0000745379-95-000006.txt : 19950811 0000745379-95-000006.hdr.sgml : 19950811 ACCESSION NUMBER: 0000745379-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENAN TRANSPORT CO CENTRAL INDEX KEY: 0000745379 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 560516485 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12058 FILM NUMBER: 95560857 BUSINESS ADDRESS: STREET 1: 143 W FRANKLIN ST STREET 2: UNIVERSITY SQ WEST POST OFFICE BOX 2729 CITY: CHAPEL HILL STATE: NC ZIP: 27516-3910 BUSINESS PHONE: 9199678221 MAIL ADDRESS: STREET 1: UNIVERSITY SQUARE WEST STREET 2: 143 W FRANKLIN ST P O BOX 2729 CITY: CHAPEL HILL STATE: NC ZIP: 27515-2729 10-Q 1 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 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 incorporation or organization) Identification No.) University Square - West, 143 W. Franklin Street Chapel Hill, North Carolina, 27516-3910 ----------------------------------------------------------- (Address of principal executive offices, including Zip Code) (919) 967-8221 ----------------------------------------------------------- (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 ------- ------- 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 -------------------------- ------------------------------ Common stock, no par value 2,389,497 KENAN TRANSPORT COMPANY INDEX Page ---- 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) ----------------------------------------------------------------------- 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 ----------------------------------------------------------------------- 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 ----------------------------------------------------------------------- 63,015 59,274 Accumulated depreciation (25,140) (24,259) ----------------------------------------------------------------------- Net Operating Property 37,875 35,015 Other Assets 488 471 ----------------------------------------------------------------------- $58,110 $57,625 ======================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY ----------------------------------------------------------------------- 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 -- ----------------------------------------------------------------------- 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 ----------------------------------------------------------------------- 41,395 39,771 ----------------------------------------------------------------------- $58,110 $57,625 ======================================================================= 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, -------------------- -------------------- 1995 1994 1995 1994 ----------------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------------- 13,458 12,931 27,319 26,841 ----------------------------------------------------------------------------------------- Operating Income 1,032 1,157 2,568 2,797 Interest income and other expenses, net 146 139 317 214 ----------------------------------------------------------------------------------------- Income before Provision for Income Taxes 1,178 1,296 2,885 3,011 Provision for income taxes 471 522 1,154 1,217 ----------------------------------------------------------------------------------------- Net Income $ 707 $ 774 $ 1,731 $ 1,794 ========================================================================================= 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 ----------------------------------------------------------------------- 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) ------------------------ Net Decrease in Cash and Cash Equivalents (4,369) (989) Beginning Cash and Cash Equivalents 12,759 9,046 ------------------------ Ending Cash and Cash Equivalents $ 8,390 $ 8,057 ======================== 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. Page 4 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 ------------------------------- 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 ------------------------------- 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. Page 5 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. Page 6 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders ------- --------------------------------------------------- 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 --------- -------- --------- 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 ------- --------------------------------- (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. Page 7 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 ---------------------------- Vice President-Finance and Chief Financial Officer Page 8 INDEX TO EXHIBITS The exhibits filed as part of this report are listed below: Exhibit Number Description --------- ----------------------------------------------------------- 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. Page 9
EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000745379 KENAN TRANSPORT COMPANY 1,000 6-MOS DEC-31-1995 JUN-30-1995 8,390 0 3,947 0 547 19,747 63,015 25,140 58,110 8,493 0 2,996 0 0 38,399 58,110 0 29,887 0 27,319 0 0 0 2,885 1,154 1,731 0 0 0 1,731 .73 .73
EX-10 3 Exhibit 10 KENAN TRANSPORT COMPANY Amendment to the 1994 Stock Bonus Plan Paragraph 11 of the 1994 Stock Bonus Plan is hereby amended and restated as follows: 11. DEFINITIONS a. After-Tax Earnings: As it pertains to the determination of the Stock Bonus earned by the Executive Group in any one year, after-tax earnings shall mean net income as reported in the Corporation's Annual Report to Shareholders; provided, however, that the Board of Directors shall have the discretion in any such year to exclude from the computation of net income any amount determined by the independent certified public accountants who audit the financial statements of the Corporation to be an "Extraordinary Item" under generally accepted accounting principles. The Board of Directors may make such a determination at any time prior to the Date of Issue for any Stock Bonus earned by the Executive Group.