UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Period Ended September 27, 1996 Commission File Number 0-14759
KLLM TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 64-012551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 6098
Jackson, Mississippi 39288
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 939-2545
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
4,338,420 Common Shares were outstanding as of September 27, 1996.
<PAGE>
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 27, 1996 (Unaudited) and December 29, 1995 1
Consolidated Statements of Earnings (Unaudited)
Thirteen weeks and Thirty-nine weeks ended September 27,
1996 and September 29, 1995 2
Condensed Consolidated Statements of Cash Flows
(Unaudited) Thirty-nine weeks ended September 27,
1996 and September 29, 1995 3
Notes to Condensed Consolidated Financial Statements
(Unaudited) 4
Item 2. 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 7
<PAGE>
KLLM TRANSPORT SERVICES, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 27, December 29,
1996 1995
(Unaudited) (Note)
(In Thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,163 $0
Accounts receivable 28,653 27,787
Inventories - at cost 1,023 1,315
Prepaid expenses:
Tires 3,794 4,096
Other 3,720 3,809
Deferred income taxes 1,940 1,940
-------- -------
Total current assets 40,293 38,947
Property and equipment 185,025 179,568
Less accumulated depreciation (61,727) (57,304)
--------- -------
123,298 122,264
Intangible assets, net 2,351 2,626
Other assets 348 411
--------- --------
$166,290 $164,248
========= ==========
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $782 $2,758
Accounts payable and accrued expenses 22,597 13,076
Current maturities of long-term debt
and capital leases 4,835 5,937
------- -------
Total current liabilities 28,214 21,771
======= =======
Long-term debt and capital leases, less
current maturities 54,937 59,594
Deferred income taxes 16,915 16,915
Stockholders' equity:
Preferred Stock, $.01 value; authorized
5,000,000 shares; none issued Common
Stock, $1 par value; 10,000,000 shares
authorized; issued shares - 4,552,219
in 1996 and 1995, respectively;
outstanding shares - 4,338,420 in 1996
and 4,358,653 in 1995. 4,552 4,552
Additional paid-in capital 32,658 32,815
Retained earnings 31,337 30,687
-------- --------
68,547 68,054
Less Common Stock in Treasury,
at cost, 213,799 shares in 1996
and 193,566 in 1995. (2,323) (2,086)
-------- --------
Total stockholders' equity 66,224 65,968
-------- --------
$166,290 $164,248
========= =========
<S> <C> <C>
</TABLE>
Note: The balance sheet at December 29, 1995 has been derived from
the audited financial statements at the date indicated, but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27, September 29, September 27,September 29,
1996 1995 1996 1995
-------------------------- -------------------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
OPERATING REVENUE $62,466 $63,158 $193,311 $177,552
OPERATING EXPENSES:
Salaries, wages and
fringe benefits 17,780 18,564 55,015 51,908
Operating supplies
and expenses 16,382 17,937 52,340 48,703
Insurance, claims,
taxes and licenses 3,694 3,226 9,828 8,495
Depreciation and
amortization 5,530 5,990 16,629 17,250
Purchased transportation
and equipment rent 15,869 14,549 48,345 38,804
Other 2,400 2,637 7,346 7,787
Gain on sale of
revenue equipment (652) (442) (996) (1,190)
----------------- -----------------
TOTAL OPERATING
EXPENSES 61,003 62,461 188,507 171,757
----------------- -------------------
OPERATING INCOME FROM
CONTINUING OPERATIONS 1,463 697 4,804 5,795
Interest and other income (18) (7) (37) (16)
Interest expense 1,131 1,471 3,600 4,289
----------------- --------------------
1,113 1,464 3,563 4,273
----------------- --------------------
EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE
INCOME TAXES 350 (767) 1,241 1,522
Income taxes 220 (293) 558 567
----------------- -------------------
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS $130 ($474) $683 $955
LOSS FROM OPERATIONS OF
DISCONTINUED DIVISION
(Net of tax expense (benefits)
of $0 in 1996 and ($23) and
($202) for the 1995 thirteen 0 ($41) $0 ($359)
weel and thirty nine week
periods, respectively)
INCOME (LOSS) ON DISPOSAL OF
DISCONTINUED DIVISION (Net of tax
expense (benefit) of ($31) and
($27) for the 1996 thirteen week
and thirty nine week
periods, respectively,and $0
in 1995) (39) $0 ($33) $0
-------------------- -------------------
NET EARNINGS (LOSS) $91 ($515) $650 $596
==================== ===================
EARNINGS (LOSS) PER SHARE:
From Continuing Operations $0.03 ($0.10) $0.16 $0.21
From Operations of
Discontinued Division 0.00 (0.01) 0.00 (0.08)
From Disposal of
Discontinued Division (0.01) 0.00 (0.01) 0.00
--------------------- -------------------
NET EARNINGS (LOSS) PER
COMMON SHARE $0.02 ($0.11) $0.15 $0.13
===================== ===================
<S> <C> <C> <C> <C>
</TABLE>
See accompanying notes.
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
September 27, September 29,
1996 1995
-------------- --------------
(In Thousands)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES $26,085 $17,127
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Vernon Sawyer,
Inc. assets (Note B) 0 (10,531)
Purchases of property and
equipment (23,151) (19,155)
Proceeds from disposition of
equipment 6,358 7,991
------------- --------------
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (16,793) (21,695)
------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from exercise of
stock options 427 244
Redemption of treasury shares (854) 0
Debt to fund Vernon Sawyer, Inc.
acquisition 0 3,795
Net increase in borrowings under
revolving line of credit 0 5,000
Repayment of long-term debt,
capital leases, and notes payable
to banks (7,188) (4,272)
Net (decrease) in borrowings under
working capital line of credit (514) (1,552)
----------- -------------
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES (8,129) 3,215
----------- -------------
Net Decrease in Cash and
Cash Equivalents 1,163 (1,353)
Cash and Cash Equivalents at
Beginning Of Period 0 1,353
----------- -------------
Cash and Cash Equivalents at End
Of Period $1,163 $0
============ =============
<S> <C> <C>
</TABLE>
See accompanying notes.
<PAGE>
KLLM TRANSPORT SERVICES, INC
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
NOTE A- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. They have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of Regulation
S-X and accordingly, do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included.
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of, which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. The Company adopted Statement 121 in the
first quarter of 1996 and the affect was not material.
NOTE B - ACQUISITION OF CORPORATION
Effective May 1, 1995, the Company acquired substantially all of the
assets of Vernon Sawyer, Inc., a regional dry-van truckload carrier based
in Bastrop, Louisiana.
NOTE C - FISCAL YEAR
The Company has adopted a fiscal year-end on the Friday nearest December
31. Accordingly, the third quarter of 1996 ended on Friday, September 27,
1996.
NOTE D - COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and routine litigation
incidental to its business. Management is of the opinion that the outcome
of these matters will not have a material adverse effect on the
consolidated financial position or results of consolidated operations of
the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
KLLM Transport Services, Inc.'s primary sources of liquidity are its
cash flow from operations and its existing credit agreements. During the
thirty-nine weeks ended September 27, 1996, the Company generated $26.1
million in net cash provided from operating activities.
Capital resources required by the Company during the first nine months
of 1996 were approximately $5,629,000 greater than the same period last year.
In January 1995, the Company entered into an operating lease for
the majority of its revenue equipment needs for that year. The payment terms
of the operating lease were more favorable than could have been obtained
with financing or capital leasing. In 1996, the Company has returned to its
traditional method of investing in maintaining a modern fleet. Capital
expenditures, net of proceeds from trade-ins, during the first nine months
of 1996 were approximately $16,793,000 as compared
to $11,164,000 in the first nine months of 1995. This is as a result of
the Company's decision to curtail growth of the fleet and refocus attention
on improving utilization and profitability in the core trucking business.
Net capital expenditures for the remainder of 1996, primarily for revenue
equipment, are expected to be approximately $5,467,000.
At the end of 1995, the Company discontinued that segment of the
international operations aimed at maritime containerized shipments.
This division proved to be unprofitable and difficult to manage; thus,
in an effort to minimize exposure on future earnings, the Company
recognized a one-time after-tax charge to 1995 earnings of $441,000, or
$0.10 per share, on the disposal of that unit. To date, there have been
no changes in the plan of disposal, or circumstances related thereto.
Effective May 1, 1995, the Company acquired substantially all of the
assets of Vernon Sawyer, Inc, a regional dry-van truckload carrier based
in Bastrop, Louisiana. The acquisition was financed from net cash
provided from operating activities and existing credit facilities.
At September 27, 1996, the aggregate principal amount of the Company's
outstanding long-term indebtedness was approximately $59.8 million. Of
this total outstanding, $2.5 million was in the form of 10.2% notes due
July 15, 1998, $17.2 million in the form of 9.11% senior notes due June 15,
2002, $35.0 million consisted of the revolving line of credit due April 7,
1998, and $5.1 million principal was relative to capital leases
with varying maturities.
The Company has a $50,000,000 unsecured revolving line of credit with a
syndication of banks. As noted above, borrowings of $35,000,000 were
outstanding at September 27, 1996. Under the terms of the agreement,
borrowings bear interest at (i) the higher of prime rate or a rate based upon
the Federal Funds Effective Rate, (ii) a rate based upon the Eurodollar rates,
or (iii) an absolute interest rate as determined by each lender in the
syndication under a competitive bid process at the Company's option.
Facilities fees from 1/4% to 3/8% per annum are charged on the
unused portion of this line.
Working capital needs have generally been met from net cash provided
from operating activities. The Company has $4,150,000 in unsecured working
capital lines of credit with a bank, $4,013,000 of which was available
at September 27, 1996. Interest is at a rate based upon the Eurodollar rates
with facility fees at 1/4% per annum on the unused portion of the line.
The Company anticipates that its existing credit facilities along with
cash flow from operations will be sufficient to fund operating expenses,
capital expenditures, and debt service.
Results of Operations
Operating revenue for the third quarter and first nine months of 1996
decreased 1.1% and increased 8.9% over the comparable periods of 1995.
The increase in operating revenue in the third quarter consisted of a 0.1%
increase from the Company's traditional over-the-road truckload business,
of which a 2.8% increase came from the owner-operator division, a 2.1%
decrease from rail services, 3.4% decrease from transportation brokerage
services, and 4.5% increase from the dry-van over-the-road truckload
division. The increase in operating revenue in the first nine months
of 1996 consisted of a 4.9% increase from the Company's traditional
over-the-road truckload business, of which a 4.6% increase came from the
owner-operator division, a 1.1% decrease from rail services, a 1.2% decrease
from transportation brokerage services, and 6.3% increase from the dry-van
over-the-road truckload division. The net revenue increase
resulted primarily from an improvement in utilization of available
equipment. Total miles per truck per week for the third quarter and first
nine months of 1996 decreased 0.2% and increased 3.0%
over the same periods in the prior year, while at the same time, deadhead
percentage decreased 5.5% and 3.2%
The operating ratio decreased from 98.9% to 97.7% for the third
quarter and increased from 96.7% to 97.5% for the first nine months of 1996
compared to the same periods in 1995. Operating revenues and results
continue to be affected by an overall weak freight market which has plagued
the industry since early last year. In addition, in the first
nine months of 1996, the Company experienced a steady and significant
increase in fuel costs, coupled by an unusually large number of severe
winter storms. The relative change in the components of
operating expenses during the first nine months of 1996, when compared to
the same period last year, reflects the following: a) an increase in driver
pay and related costs of approximately $2,871,000, b) the previously mentioned
increased fuel costs of approximately $4,231,000, (within this amount,
approximately $2,318,000, or $0.019 per mile is associated with the rising
fuel prices), c) an increase in purchased transportation of approximately
$2,060,000, which is less than the $2,779,000 in costs relative to dedicated
services that were not offered by the Company in the first
nine months of last year, and d) the increased equipment rent of
approximately $2,148,000 regarding the operating leases for revenue
equipment, as previously mentioned. Those leases were gradually implemented
throughout 1995. These increased costs accounted for 0.5%, 1.8%, less than
0.1%, and 1.0%, respectively, of the increase in the operating ratio.
As a result of the foregoing, net earnings from continuing operations
increased by $604,000 or 127.4% for the third quarter and decreased by
$272,000 or 28.5% for the first nine months of 1996 from the comparable
periods of 1995. Earnings/(loss) per share from continuing operations
increased from $(.10) to $.03 in the third quarter of 1996
and decreased from $.21 to $.16 in the first nine months of 1996 compared
to the same periods of 1995.
Seasonality
In the transportation industry, results of operations generally show
a seasonal pattern because customers reduce shipments during and after the
winter holiday season with its attendant weather variations. The Company's
operating expenses have historically been higher in the winter months
primarily due to decreased fuel efficiency and increased
maintenance costs in colder weather.
<PAGE>
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
There were no Form 8-K filings for the quarter ended
September 27, 1996.
<PAGE>
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.
KLLM TRANSPORT SERVICES, INC.
(Registrant)
<TABLE>
<S> <C>
Date November 6, 1996
S/J. Kirby Lane
J. Kirby Lane
Executive Vice President and
Chief Financial Officer
Date November 6, 1996
Cindy F. Bailey
Corporate Controller
</TABLE>
<PAGE>
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.
KLLM TRANSPORT SERVICES, INC.
(Registrant)
<TABLE>
<S> <C>
Date November 6, 1996
/s/ J. Kirby Lane
J. Kirby Lane
Executive Vice President and
Chief Financial Officer
Date November 6, 1996 /s/Cindy F. Bailey
Cindy F. Bailey
Corporate Controller
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> SEP-27-1996
<CASH> 1,163
<SECURITIES> 0
<RECEIVABLES> 28,653
<ALLOWANCES> 798
<INVENTORY> 1,023
<CURRENT-ASSETS> 40,293
<PP&E> 185,025
<DEPRECIATION> 61,727
<TOTAL-ASSETS> 166,290
<CURRENT-LIABILITIES> 28,214
<BONDS> 0
0
0
<COMMON> 4,552
<OTHER-SE> 61,672
<TOTAL-LIABILITY-AND-EQUITY> 166,290
<SALES> 0
<TOTAL-REVENUES> 193,311
<CGS> 0
<TOTAL-COSTS> 188,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,600
<INCOME-PRETAX> 1,241
<INCOME-TAX> 558
<INCOME-CONTINUING> 683
<DISCONTINUED> (33)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 650
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
