-----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, UEnv/V0ELwL+X32jUHWooQzuxeu6hZ2wBRpYwCu9GYNl1voOS0cUtcUUiWOs1ftc ayCRrxetbomw7YgLmvXTZw== 0000793765-98-000011.txt : 19981109 0000793765-98-000011.hdr.sgml : 19981109 ACCESSION NUMBER: 0000793765-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981002 FILED AS OF DATE: 19981106 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: 98739178 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 October, 2, 1998 Commission File Number 0-14759 KLLM TRANSPORT SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 64-9412551 135 Riverview Drive Richland, 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 4,326,035 Common Shares were outstanding as of October 2, 1998. KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES INDEX Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets October 2, 1998 (Unaudited) and January 2, 1998 1 Consolidated Statements of Earnings (Unaudited) Thirteen weeks and Thirty-nine weeks ended October 2, 1998 and October 3, 1997 2 Condensed Consolidated Statements of Cash Flows (Unaudited) Thirty-nine weeks ended October 2, 1998 and October 3, 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 KLLM TRANSPORT SERVICES, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS October 2, January 2, 1998 1998 -------------------------- (Unaudited) (Note) (In Thousands) ASSETS Current assets: Cash and cash equivalents $2,161 $670 Accounts receivable, net 22,141 20,824 Inventories - at cost 679 635 Prepaid expenses: Tires 3,048 2,885 Other 860 2,494 Assets held for sale 1,530 3,383 Deferred income taxes 5,413 5,413 _______ ______ Total current assets 35,832 36,304 Property and equipment 138,167 137,216 Less accumulated depreciation (33,162) (29,276) _______ _______ 105,005 107,940 Intangible assets, net 0 90 Other assets 114 201 ______ ________ $140,951 $144,535 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $16,749 $15,912 Accrued claims expense 14,779 13,913 Current maturities of long-term debt and capital leases 2,857 4,898 ______ _______ Total current liabilities 34,385 34,723 Long-term debt and capital leases, less current maturities 39,571 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 - 4,326,035 in 1998 and 4,373,155 in 1997. 4,559 4,559 Additional paid-in capital 32,860 32,854 Retained earnings 19,174 16,733 _______ _______ 56,593 54,146 Less Common Stock in Treasury, at cost, 232,719 shares in 1998 and 185,639 shares in 1997. (2,473) (2,035) _______ ________ Total stockholders' equity 54,120 52,111 _______ ________ $140,951 $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 Thirty-Nine Weeks Ended October 2 October 3 October 2 October 3, 1998 1997 1998 1997 --------------------- ---------------- (In Thousands, Except Per Share Amounts) OPERATING REVENUE FROM TRUCK LOAD OPERATIONS $55,102 $60,127 $174,405 $183,338 OPERATING EXPENSES: Salaries, wages and fringe benefits 17,119 18,364 54,956 56,507 Operating supplies and expenses 13,977 14,784 42,822 46,341 Insurance, claims, taxes and licenses 3,550 3,430 10,738 10,965 Depreciation and amortization 4,595 5,426 13,769 15,857 Purchased transportation and equipment rent 12,588 12,875 38,755 39,704 Other 2,809 2,786 8,523 8,055 (Gain) loss on sale of revenue equipment (798) (109) (1,005) 240 -------------------- ---------------- TOTAL OPERATING EXPENSES FROM TRUCK LOAD OPERATIONS 53,840 57,556 168,558 177,669 -------------------- ---------------- OPERATING INCOME FROM TRUCK LOAD OPERATIONS 1,262,2 571 5,847 5,669 OPERATING REVENUE FROM RAIL CONTAINER OPERATIONS 0 0 0 3,319 OPERATING EXPENSES 0 0 0 4,128 RESTRUCTURING CHARGE - Note C 0 0 0 1,906 -------------------- ---------------- OPERATING LOSS FROM RAIL CONTAINER OPERATIONS 0 0 0 (2,715) Interest and other income 8) (10) (934) (53) Interest expense 874 1,119 2,700 3,234 -------------------- ---------------- 866 1,109 1,766 3,181 EARNINGS (LOSS) BEFORE INCOME TAXES 396 1,462 4,081 (227) Income taxes 165 575 1,640 (50) -------------------- ---------------- NET EARNINGS (LOSS) $231 $887 $2,441 ($177) BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE $0.05 $0.20 $0.56 ($0.04)
See accompanying notes. KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Thirty-Nine Weeks Ended October 2 October 3, 1998 1997 ------------------------ (In Thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $16,232 $21,856 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (19,527) (33,243) Proceeds from disposition of property, equipment and assets held for sale 12,550 8,579 NET CASH FLOWS USED IN INVESTING ACTIVITIES (6,977) (24,664) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 0 213 Purchase of common stock for treasury (468) 0 Net increase in borrowings under revolving line of credit 1,000 8,000 Repayment of long-term debt, capital leases,and notes payable to banks (8,296) (4,879) Net decrease in borrowings under working capital line of credit 0 (3,400) ---------- ---------- NET CASH FLOWS USED IN FINANCING ACTIVITIES (7,764) (66) Net Increase (Decrease)in Cash and Cash Equivalents 1,491 (2,874) Cash and Cash Equivalents at Beginning Of Period 670 2,874 --------- ---------- Cash and Cash Equivalents at End Of Period $2,161 $0 ========= ==========
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 third 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. During the first nine months of 1998, the Company incurred no material costs for the development of software. NOTE B- FISCAL YEAR The Company has adopted a fiscal year-end on the Friday nearest December 31. Accordingly, the third quarter of 1998 ended on Friday, October 2, 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 October 2, 1998, the Company had approximately 23% 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 third quarter of 1998 decreased 8.3% from the comparable period of 1997. The decrease in operating revenue in the third quarter consisted of a 9.7% decrease from the Company's traditional over-the-road temperature- controlled freight services, net of a 1.4% 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 $1.122 to $1.125 for the third quarter of 1998 as compared to the same period in 1997. In 1997, fuel surcharges increased revenue slightly by $0.003 per mile. For the year, operating revenue decreased 4.9% from the first nine 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. The challenge of attracting and retaining drivers had an adverse effect on profitability in the third quarter. The operating ratio increased from 95.7% to 97.7% for the third quarter of 1998 compared to the same period in 1997. During the first nine months of 1998 the operating ratio improved slightly from 96.9% in 1997 to 96.7%. On September 1, 1998, the Company implemented a restructured pay package for certain drivers. Although average driver compensation rates have increased since the third quarter of 1997, fewer miles driven and reductions in nondriver compensation have resulted in a net decrease in salaries, wages, and benefits of $1,245,000 and $1,551,000 for the third quarter and first nine months of 1998. Operating supplies decreased $807,000 in the third quarter compared to the same period last year primarily due to lower fuel prices ($595,000) and cost control efforts offset by an increase in repair costs. For the year, insurance, claims, taxes and licenses are $227,000 below 1997; however, in the third quarter, these costs were $120,000 above the third quarter of 1997 primarily reflecting a higher number of claims in the quarter. Depreciation and amortization were $831,000 for the quarter and $2,088,000 for the first nine 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, the fourth quarter 1997 special charge to recognize an impairment in value of the Company's 48-foot temperature- controlled trailers, and the replacement of certain owned equipment with equipment leased under operating leases. During the first nine months of 1998, other expenses increased $468,000 over the same period last year as a result of increased expenses related to advertising for and recruiting of drivers. The Company's equipment trade cycle resulted in a gain on the disposition of revenue equipment of $798,000, an increase of $689,000 over the same period in 1997. As a result of the foregoing, income from truckload operations decreased by $1,309,000 for the third quarter of 1998 and increased $178,000 for the first nine months when compared to the comparable periods of 1997. Other income increased $881,000 during the first nine months 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 that disposition of $858,000. During 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 $809,000 in the first nine months of 1997. Net income for the third quarter of 1998 decreased $656,000 to $231,000 compared to the same period in 1997. For the year, net income increased $2,618,000 to $2,441,000 compared to the same period in 1997. Basic and diluted earnings (loss) per share decreased from $.20 to $.05 in the third quarter of 1998 and increased from $(.04) to $.56 in the first nine months compared to the same period in 1997. The primary restraint on operating results in 1998 has been recruitment and retention of drivers. The restructured pay package which went into effect during the quarter will raise average base pay approximately 20% and total driver compensation approximately 7%. While the change in the pay package will increase salary expense, management believes the expected improvement in retention and experience level will, in time, produce significant improvements in efficiency, operating costs, and customer service. 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 thirty-nine weeks ended October 2, 1998, the Company generated $16.2 million in net cash 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 nine months of 1998, net capital resources required by the Company were approximately $18 million less than the same period last year. The most significant change from last year has been the decision to lease rather than purchase certain revenue equipment. Net capital expenditures for the remainder of 1998, primarily for revenue equipment, are expected to be approximately $2.7 million. In addition to the equipment leased during the third quarter, management expects to lease 150 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 $31,000,000 were outstanding at October 2, 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 October 2, 1998, the aggregate principal amount of the Company's outstanding long-term indebtedness was approximately $42.4 million. Of this total outstanding, $11.4 million was in the form of 9.5% senior notes due June 2002 and $31.0 million consisted of the revolving line of credit due April 2000. 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 October 2, 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. In August 1998, the Company announced a stock repurchase plan to purchase up to 200,000 shares of the Company's outstanding stock. During the quarter ended October 2, 1998, 50,000 shares were repurchased for $468,000 with an additional 103,250 shares repurchased for $862,000 subsequent to the end of the quarter. The Company anticipates that its existing credit facilities along with cash flow from operations will be sufficient to fund operating expenses, capital expenditures, debt service, and any additional stock repurchases. 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 failure of the Company or its suppliers or its customers to adequately prepare for the Year 2000 problem could have an adverse affect on the consolidated financial position or results of consolidated operations of the Company. Beginning in mid 1996, the Company established a conversion timeline. Each of the Company's information systems were categorized as Year 2000 ready, not-ready and conversion planned, and not-ready with replacement planned. During the two years since that study, the conversion effort and timeline has been updated to reflect progress on the overall project. Consistent with the original Year 2000 conversion timeline, the project is approximately seventy percent complete. At present, management of the Company believes that sufficient resources are in place to complete the effort by mid-1999. Upon completion of the effort, detail testing, including actually changing the date to the year 2000 in certain systems, will be performed to ensure a seamless passage into the year 2000. The total project cost is estimated at approximately $700,000 (excluding internal payroll costs) with $400,000 capitalized for the purchase of new software, and the remaining $300,000 expensed as incurred for the modification of existing software. Over the three-year-project, approximately 10% of the information systems budget will be directed to year 2000 compliance. Through the third quarter of 1998, approximately $200,000 had been capitalized and $150,000 had been expensed. To determine the scope of the effort beyond the Company's systems, each operating department of the Company is evaluating the level of Year 2000 preparedness of significant suppliers and customers. These customers, vendors, and equipment manufacturers, have indicated that they continue to assess the impact of the Year 2000 on their operations. In the event of an unforeseen problem, the Company is developing contingency plans that may include communicating with drivers other than via satellite and processing certain transactions manually. If certain suppliers such as fuel vendors are unable to supply products or if customer locations are closed due to their inability to operate, the Company's operations could be suspended. Although management has been assured that revenue equipment will not be affected, a year 2000 electronic malfunction could render certain pieces of equipment inoperable. Management believes it is unlikely that these uncertainties will occur. The Company's diverse customer base provides assurance that the inability of a particular customer to operate, due to Year 2000 related problems, will not have a significant adverse 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 two Form 8-K filings for the quarter ended October 2, 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 November 5, 1998 S/William J. Liles, III ------------------------------ William J. Liles,III William J. Liles, III President and Chief Executive Officer Date November , 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 November , 1998 /s/ William J. Liles, III ------------------------------ William J. Liles,III President and Chief Executive Officer Date November , 1998 /s/ Steven L. Dutro ------------------------------- Steven L. Dutro Chief Financial Officer
EX-27 2
5 9-MOS JAN-01-1999 OCT-02-1998 2,161 0 22,665 524 679 35,832 138,167 33,162 140,951 34,385 0 0 0 4,559 49,561 140,951 0 174,405 0 168,558 0 0 2,700 4,081 1,640 2,441 0 0 0 2,441 0.56 0.56
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