
-----------------
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
------------------------------------------------------
(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. [ ]
Based on the closing sales price of March 3, 1997, the aggregate market
value of the voting stock held by persons other than those who may be
deemed affiliates of the registrant was $19,657,280.
------------
The number of shares outstanding of the registrant's common stock was
2,389,497 at March 3, 1997.
<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 27, 1997 in
connection with its Annual Meeting to
be held on May 5, 1997.
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. One customer accounted for 11% of the
Company's revenue in 1996.
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 428
tractors and 645 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 820 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-one real properties located in five states.
At December 31, 1996, these properties had a net book value of
$10,724,000. Additionally, the Company leases thirteen 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, 1996, revenue equipment owned by
the Company, less accumulated depreciation, totaled $31,440,000.
Page 3<PAGE>
<PAGE>
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 1996 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
- -------------------- ---- ---------------------------------------
Lee P. Shaffer 58 Director, Chief Executive Officer of
the Company beginning in 1996;
President of the Company since 1975;
Chief Operating Officer of the Company
(1975-1996).
William L. Boone 57 Vice President-Finance and Secretary of
the Company since 1974. Treasurer of
the Company beginning in 1996;
Assistant Treasurer of the Company
(1981-1996).
L. Avery Corning 39 Vice President-Operations and Sales
beginning in 1994; President (1990-
1994), Redwing Carriers, Inc., Tampa,
Florida.
Gary J. Knutson 46 Vice President-Marketing of the Company
beginning in 1994. Vice President-Sales
of the Company (1990-1993).
John E. Krovic 41 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) 37 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 Executive 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
591 shareholders, including holders whose shares are held in street
names, on December 31, 1996.
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:
1996 1995
--------------------------- ---------------------------
Quarter High Low Dividend High Low Dividend
- -------- -------- ------- -------- -------- ------- --------
First $22 $19 $.0650 $20 $17.50 $.0625
Second 21 18.75 .0650 21 19.25 .0625
Third 21.50 20 .0675 22 20 .0650
Fourth 21.50 19 .0675 22.25 20.25 .0650
Page 5<PAGE>
<PAGE>
<TABLE>
Item 6. Selected Financial Data
- -------------------------------------------------------------------------
Selected financial data for the past five years is presented below:
<CAPTION>
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations (in thousands)
- ---------------------------------
Operating revenue $68,795 $61,717 $59,100 $57,063 $53,750
Operating income 6,244 5,124 5,787 5,421 4,702
Net income (1) 3,805 3,323 3,682 3,435 3,054
Per Share
- ---------------------------------
Earnings (1) $ 1.59 $ 1.39 $ 1.55 $ 1.45 $ 1.29
Dividends declared .2675 .2575 .2475 .2375 .2275
Book value 19.19 17.86 16.72 15.76 14.56
Market value 19.00 20.75 17.50 17.38 14.00
Financial Position (in thousands)
- ---------------------------------
Cash, cash equivalents and
short-term investments $11,181 $10,106 $13,759 $11,996 $10,816
Working capital 10,034 9,568 12,260 10,766 9,044
Net operating property 44,133 41,265 35,015 32,747 29,577
Total assets 65,044 61,188 57,625 54,727 48,568
Total debt -- -- -- -- --
Stockholders' equity 45,843 42,677 39,771 37,363 34,348
Ratios and Statistics
- ---------------------------------
Operating ratio 90.9% 91.7% 90.2% 90.5% 91.3%
Return on equity (1) 9% 8% 9% 10% 9%
Current ratio 2.00 1.98 2.24 2.07 2.02
Debt equity ratio -- -- -- -- --
Average shares outstanding
(in thousands) 2,389 2,387 2,377 2,368 2,359
<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 - 1996 Compared to 1995
- ---------------------------------------------
Revenue increased 11% from 1995 to $68,795,000. The $7,078,000
increase in revenue reflects growth in demand for transportation services
and the effect of higher prices to our customers to cover increased
operating costs. The addition of transportation services to Cary Oil
Company, Inc. in July of 1995 and the expansion into Alabama and
Tennessee markets in 1995 also contributed to revenue growth for the
year. Miles operated increased 8% to 44,177,000 in 1996.
Operating expenses increased 11% in 1996 to $62,551,000. The
$5,958,000 increase was due in large part to the 8% increase in miles
operated, a 23% increase in diesel fuel prices and an 18% increase in
depreciation expense. Wages and employee benefits decreased to 50.3% of
revenue from 50.9% in 1995. Fuel, parts, tires and other operating
expenses increased from 18.7% to 19.1% of revenue in 1996 due primarily
to fuel price increases that were substantially offset by fuel surcharges
that are included in revenue. Accident claims and insurance costs fell to
3.6% of revenue in 1996 from 4.2% due to lower insurance premiums and
claims cost control. Recently completed terminal facilities in Atlanta
and Fort Lauderdale resulted in lower communication, utilities and rent
expense which decreased to 2.1% of revenue from 2.5% in 1995. The
depreciation expense increase to 9.6% of revenue compared to 9.0% in 1995
reflects the impact of new equipment purchased for the Alabama and
Tennessee expansion markets, and new terminal facilities in Atlanta and
Fort Lauderdale placed in service in 1996.
Net interest income and expenses decreased $405,000 from 1995. The
reduction stems from lower interest rates and invested cash balances in
1996 from 1995 levels as well as losses recorded from the early
retirement of high-mileage tractors.
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
into the Tennessee and Alabama markets, 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.
Federal legislation was enacted during 1994 which generally preempted
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>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
- -------------------------------------------------------------------------
Liquidity and Capital Resources
- ---------------------------------------------
The Company's liquidity and capital resources are adequate. At
December 31, 1996, working capital was $10,034,000 compared to $9,568,000
at December 31, 1995 and the current ratios were 2.00 and 1.98,
respectively. Cash and cash equivalents totaled $11,181,000 at December
31, 1996 and the Company had no debt outstanding under its $7,000,000
bank line of credit.
Net capital expenditures for replacement of tractors and tank
trailers and the construction of terminal facilities are projected to be
$9,200,000 in 1997. Management believes 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 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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and
the results of their operations and cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Raleigh, North Carolina,
February 7, 1997.
Page 9<PAGE>
<PAGE>
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
-------------------------
1996 1995
- -------------------------------------------------------------------------
ASSETS
- ---------------------------------------------
Current Assets
Cash and cash equivalents $11,181 $ 3,220
Short-term investments -- 6,886
Accounts receivable 4,988 4,945
Operating supplies and parts 413 506
Prepayments
Tires 1,033 1,238
Insurance, licenses and other 698 639
Deferred income taxes 1,741 1,878
-----------------------
Total Current Assets 20,054 19,312
Operating Property
Land 3,531 3,398
Buildings and leasehold improvements 9,279 7,159
Revenue equipment 56,015 54,379
Other equipment 3,923 3,492
-----------------------
72,748 68,428
Accumulated depreciation (28,615) (27,163)
-----------------------
Net Operating Property 44,133 41,265
Other Assets 857 611
-----------------------
$65,044 $61,188
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------
Current Liabilities
Accounts payable $ 1,257 $ 975
Wages and employee benefits payable 5,136 4,148
Claims payable 3,409 4,153
Other accrued expenses 166 160
Income taxes currently payable 52 308
-----------------------
Total Current Liabilities 10,020 9,744
Deferred Income Taxes 9,181 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 42,847 39,681
-----------------------
45,843 42,677
-----------------------
$65,044 $61,188
=======================
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,
---------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenue $68,795 $61,717 $59,100
Operating Expenses
Wages and employee benefits 34,580 31,412 29,588
Fuel, parts, tires and other 13,138 11,566 10,834
Taxes and licenses 4,261 3,926 3,852
Claims and insurance 2,502 2,567 2,521
Communications, utilities and rent 1,472 1,544 1,205
Depreciation 6,598 5,578 5,313
---------------------------------
62,551 56,593 53,313
---------------------------------
Operating Income 6,244 5,124 5,787
Interest income and other expenses, net 10 415 334
---------------------------------
Income before Provision for Income Taxes
and Extraordinary Item 6,254 5,539 6,121
Provision for income taxes 2,449 2,216 2,439
---------------------------------
Income before Extraordinary Item 3,805 3,323 3,682
Extraordinary Item - write off intrastate
operating rights, net of tax -- -- (823)
---------------------------------
Net Income 3,805 3,323 2,859
Retained earnings, beginning of the year 39,681 36,973 34,703
Cash dividends (639) (615) (589)
---------------------------------
Retained earnings, end of the year $42,847 $39,681 $36,973
=================================
Earnings Per Share
Before extraordinary item $ 1.59 $ 1.39 $ 1.55
Extraordinary item -- -- (.35)
---------------------------------
$ 1.59 $ 1.39 $ 1.20
=================================
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,
---------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $3,805 $ 3,323 $ 2,859
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item -- -- 823
Depreciation 6,598 5,578 5,313
Deferred income taxes 551 574 747
Changes in current assets and current liabilities 472 (743) 229
Common stock issued under incentive plan -- 198 138
Other (246) (140) (176)
---------------------------------
Net cash provided by operating activities 11,180 8,790 9,933
Cash Flows From Investing Activities:
Purchases of operating property, net (9,466) (11,828) (7,581)
Sales (purchases) of short-term investments, net 6,886 (5,886) 1,950
---------------------------------
Net cash used by investing activities (2,580) (17,714) (5,631)
Cash Flows From Financing Activities:
Dividends (639) (615) (589)
---------------------------------
Net Increase (Decrease) In Cash And Cash Equivalents 7,961 (9,539) 3,713
Cash and Cash Equivalents at Beginning of Year 3,220 12,759 9,046
---------------------------------
Cash and Cash Equivalents at End of Year $11,181 $ 3,220 $12,759
=================================
Supplemental Schedule Of Changes In Current Assets
And Current Liabilities:
(Increase) decrease in:
Accounts receivable $ (43) (696) $ (93)
Operating supplies and parts 93 68 114
Prepayments 146 20 394
Increase (decrease) in:
Accounts payable 282 (282) 216
Wages and employee benefits payable 988 (455) 494
Claims payable (744) 287 (676)
Other accrued expenses 6 7 22
Income taxes currently payable (256) 308 (242)
---------------------------------
$ 472 $ (743) $ 229
=================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for income taxes $ 2,154 $ 1,334 $ 1,934
=================================
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 which was
merged into Kenan Transport Company effective December 31, 1996. 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 periods. Actual results
could differ from those estimates.
Cash Equivalents and Short-Term Investments
The Company classifies investments maturing within three months from
the date of purchase as cash equivalents. Investments maturing within
twelve months of the balance sheet date are classified as short-term
investments. All investments at December 31, 1996 were cash
equivalents. At December 31, 1995 the Company had short-term
investments in municipal bonds totaling $6,886,000. The bonds were
classified as held-to-maturity investments and recorded at cost.
These investments matured in 1996 and were sold at market value,
which approximated cost.
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 2,389,497 (1996), 2,387,265 (1995) and 2,376,765 (1994).
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, 1996. 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, 1996 and 1995 were as follows (dollars in thousands):
1996 1995
---------------------
Liabilities
Depreciation $8,715 $8,384
Prepaid tires 392 470
Other 525 405
---------------------
Deferred tax liabilities 9,632 9,259
Assets
Claims payable 1,294 1,577
Employee benefits 610 569
Other 288 224
---------------------
Deferred tax assets 2,192 2,370
---------------------
Net deferred tax liability $7,440 $6,889
=====================
The provisions for income taxes consist of the following (dollars in
thousands):
1996 1995 1994
--------------------------------
Currently payable
Federal $1,568 $1,387 $1,428
State 330 255 264
--------------------------------
1,898 1,642 1,692
Deferred 551 574 747
--------------------------------
$2,449 $2,216 $2,439
================================
The statutory federal income tax rates differ from the effective
income tax rates as follows:
1996 1995 1994
-------------------------------
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 4.0
Other items, net 1.2 2.0 1.8
-------------------------------
Effective income tax rate 39.2% 40.0% 39.8%
===============================
Page 15<PAGE>
<PAGE>
Note 6 - Incentive Plans
- ---------------------------------------------------------------
The Company has a stock incentive plan for key employees that became
effective January 1, 1994. The Plan enables the Company to provide
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. Approximately 5,300 shares of stock were
earned in 1996 that will be issued in 1997. The actual number of shares
will be based upon the market value of a share on the day preceding
issuance. There would be no impact on reported net income from applying
the disclosure requirements of SFAS 123 "Accounting for Stock-Based
Compensation." 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
$1,173,000 (1996), $980,000 (1995) and $1,285,000 (1994).
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 $127,000
(1996), $109,000 (1995) and $56,000 (1994).
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, 1996, total future minimum rental payments
required under leases having initial or remaining noncancellable lease
terms in excess of one year are:
1997 $435,000
1998 346,000
1999 306,000
A bank letter of credit of $3,160,000 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 11% of the Company's revenue in 1996, 12% in 1995 and 11%
in 1994. 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 $290,000 and
$261,000 at December 31, 1996 and 1995, 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
- -------------------------------------------------------------------------
1996
First $17,587 $1,648 $1,040 $.44
Second 16,637 1,221 763 .32
Third 16,638 1,271 716 .30
Fourth 17,933 2,104 1,286 .54
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
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 Item 401 of
Regulation S-K, appearing under the heading "Election of Directors" in
the Registrant's proxy statement dated March 27, 1997 for the Annual
Meeting of Shareholders to be held May 5, 1997, is incorporated herein by
reference. Information with respect to executive officers required by
Item 401 of Regulation S-K is included as Item 4(a) in Part I.
Information with respect to directors and executive officers required
by Item 405 of Regulation S-K, appearing under the heading "Section 16(a)
Beneficial Ownership Compliance" in the Registrant's proxy statement
dated March 27, 1997 for the Annual Meeting of Shareholders to be held
May 5, 1997, is incorporated herein by reference.
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 27, 1997
for the Annual Meeting of Shareholders to be held May 5, 1997, 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
27, 1997 for the Annual Meeting of Shareholders to be held May 5, 1997,
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 27, 1997 for the Annual
Meeting of Shareholders to be held May 5, 1997, 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 Executive Officer
Date: March 14, 1997
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 Financial Officer:
/s/ William L. Boone Vice President-Finance; March 14, 1997
- ------------------------ Secretary; Treasurer
William L. Boone
Controller or Principal
Accounting Officer:
/s/ J. Earl Cowan Controller March 14, 1997
- ------------------------
J. Earl Cowan
Page 21<PAGE>
<PAGE>
Signature Title Date
- ------------------------ -------------------------- ---------------
Directors:
/S/ Thomas S. Kenan, III Chairman of the Board March 14, 1997
- ------------------------ of Directors
Thomas S. Kenan, III
/S/ Owen G. Kenan Vice Chairman of the March 14, 1997
- ------------------------ Board of Directors
Owen G. Kenan
/S/ William O. McCoy Director March 14, 1997
- ------------------------
William O. McCoy
/S/ Paul J. Rizzo Director March 14, 1997
- ------------------------
Paul J. Rizzo
/S/ William C. Friday Director March 14, 1997
- ------------------------
William C. Friday
/S/ Braxton Schell Director March 14, 1997
- ------------------------
Braxton Schell
/S/ Paul Wright, Jr. Director March 14, 1997
- ------------------------
Paul Wright, Jr.
/S/ Kenneth G. Younger Director March 14, 1997
- ------------------------
Kenneth G. Younger
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, 1996 and 1995 10
Consolidated Statements of Income and Retained Earnings -
For the Years Ended December 31, 1996, 1995 and 1994 11
Consolidated Statements of Cash Flows - For the Years
Ended December 31, 1996, 1995 and 1994 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.
3(i) Amendment to the Bylaws of the Registrant as adopted
October 21, 1996 by the Registrant's Board of Directors.
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.
Page 24<PAGE>
<PAGE>
INDEX TO EXHIBITS - continued
Exhibit No. Description
- ----------- ---------------------------------------------------------
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.
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.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule for the year ended December 31,
1996.
Page 25 <PAGE>
Exhibit 3(i)
KENAN TRANSPORT COMPANY
Board of Directors Resolution
Concerning Amendment to Bylaws
October 21, 1996
RESOLVED, that the Amended and Restated Bylaws of the Corporation,
as previously amended (hereafter, the "Bylaws"), be and hereby are amended
by the deletion of the first sentence of Section 2 of Article IV of the
Bylaws, and the substitution of a new first sentence therefor, as follows:
2. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the Vice
Chairman, the President or any two directors.
FURTHER RESOLVED, that the Bylaws be and hereby are amended further
by the deletion of Section 5 of Article V of the Bylaws, and the
substitution of a new Section 5 therefor, as follows:
5. Chairman. The Chairman shall preside at all meetings of the
Board of Directors and of the shareholders, and shall perform such other
duties as may be directed by the Board.
FURTHER RESOLVED, that the Bylaws be and hereby are amended further
by the deletion of Section 5A of Article V of the Bylaws, and the
substitution of a new Section 5A therefor, as follows:
5A. Vice Chairman. In the event of the absence of the Chairman,
the Vice Chairman shall preside at all meetings of the Board of Directors
and of the shareholders, and shall perform such other duties as may be
directed by the Board.
FURTHER RESOLVED, that the Bylaws be and hereby are amended further
by the deletion of the first sentence of Section 6 of article V of the
Bylaws, and the substitution of a new first sentence therefor, as follows:
6. President. The President shall, unless otherwise determined by
the Board of Directors, be the Chief Executive Officer of the corporation
and shall have general responsibility for the business and affairs of the
corporation, subject to the supervision and control of the Board of
Directors.
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 7, 1997, 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 27, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,181
<SECURITIES> 0
<RECEIVABLES> 4,988
<ALLOWANCES> 0
<INVENTORY> 413
<CURRENT-ASSETS> 20,054
<PP&E> 72,748
<DEPRECIATION> 28,615
<TOTAL-ASSETS> 65,044
<CURRENT-LIABILITIES> 10,020
<BONDS> 0
0
0
<COMMON> 2,996
<OTHER-SE> 42,847
<TOTAL-LIABILITY-AND-EQUITY> 65,044
<SALES> 0
<TOTAL-REVENUES> 68,795
<CGS> 0
<TOTAL-COSTS> 62,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,254
<INCOME-TAX> 2,449
<INCOME-CONTINUING> 3,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,805
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.59
</TABLE>
