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 June 28, 1996 Commission File Number 0-14759
KLLM TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 64-0412551
(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
4,408,820 Common Shares were outstanding as of June 28, 1996.
<PAGE>
KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 28, 1996 (Unaudited) and December 29, 1995 1
Consolidated Statements of Earnings (Unaudited)
Thirteen weeks and Twenty-six weeks ended June 28, 1996
and June 30, 1995 2
Condensed Consolidated Statements of Cash Flows (Unaudited)
Twenty-six weeks ended June 28, 1996 and June 30, 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>
<TABLE>
<CAPTION>
KLLM TRANSPORT SERVICES, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 28, December 29,
1996 1995
(Unaudited) (Note)
(In Thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 956 $0
Accounts receivable 29,182 27,787
Inventories - at cost 1,160 1,315
Prepaid expenses:
Tires 3,829 4,096
Other 4,930 3,809
Deferred income taxes 1,940 1,940
_________ _________
Total current assets 41,997 38,947
Property and equipment 181,016 179,568
Less accumulated
depreciation (63,257) (57,304)
__________ ___________
117,759 122,264
Intangible assets, net
(Note B) 2,443 2,626
Other assets 367 411
__________ ____________
$162,566 $164,248
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $4,058 $2,758
Accounts payable and
accrued expenses 16,409 13,076
Current maturities of
long-term debt and capital
leases 4,824 5,937
___________ _____________
Total current liabilities 25,291 21,771
Long-term debt and capital
leases, less current
maturities 53,373 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 - 4,408,820
in 1996 and 4,358,653 in 1995. 4,552 4,552
Additional paid-in capital 32,658 32,815
Retained earnings 31,247 30,687
_________ _______
68,457 68,054
Less Common Stock in
Treasury, at cost, 143,399
shares in 1996
and 193,566 in 1995. (1,470) (2,086)
_________ __________
Total stockholders' equity 66,987 65,968
__________ __________
$162,566 $164,248
</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.<PAGE>
<TABLE>
<CAPTION>
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
OPERATING REVENUE $67,110 $60,971 $130,846 $114,394
OPERATING EXPENSES:
Salaries, wages and
fringe benefits 18,528 17,720 37,235 33,343
Operating supplies
and expenses 17,925 16,152 35,958 30,766
Insurance, claims,
taxes and licenses 3,209 2,599 6,134 5,269
Depreciation and
amortization 5,422 5,801 11,100 11,261
Purchased transportation
and equipment rent 16,791 13,533 32,476 24,254
Other 2,640 2,647 4,945 5,150
Gain on sale of
revenue equipment (140) (227) (344) (748)
TOTAL OPERATING EXPENSES 64,375 58,224 127,504 109,295
OPERATING INCOME FROM
CONTINUING OPERATIONS 2,735 2,747 3,342 5,099
Interest and other income (12) (9) (18) (9)
Interest expense 1,201 1,455 2,469 2,818
1,189 1,446 2,451 2,809
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 1,546 1,300 891 2,290
Income taxes 587 490 338 861
NET EARNINGS FROM
CONTINUING OPERATIONS
$959 $810 $553 $1,429
LOSS FROM OPERATIONS
OF DISCONTINUED DIVISION
(Net of tax expense
(benefits) of $0 in 1996
and ($72) and ($179)
for the 1995 thirteen week
and twenty six week
periods, respectively) 0 (129) 0 (318)
INCOME (LOSS) ON DISPOSAL
OF DISCONTINUED DIVISION
(Net of tax expense
(benefit) of ($9) and $4
for the 1996 thirteen week
and twenty six week periods,
respectively, and $0 in 1995) (14) 6
NET EARNINGS $945 $681 $559 $1,111
EARNINGS (LOSS) PER SHARE:
From Continuing Operations $0.22 $0.18 $0.13 $0.32
From Operations of
Discontinued Division 0.00 (0.03) 0.00 (0.07)
From Disposal of
Discontinued Division (0.00) 0.00 0.00 0.00
NET EARNINGS PER COMMON
SHARE $0.22 $0.15 $0.13 $0.25
</TABLE>
See accompanying notes.<PAGE>
<TABLE>
<CAPTION>
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-Six Weeks Ended
June 28, June 30,
1996 1995
(In Thousands)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES $12,889 $11,445
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Vernon Sawyer,
Inc. assets (Note B) 0 (6,399)
Purchases of property and
equipment (8,984) (12,907)
Proceeds from disposition of
equipment 2,625 4,663
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (6,359) (14,643)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from exercise of
stock options 427 244
Net increase (decrease)
in borrowings under revolving
line of credit (3,000) 4,000
Repayment of long-term debt and
capital leases (5,318) (1,029)
Net change in borrowings
under working capital line of
credit 2,317 (1,081)
NET CASH FLOWS (USED) PROVIDED BY
FINANCING ACTIVITIES (5,575) 2,134
Net Increase (Decrease) in Cash
and Cash Equivalents 956 (1,064)
Cash and Cash Equivalents at Beginning
Of Period 0 1,353
Cash and Cash Equivalents at End
Of Period $956 $289
</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 second quarter of 1996 ended on Friday,
June 28, 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 twenty-six weeks ended June 28, 1996, the Company
generated $12.9 million in net cash provided from operating activities.
Capital resources required by the Company during the first half of
1996 were approximately $1,800,000 less 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 half of 1996 were approximately $6,400,000 as compared
to $8,200,000 in the first half 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 $15,900,000.
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 June 28, 1996, the aggregate principal amount of the Company's
outstanding long-term indebtedness was approximately $58.2 million.
Of this total outstanding, $3.8 million was in the form
of 10.2% notes due July 15, 1998, $17.1 million in the form of 9.11%
senior notes due June 15, 2002, $32.0 million consisted of the revolving
line of credit due April 7, 1998, and $5.3 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 $32,000,000
were outstanding at June 28, 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, $1,182,000 of which was
available at June 28, 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 second quarter and first half of 1996
increased 10.1% and 14.4% over the comparable periods of 1995. The increase
in operating revenue in the second quarter consisted of a 5.8% increase
from the Company's traditional over-the-road truckload business, of which a
5.2% increase came from the owner-operator division, a 0.8% decrease from
rail services, 0.5% decrease from transportation brokerage services, and
5.5% increase from the dry-van over-the-road truckload division. The
increase in operating revenue in the first half of 1996 consisted
of a 7.7% increase from the Company's traditional over-the-road
truckload business, of which a 5.7% increase came from the owner-operator
division, a 0.6% decrease from rail services, less than 0.1%
increase from transportation brokerage services, and 7.3% 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
second quarter and first half of 1996 increased 3.0% over the same
periods in the prior year, while at the same time, deadhead percentage
decreased 5.0% and 2.0%. The operating ratio increased from 95.5% to 95.9%
for the second quarter and from 95.5% to 97.5% for the
first half 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 half 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 half of 1996, when
compared to the same period last year, reflects the following: a) an
increase in driver pay and related costs of
approximately $3,801,000, b) the previously mentioned increased fuel
costs of approximately $3,877,000, (within this
amount, approximately $1,795,000, or $0.022 per mile is associated with
the rising fuel prices), c) an increase in
purchased transportation of approximately $3,109,000, of which
$1,474,000 is relative to dedicated services that were
not offered by the Company in the first half of last year, and d) the
increased equipment rent of approximately
$1,899,000 regarding the operating leases for revenue equipment, as
previously mentioned. Those leases were gradually
implemented throughout 1995. These increased costs accounted for 0.4%,
0.4%, 0.3%, and 0.2%, respectively, of the increase in the operating ratio.
As a result of the foregoing, net earnings from continuing
operations increased by $149,000 or 18.4% for the
second quarter and decreased by $876,000 or 61.3% for the first half of
1996 from the comparable periods of 1995.
Earnings per share from continuing operations increased from $.18 to
$.21 in the second quarter of 1996 and decreased
from $.32 to $.13 in the first half 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 June
28, 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 August 12, 1996
s/J. Kirby Lane
J. Kirby Lane
Executive Vice President
and Chief Financial Officer
Date August 12, 1996
s/ Cindy F. Bailey
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 August 12, 1996
/s/ J. Kirby Lane
J. Kirby Lane
Executive Vice President
and Chief Financial Officer
Date August 12, 1996
/s/ Cindy F. Bailey
Cindy F. Bailey
Corporate Controller
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> JUN-28-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 30,296
<ALLOWANCES> 462
<INVENTORY> 1,323
<CURRENT-ASSETS> 42,680
<PP&E> 178,683
<DEPRECIATION> 60,368
<TOTAL-ASSETS> 163,915
<CURRENT-LIABILITIES> 23,004
<BONDS> 0
0
0
<COMMON> 4,552
<OTHER-SE> 61,030
<TOTAL-LIABILITY-AND-EQUITY> 65,582
<SALES> 0
<TOTAL-REVENUES> 63,736
<CGS> 0
<TOTAL-COSTS> 63,129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,268
<INCOME-PRETAX> (655)
<INCOME-TAX> (249)
<INCOME-CONTINUING> (406)
<DISCONTINUED> 20
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (386)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
