-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EFj+D7j80nSwS3O+pv+g1HwdWcDqd4a+n0CMe20/i275hjtfwGZfr5W4J9d8DbLL 7+oqOh7iyge+txLygAFsVQ== 0000793765-98-000010.txt : 19980817 0000793765-98-000010.hdr.sgml : 19980817 ACCESSION NUMBER: 0000793765-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980703 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KLLM TRANSPORT SERVICES INC CENTRAL INDEX KEY: 0000793765 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 640412551 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14759 FILM NUMBER: 98687796 BUSINESS ADDRESS: STREET 1: 135 RIVERVIEW DR CITY: RICHLAND STATE: MS ZIP: 39218 BUSINESS PHONE: 6019392545 MAIL ADDRESS: STREET 1: P.O.BOX 6098 CITY: JACKSON STATE: MS ZIP: 39288 10-Q 1 QUARTERLY REPORT 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 Commission File Number July 3, 1998 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.) 135 Riverview Drive Richland, Mississippi 39218 (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 4,374,473 Common Shares were outstanding as of July 3, 1998. KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES INDEX Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets July 3, 1998 (Unaudited) and January 2, 1998 1 Consolidated Statements of Earnings (Unaudited) Thirteen weeks and Twenty-six weeks ended July 3, 1998 and July 4, 1997 2 Condensed Consolidated Statements of Cash Flows (Unaudited)Twenty-six weeks ended July 3, 1998 and July 4, 1997 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 3 January 2, 1998 1998 --------- ---------- (Unaudited) (Note) (In Thousands) ASSETS Current assets: Cash and cash equivalents $1,006 $ 670 Accounts receivable, net 21,019 20,824 Inventories - at cost 613 635 Prepaid expenses: Tires 3,083 2,885 Other 1,524 2,494 Assets held for sale 1,530 3,383 Deferred income taxes 5,413 5,413 --------- ---------- Total current assets 34,188 36,304 Property and equipment 134,410 137,216 Less accumulated depreciation (32,025)(29,276) --------- ---------- 102,385 107,940 Intangible assets, net 0 90 Other assets 137 201 --------- ---------- $136,710 $144,535 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $14,188 $15,912 Accrued claims expense 14,831 13,913 Current maturities of long-term debt and capital leases 7,021 4,898 --------- ---------- Total current liabilities 36,040 34,723 Long-term debt and capital leases, less current maturities 33,457 44,826 Deferred income taxes 12,875 12,875 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 1998 and 1997;outstanding shares - 4,374,473 in 1998 and 4,373,155 in 1997 4,559 4,559 Additional paid-in capital 32,857 32,854 Retained earnings 18,943 16,733 ---------- ---------- 56,359 54,146 Less Common Stock in Treasury, at cost, 184,281 shares in 1998 and 185,639 shares in 1997 (2,021) (2,035) ---------- ---------- Total stockholders' equity 54,338 52,111 ---------- ---------- $136,710 $144,535 ========== ==========
Note: The balance sheet at January 2, 1998 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 3 July 4 July 3 July 4, 1998 1997 1998 1997 -------------------- ---------------------- (In Thousands, Except Per Share Amounts) OPERATING REVENUE FROM TRUCK LOAD OPERATIONS $60,113 $62,593 $119,303 $123,211 OPERATING EXPENSES: Salaries, wages and fringe benefits 18,081 19,050 37,837 38,143 Operating supplies and expenses 14,514 15,418 28,845 31,557 Insurance, claims, taxes and licenses 3,938 3,498 7,188 7,535 Depreciation and amortization 4,514 5,206 9,174 10,431 Purchased transportation and equipment rent 13,431 13,899 26,167 26,829 Other 2,985 2,593 5,714 5,269 (Gain) loss on sale of revenue equipment (205) 182 (207) 349 -------------------- ---------------------- TOTAL OPERATING EXPENSES FROM TRUCK LOAD OPERATIONS 57,258 59,846 114,718 120,113 -------------------- ---------------------- OPERATING INCOME FROM TRUCK LOAD OPERATIONS 2,855 2,747 4,585 3,098 OPERATING REVENUE FROM RAIL CONTAINER OPERATIONS 0 1,170 0 3,319 OPERATING EXPENSES 0 1,928 0 4,128 RESTRUCTURING CHARGE - Note C 0 1,906 0 1,906 -------------------- ---------------------- OPERATING INCOME (LOSS) FROM RAIL CONTAINER OPERATIONS 0 (2,664) 0 (2,715) Interest and other income (19) (17) (926) (43) Interest expense 870 1,059 1,826 2,115 -------------------- ---------------------- 851 1,042 900 2,072 -------------------- ---------------------- EARNINGS (LOSS) BEFORE INCOME TAXES 2,004 (959) 3,685 (1,689) Income taxes 800 (350) 1,475 (625) -------------------- ---------------------- NET EARNINGS (LOSS) $1,204 ($609) $2,210 ($1,064) BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE $0.28 ($0.14) $0.51 ($0.24)
See accompanying notes. KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Twenty-Six Weeks Ended July 3 July 4, 1998 1997 ---------- ----------- (In Thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $10,241 $9,885 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (5,673) (9,890) Proceeds from disposition of property, equipment and assets held for sale 5,014 4,208 --------- ----------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (659) (5,682) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 0 99 Net increase (decrease) in borrowings under revolving line of credit (6,000) 2,000 Repayment of long-term debt and capital leases (3,246) (3,442) Net change in borrowings under working capital line of credit 0 (3,400) --------- ----------- NET CASH FLOWS USED IN FINANCING ACTIVITIES (9,246) (4,743) --------- ----------- Net Increase (Decrease)in Cash and Cash Equivalents 336 (540) Cash and Cash Equivalents at Beginning Of Period 670 2,874 --------- ----------- Cash and Cash Equivalents at End Of Period $1,006 $2,334 ========= =========== NONCASH FINANCING ACTIVITIES Common stock issued for services $17
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. As of January 3, 1998, the Company adopted Financial Accounting Standards Board Statement No. 130, Reporting Comprehensive Income. Statement No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's consolidated net income or shareholders' equity. Statement No. 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were required to be reported separately in shareholders' equity, to be included in other comprehensive income. The Company has no available-for-sale securities or foreign currency translation adjustments; therefore, no disclosure is necessary for the second quarter of 1998. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1, Accounting For the Costs of Computer Software Developed For or Obtained For Internal-Use. The SOP is effective for financial statements for fiscal years beginning after December 15, 1998 and restatement of previously issued annual financial statements or adoption by cumulative catch-up adjustment is prohibited. The Company has elected early adoption of SOP 98-1 for its fiscal year beginning January 3, 1998. The SOP requires the capitalization of certain costs incurred after the date of adoption. The Company incurred no such costs in the first six months of 1998. NOTE B- FISCAL YEAR The Company has adopted a fiscal year-end on the Friday nearest December 31. Accordingly, the second quarter of 1998 ended on Friday, July 3, 1998. NOTE C- 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 3, 1998, the Company had approximately 20.6% of its remaining 1998 anticipated fuel requirements and approximately 5% of its 1999 anticipated fuel requirements under swap agreements which expire in May, 1999. Gains and losses on hedging contracts are recognized in operating expenses as part of the fuel cost over the hedge period. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operating revenue for the second quarter of 1998 decreased 4.0% from the comparable period of 1997. The decrease in operating revenue in the second quarter consisted of a 6.2% decrease from the Company's traditional over-the-road temperature-controlled freight services, net of a 2.2% increase from the dry-van over-the-road truckload division. The decline in revenue reflects the ongoing challenge of attracting and retaining qualified drivers. The average revenue per mile excluding fuel surcharges increased from $1.119 to $1.146 for the second quarter of 1998 as compared to the same period in 1997. In 1997, fuel surcharges increased revenue slightly by $0.005 per mile. For the year, operating revenue decreased 3.2% from the first six months of 1997 reflecting a similar decrease in the Company's traditional over-the-road temperature-controlled business and an increase in the dry-van over-the-road truckload business. Although revenues declined slightly, the Company improved profitability. The operating ratio improved from 95.6% to 95.3% for the second quarter of 1998 compared to the same period in 1997. During the first six months of 1998 the operating ratio improved from 97.5% in 1997 to 96.2%. As a result of the aggressive cost control measures over the past several quarters, the Company has seen certain items of expense remain below prior year levels. Although average driver compensation rates have increased since the second quarter of 1997, fewer miles driven and reductions in nondriver compensation have resulted in a net decrease in salaries, wages, and benefits of $969,000 and $306,000 for the second quarter and first six months of 1998. Operating supplies decreased $904,000 in the second quarter compared to the same period last year primarily due to lower fuel prices ($715,000) and cost control efforts. For the year, insurance, claims, taxes and licenses are $347,000 below 1997; however, in the second quarter, these costs were $440,000 above the second quarter of 1997 primarily reflecting a higher number of claims in the quarter. Depreciation and amortization was $692,000 for the quarter and $1,257,000 for the first six months below last year due to the second quarter 1997 write-off of intangible assets within the restructuring charge related to exiting the rail container business and the fourth quarter 1997 special charge to recognize an impairment in value of the Company's 48-foot temperature-controlled trailers. During the second quarter, other expenses increased $392,000 over the same period last year as a result of increased expenses related to advertising for and recruiting of drivers. In the second quarter of 1998, the Company recognized an improvement of $387,000 from gains and losses on the disposition of its revenue equipment as compared to the same period in 1997. As a result of the foregoing, income from truckload operations increased by $108,000 or 3.9% for the second quarter of 1998 and $1,487,000 or 48.0% for the first six months when compared to the comparable period of 1997. Other income increased $883,000 during the first half of 1998 as compared to the same period in 1997 primarily as a result of the sale of the corporate office building during the first quarter of 1998. The Company realized a net gain on disposition of $858,000. During the second quarter of 1997, the Company completed its plan to exit the rail container operation. A restructuring charge of $1,906,000 was recorded in 1997 as a result of the decision. Operating losses in the rail operation were $758,000 in the second quarter and $809,000 in the first six months of 1997. Net income for the second quarter of 1998 of $1,204,000 is $1,813,000 greater than the same period in 1997, which was a net loss of $609,000. For the year, net income increased $3,274,000 to $2,210,000 compared to the same period in 1997. Basic and diluted earnings (loss) per share increased from $(.14) to $.28 in the second quarter of 1998 and increased from $(.24) to $.51 in the first six months compared to the same period in 1997. The primary restraint on operating results in 1998 has been recruitment and retention of drivers. Subsequent to the end of the quarter, the Company announced a significant restructuring of its driver compensation plan including provisions which will raise total driver compensation approximately 7%. Management believes the expected improvement in retention and experience level will, in time, produce significant improvements in efficiency and cost. 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 3, 1998, the Company generated $10.2 million in net cash provided from operating activities. As a result of the Company's decision to consolidate the corporate office and terminal operations, the sale of the corporate office building was finalized in March 1998. The sale generated $3.2 million, thus, providing additional liquidity to the Company. During the first half of 1998, net capital resources required by the Company were approximately $5 million less than the same period last year or $.7 million. The most significant changes from last year have been the timing of the delivery of new equipment. Net capital expenditures for the remainder of 1998, primarily for revenue equipment, are expected to be approximately $4.6 million. Additionally, management expects to lease 600 temperature-controlled trailers through the remainder of 1998. The Company has a $50,000,000 unsecured revolving line of credit with a syndication of banks. Borrowings of $24,000,000 were outstanding at July 3, 1998. 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 1/5% to 3/8% per annum are charged on the unused portion of this line. At July 3, 1998, the aggregate principal amount of the Company's outstanding long-term indebtedness was approximately $40.4 million. Of this total outstanding, $1.2 million was in the form of 10.6% notes due July 15, 1998, $11.4 million in the form of 9.5% senior notes due June 15, 2002, $24.0 million consisted of the revolving line of credit due April 7, 1999, and $3.8 million principal 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 3, 1998. 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. IMPACT OF YEAR 2000 During 1998 the Company has progressed with modifications to its computer software which will enable its computer systems to function properly with respect to dates in the year 2000 and thereafter. The total project is estimated at approximately $700,000 for the purchase of new software and the modification of existing software. The project is estimated to be completed no later than June 30, 1999, which is prior to any anticipated impact on the operations of the Company. 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. PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Exhibit 27 - Financial Data Schedule There were no Form 8-K filings for the quarter ended July 3, 1998. 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 12, 1998 s/William J. Liles, III -------------------------- William J. Liles, III President and Chief Executive Officer Date August 12, 1998 s/Steven L. Dutro -------------------------- Steven L. Dutro 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 12, 1998 /s/William J. Liles, III ---------------------------- William J. Liles,III President and Chief Executive Officer Date August 12, 1998 /s/Steven L. Dutro --------------------------- Steven L. Dutro Chief Financial Officer
EX-27 2
5 6-MOS JAN-01-1999 JUL-03-1998 1,006 0 21,570 551 613 34,188 134,410 32,025 136,710 36,040 0 0 0 4,559 49,779 136,710 0 119,303 0 114,718 0 0 1,826 3,685 1,475 2,210 0 0 0 2,210 0.51 0.51
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