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 July 4, 1997 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
4,355,922 Common Shares were outstanding as of July 4,
1997.
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
July 4, 1997 (Unaudited) and January 3, 1997 1
Consolidated Statements of Earnings (Unaudited)
Thirteen weeks and Twenty-six weeks ended
July 4, 1997 and June 28, 1996 2
Condensed Consolidated Statements of Cash Flows
(Unaudited) Twenty-six weeks ended July 4, 1997
and June 28, 1996 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
KLLM TRANSPORT SERVICES, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
July 4, January 3,
1997 1997
------- ---------
(Unaudited) (Note)
(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents $2,334 $2,874
Accounts receivable 25,453 22,684
Inventories - at cost 646 891
Prepaid expenses:
Tires 4,323 4,282
Other 2,159 1,365
Deferred income taxes 3,325 3,325
-------- -------
Total current assets 38,240 35,421
Property and equipment 179,254 179,613
Less accumulated depreciation (62,538) (57,738)
--------- --------
116,716 121,875
Intangible assets, net - Note C 248 2,259
Other assets 262 339
---------- ---------
$155,466 $159,894
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ -- $3,598
Accounts payable and accrued expenses 17,726 16,414
Current maturities of long-term debt
and capital leases 4,872 4,848
----------- ---------
Total current liabilities 22,598 24,860
Long-term debt and capital leases, less
current maturities 48,479 49,747
Deferred income taxes 18,787 18,787
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 - 4,558,754 in 1997
and 4,558,754 in 1996; outstanding
shares - 4,355,922 in 1997 and
4,344,955 in 1996. 4,559 4,559
Additional paid-in capital 32,865 32,811
Retained earnings 30,389 31,453
-------- -------
67,813 68,823
Less Common Stock in Treasury,
at cost, 202,832 shares
in 1997 and 213,799 shares in 1996. (2,211) (2,323)
--------- --------
Total stockholders' equity 65,602 66,500
--------- --------
$155,466 $159,894
=========== ==========
Note: The balance sheet at January 3, 1997 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)
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 4, June 28, July 4, June 28,
1997 1996 1997 1996
--------------------- ----------------------
(In Thousands, Except Per Share Amounts)
OPERATING REVENUE FROM
TRUCK LOAD OPERATIONS $62,593 $64,267 $123,211 $125,277
OPERATING EXPENSES:
Salaries, wages and
fringe benefits 19,050 18,471 38,143 37,067
Operating supplies
and expenses 15,418 17,865 31,557 35,754
Insurance, claims,
taxes and licenses 3,498 3,201 7,535 6,118
Depreciation and
amortization 5,206 5,384 10,431 11,024
Purchased transportation
and equipment rent 13,899 14,225 26,829 27,444
Other 2,593 2,569 5,269 4,800
(Gain) loss on sale of
revenue equipment 182 (140) 349 (344)
-------------------- ------------------
TOTAL OPERATING EXPENSES FROM
TRUCK LOAD OPERATIONS 59,846 61,575 120,113 121,863
-------------------- ------------------
OPERATING INCOME FROM TRUCK
LOAD OPERATIONS 2,747 2,692 3,098 3,414
OPERATING REVENUE FROM RAIL
CONTAINER OPERATIONS 1,170 2,843 3,319 5,569
OPERATING EXPENSES 1,928 2,800 4,128 5,641
RESTRUCTURING CHARGE - Note C 1,906 0 1,906 0
------------------- ------------------
OPERATING INCOME (LOSS) FROM
RAIL CONTAINER OPERATIONS (2,664) 43 (2,715) (72)
Interest and other income (17) (12) (43) (18)
Interest expense 1,059 1,201 2,115 2,469
-------------------- ------------------
1,042 1,189 2,072 2,451
-------------------- ------------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (959) 1,546 (1,689) 891
Income taxes (350) 587 (625) 338
--------------------- ------------------
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS (609) 959 (1,064) 553
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)INCOME (LOSS) OF
DISCONTINUED DIVISION (Net of
tax expense (benefit) of ($9)
and $4 for the thirteen-week
and twenty-six-week periods,
respectively) 0 (14) 0 6
------------------- -------------
NET EARNINGS (LOSS) ($609) 945 ($1,064) 559
==================== ===============
EARNINGS (LOSS) PER SHARE:
From Continuing Operations ($0.14) 0.22 ($0.24) 0.13
From Operations of
Discontinued Division
From Discontinued Division 0 0 0 0
-------------------- -----------------
NET EARNINGS PER COMMON SHARE ($0.14) 0.22 ($0.24) 0.13
==================== =================
See accompanying notes.
KLLM TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-Six Weeks Ended
July 4, June 28,
1997 1996
---------- ------------
(In Thousands)
NET CASH PROVIDED BY OPERATING
ACTIVITIES $9,885 $12,889
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (9,890) (8,984)
Proceeds from disposition of equipment 4,208 2,625
--------- ---------
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (5,682) (6,359)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 99 427
Net increase (decrease) in borrowings under
revolving line of credit 2,000 (3,000)
Repayment of long-term debt and capital
leases (3,442) (5,318)
Net change in borrowings under working
capital line of credit (3,400) 2,317
NET CASH FLOWS USED IN
FINANCING ACTIVITIES (4,743) (5,574)
---------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents (540) 956
Cash and Cash Equivalents at Beginning
Of Period 2,874 0
---------- ----------
Cash and Cash Equivalents at End
Of Period $2,334 $956
========== ==========
See accompanying notes.
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 February 1997, the Financial Accounting Standards
Board issued Statement No. 128, Earnings per Share,
which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the
method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for
calculating earnings per share, the dilutive effect of stock
options will be excluded. The impact of Statement 128 on
the calculation of earnings per share is not expected to be
material.
NOTE B- FISCAL YEAR
The Company has adopted a fiscal year-end on the Friday
nearest December 31. Accordingly, the second
quarter of 1997 ended on Friday, July 4, 1997.
NOTE C - RAIL CONTAINER RESTRUCTURING CHARGE
During the quarter ended July 4, 1997 the Company
completed its plan to exit the rail container market. A
one-time restructuring charge of $1,906,000 was recorded for
the write off of intangible assets pertaining to the rail
container operation and the accrual of certain expenses
related to the subleasing of rail containers and exiting
this market.
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.
The Company has entered into heating oil (diesel fuel)
swap agreements in order to hedge its exposure to price
fluctuations. At July 4, 1997, the Company had
approximately 11% of its remaining 1997 anticipated fuel
requirements under swap agreements which expire in January 1998. Gains
and losses on such agreements are recognized in
operating expenses as part of fuel cost over the hedge
period.
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 July
4, 1997, the Company generated $9.9 million in net cash
provided from operating activities.
Capital resources required by the Company during the
first half of 1997 of $5.7 million were approximately
$.7 million less than the same period last year. This
reduction is primarily a result of the Company's decision to
curtail growth of the fleet and focus attention on improving
utilization and profitability in the core trucking business.
Net capital expenditures for the remainder of 1997, primarily
for revenue equipment, are expected to be approximately
$13.9 million.
The Company has a $50 million unsecured revolving line
of credit with a syndication of banks. Borrowings
of $32 million were outstanding at July 4, 1997. 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 .25
percent to % per annum
are charged on the unused portion of this line.
At July 4, 1997, the aggregate principal amount of the
Company's outstanding long-term indebtedness was
approximately $53.4 million. Of this total outstanding,
$2.5 million was in the form of 10.2% notes due July 15,
1998, $14.3 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, 1999, and $4.6 million in principal was
related to capital leases with varying maturities.
Working capital needs have generally been met from net
cash provided from operating activities. The
Company has $4,000,000 in an unsecured working capital line
of credit with a bank, all of which was available at July
4, 1997. Interest is at a rate based upon the Eurodollar
rates with facility fees at 25
% 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 from truckload operations decreased
2.6% for the second quarter of 1997 and 1.6% for the
first six months of 1997 compared to the comparable periods
of 1996. The decrease in truckload operating revenue
in the first half of 1997 was due to a decrease in the
transportation brokerage and trailer on flatcar services
partially offset by an increase in truck fleet operations. Although
revenue per total mile decreased by 0.2% for the second
quarter and increased by 0.5% for the first half of 1997 when
compared to the same period last year, revenue per mile
excluding fuel surcharge increased by 0.2% for both periods. The
empty mile percentage improved for both the second quarter
and the first half of 1997 when compared to 1996. Average
miles per truck increased by approximately 2% for both
the second quarter and the first half of 1997 when compared
to 1996.
The operating ratio within the truckload operation
improved from 95.8% to 95.6% for the second quarter of
1997 compared to the same period in 1996. For the first
half of 1997 compared to the same period in 1996, the
operating ratio within the truckload operation increased
from 97.3% to 97.5%. The Company has continued to increase
the use of owner-operated tractors and has decreased the
company-owned fleet. This change in the mix of the fleet
affects the comparability of components of operating
expenses by increasing purchased transportation and
decreasing wages, depreciation, and various operating supplies and
expenses. Purchased transportation also reflects the
significant reductions in transportation brokerage and rail operations.
Driver wages were increased at the start of 1997 to offset
cancellation of reimbursement of certain expenses to
drivers. The effect was to increase wages and decrease
operating supplies $1.2 million compared to the second quarter of 1996
and $2.3 million compared to the first half of 1996.
Operating supplies ans expenses in the second quarter were
also affected by a small decrease in fuel prices and the
benefit of cost reduction efforts. During the second
quarter the Company closed two maintenance facilities to
eliminate excess capacity.
Insurance and claims costs which were high in the first
quarter as a result of our reassessment of reserving and
claims management practices were lower in the second quarter
of 1997. However, insurance costs remain .5% of
revenue higher in the second quarter of 1997 than the
second quarter of 1996.
Due to the quantity of equipment available in the used
equipment market, the proceeds on equipment sold
during the second quarter and the first half of 1997 were
less per unit than anticipated resulting in a loss on the
sale of revenue equipment.
As a result of the foregoing, net income from
continuing truckload operations increased by $165,000 or
18.0% for the second quarter and increased by $15,000 or 2.4% for
the first half of 1997 from the comparable periods of 1996.
Earnings per share from continuing truckload operations
increased from $.21 to $.25 in the second quarter and from
$.14 to $.15 in the first half of 1997 compared to the same
periods in 1996.
During the second quarter the Company completed its
plan to exit the rail container operation because of the
Company's focus on traditional truckload operations. The
Company anticipates being out of the rail container
operations by the end of the third quarter of 1997 with no
additional charges pertaining thereto. Operating revenue
from the rail container operation was significantly less than in
1996 for both the second quarter and the first half of 1997.
Closure of the container operation has resulted in high
operating costs and a restructuring charge in the second
quarter of 1997. As a result the effect of the rail container
operation on earnings per share was a loss of $0.39 per
share for the second quarter and for the first half of 1997.
Factors Affecting Future Performance
The Company's future operating results may be affected
by various trends and factors which are beyond the
Company's control. These include adverse changes in demand
for trucking services, availability of drivers and fuel
prices. Accordingly, past performance should not be
presumed to be an accurate indication of future performance.
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.
The foregoing statements contain forward-looking
statements which involve risks and uncertainties and the
Company's actual experience may differ materially from that
discussed above. Factors that may cause such a difference
include, but are not limited to, those discussed in "Factors
Affecting Future Performance" as well as future events that
have the effect of reducing the Company's available cash
balances, such as unanticipated operating losses or capital
expenditures related to possible future acquisitions.
Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's
analysis only as the date hereof. The Company assumes no
obligation to update forward-looking statements.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
There were no Form 8-K filing for the quarter ended
July 4, 1997.
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)
Date August 18, 1997 s/Steven K. Bevilaqua
Steven K. Bevilaqua
President and Chief Executive Officer
Date August 18, 1997
s/Steven L. Dutro
Steven L. Dutro
Vice President-Finance and Acting
Chief Financial Officer
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)
Date August 18, 1997 /s/ Steven K. Bevilaqua
Steven K. Bevilaqua
President and
Chief Executive Officer
Date August 18, 1997 /s/ Steven L. Dutro
Steven L. Dutro
Vice President-Finance and Acting
Chief Financial Officer