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 June 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-12058
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KENAN TRANSPORT COMPANY
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(Exact name of registrant as specified in its charter)
North Carolina 56-0516485
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
University Square - West, 143 W. Franklin Street
Chapel Hill, North Carolina, 27516-3910
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(Address of principal executive offices, including Zip Code)
(919) 967-8221
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(Registrant's telephone number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
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Common stock, no par value 2,389,497
KENAN TRANSPORT COMPANY
INDEX
Page
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Part I - Financial Information
Consolidated Balance Sheets as of June 30, 1995 and
December 31, 1994 1
Consolidated Statements of Income for the three
and six months ended June 30, 1995 and 1994 2
Consolidated Statements of Cash Flows for the
six months ended June 30, 1995 and 1994 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 6
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 7
Item 6 - Exhibits and Reports on Form 8-K 7
Signatures 8
Index to Exhibits
PART I - FINANCIAL INFORMATION
KENAN TRANSPORT COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
1995 1994
ASSETS (Unaudited) (Note 1)
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Current Assets
Cash and cash equivalents $ 8,390 $12,759
Short-term investments 3,061 1,000
Accounts receivable 3,947 4,249
Operating supplies and parts 547 574
Prepayments -
Tires 1,209 1,295
Insurance, licenses and other 873 602
Deferred income taxes 1,720 1,660
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Total Current Assets 19,747 22,139
Operating Property
Land 3,205 3,201
Buildings and leasehold improvements 4,983 4,972
Revenue equipment 50,965 47,434
Other equipment 3,862 3,667
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63,015 59,274
Accumulated depreciation (25,140) (24,259)
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Net Operating Property 37,875 35,015
Other Assets 488 471
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$58,110 $57,625
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 857 $ 1,257
Wages and employee benefits payable 3,531 4,603
Claims payable 3,911 3,866
Other accrued expenses 156 153
Income taxes payable 38 --
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Total Current Liabilities 8,493 9,879
Deferred Income Taxes 8,222 7,975
Stockholders' Equity
Common stock; no par; 20,000,000 shares
authorized; 2,389,497 and 2,378,339
shares issued and outstanding 2,996 2,798
Retained earnings 38,399 36,973
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41,395 39,771
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$58,110 $57,625
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The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.
Page 1
KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and dollars in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
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1995 1994 1995 1994
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Operating Revenue $14,490 $14,088 $29,887 $29,638
Operating Expenses
Wages and employee benefits 7,433 7,179 15,349 15,017
Fuel, parts, tires and other 2,759 2,626 5,498 5,517
Taxes and licenses 948 946 1,935 1,985
Claims and insurance 636 628 1,158 1,157
Communications, utilities and rent 335 289 683 576
Depreciation 1,347 1,263 2,696 2,589
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13,458 12,931 27,319 26,841
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Operating Income 1,032 1,157 2,568 2,797
Interest income and other expenses, net 146 139 317 214
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Income before Provision for Income Taxes 1,178 1,296 2,885 3,011
Provision for income taxes 471 522 1,154 1,217
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Net Income $ 707 $ 774 $ 1,731 $ 1,794
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Weighted average number of shares
outstanding (in thousands) 2,389 2,378 2,385 2,375
Earnings per share $ .30 $ .33 $ .73 $ .76
Operating ratio 92.9% 91.8% 91.4% 90.6%
Dividends paid per share $ .0625 $ .0600 $ .1250 $ .1200
The Notes to Consolidated Financial Statements are an integral part of these statements.
Page 2
KENAN TRANSPORT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1995 and 1994
(Unaudited and dollars in thousands)
1995 1994
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Cash Provided by (Applied to):
Operations $ 3,553 $ 5,296
Purchases of operating property, net (5,556) (4,493)
Short-term investments, net (2,061) (1,500)
Dividends (305) (292)
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Net Decrease in Cash and Cash Equivalents (4,369) (989)
Beginning Cash and Cash Equivalents 12,759 9,046
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Ending Cash and Cash Equivalents $ 8,390 $ 8,057
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The Notes to Consolidated Financial Statements are an integral part of
these statements.
Page 3
KENAN TRANSPORT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary
for a fair statement of results for the interim periods.
The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date.
The results of operations for the three and six months ended June
30, 1995 and 1994 are not necessarily indicative of the results to be
expected for the full year.
2. Purchase of Assets
On June 29, 1995, the Company purchased the transportation assets
of Cary Oil Company, Inc. for cash and entered into a long-term contract
to provide transportation services to Cary Oil.
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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 second quarter of 1995 was $14,490,000, an increase of
$402,000 and 3% over the second quarter of 1994. Net income was $707,000, a
decrease of $67,000 and 9% from the second quarter of 1994. Earnings per share
were $.30 compared to $.33 in 1994. Second quarter revenue did not reach
planned growth goals and continued to be impacted by the effect of reduced
demand for heating fuels due to warm weather during the heating season. Miles
operated increased 1% in comparison to the second quarter of 1994, while
average freight rates were up 2%.
Revenue for the six months ended June 30, 1995 was $29,887,000, an
increase of $249,000 and 1% over the first half of 1994. Net income was
$1,731,000, a decrease of $63,000 and 4%. Earnings per share were $.73 compared
to $.76 in 1994. Miles operated remained flat in comparison to the first half
of 1994, while average freight rates increased 1%.
Operating expenses for the second quarter of 1995 totaled $13,458,000, an
increase of $527,000 and 4% from the second quarter of 1994. The increase in
operating expenses was primarily due to the cost of additional resources put
in place to meet growth goals and expansion opportunities in the Southeast. The
operating ratio increased to 92.9% from 91.8% in 1994.
Operating expenses for the six months ended June 30, 1995 totaled
$27,319,000, an increase of $478,000 and 2% from the first half of 1994. The
operating ratio increased to 91.4% from 90.6% in 1994.
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. Annual transportation revenue generated
by this contract is expected to exceed $4,000,000.
Liquidity and Capital Resources
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The Company's financial condition at June 30, 1995 was strong. Working
capital was $11,254,000 compared to $12,260,000 at December 31, 1994 and the
current ratios were 2.3 and 2.2, respectively. The Company had no debt
outstanding under its $7,000,000 bank line of credit.
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KENAN TRANSPORT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Cash equivalents together with short-term investments totaled $11,451,000
at June 30, 1995. Cash flows from operations for the first half of 1995 were
down $1,743,000 from 1994 levels due largely to the timing of payment for
operating property additions. Net purchases of operating property in 1995 were
up $1,063,000 over 1994 levels as a result of the purchase of assets from Cary
Oil and the replacement of 52 tractors under the Company's equipment
replacement program.
The cash dividend was increased 4% to an annual rate of $.26 per share
effective with the quarterly payment in July. This was the seventeenth
consecutive annual increase in the dividend.
The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. Beginning in 1989, the
Company began a program to upgrade its fuel storage facilities. Under the
program, the Company incurs costs to replace tanks, remediate soil
contamination resulting from overfills, spills and leaks and 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.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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The Registrant's Annual Meeting of Stockholders was held on May 1,
1995, for the purpose of electing a board of directors, approving
a proposal to amend the 1994 Stock Bonus Plan and to transact other
business as came before the meeting. Proxies for the meeting were
solicited pursuant to Section 14(a) of the Securities Act of 1934
and there was no solicitation in opposition to management's
solicitations. The proposals voted upon and the results of voting
were as follows:
(1) Nominees for directors as listed in the proxy statement were
elected for a one year term with the following vote:
Votes Votes Broker
For Withheld Non-votes
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Frank H. Kenan 2,165,627 3,910 159,392
Lee P. Shaffer 2,165,727 3,810 159,392
William C. Friday 2,165,727 3,810 159,392
Owen G. Kenan 2,165,727 3,810 159,392
Thomas S. Kenan, III 2,165,627 3,910 159,392
Braxton Schell 2,165,627 3,910 159,392
Paul Wright, Jr. 2,165,727 3,810 159,392
(2) The proposal to amend the 1994 Stock Bonus Plan as described
in the proxy statement was approved with the following vote:
Shares voted for: 1,924,147
Shares voted against: 11,388
Shares withheld:
Shares abstaining: 218,000
Shares not voted: 175,394
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
June 30, 1995.
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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: August 8, 1995 BY: /s/ William L. Boone
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Vice President-Finance and
Chief Financial Officer
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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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10 Amendment to the 1994 Stock Bonus Plan, adopted by the
Registrant's Board of Directors on February 13, 1995 and
approved by shareholders on May 1, 1995 at the Annual
Meeting.
27 Financial Data Schedule for the 2nd Quarter 10-Q.
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