-----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, S48KsFacP2Dj0FYMfFhN+dTYvcC0RsK+aQB0JZo54CRcyXVvA74DesK/M17rIxTb MyqD2KWUVYoo3WMLJI19tw== 0000950144-99-010380.txt : 19990817 0000950144-99-010380.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950144-99-010380 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990702 FILED AS OF DATE: 19990816 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: 99692483 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 KLLM TRANSPORT SERVICES, INC 1 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 Quarterly Period Ended July 2, 1999 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.) 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 [ ] 4,095,134 Common Shares were outstanding as of July 2, 1999. 2 KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES INDEX
Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets July 2, 1999 (Unaudited) and January 1, 1999 1 Consolidated Statements of Earnings (Unaudited) Thirteen weeks and Twenty-six weeks ended July 2, 1999 and July 3, 1998 2 Condensed Consolidated Statements of Cash Flows (Unaudited) Twenty-six weeks ended July 2, 1999 and July 3, 1998 3 Notes to Condensed Consolidated Financial Statements (Unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 3. Quantitative and Qualitative Disclosures about Market Risk 7 PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 8
3 KLLM TRANSPORT SERVICES, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
July 2, January 1, 1999 1999 ---------- ---------- (Unaudited) (Note) (In thousands) ASSETS Current assets: Cash and cash equivalents $ 1,142 $ 756 Accounts receivable 24,390 21,132 Inventories - at cost 771 597 Prepaid expenses: Tires 2,847 2,758 Other 3,395 2,490 Assets held for sale 1,530 1,530 Deferred income taxes 5,818 5,818 --------- --------- Total current assets 39,893 35,081 Property and equipment 134,957 131,953 Less accumulated depreciation (39,703) (33,741) --------- --------- 95,254 98,212 Other assets 22 69 --------- --------- $ 135,169 $ 133,362 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 13,574 $ 11,745 Accrued claims expense 14,452 15,041 Current maturities of long-term debt and capital leases 0 2,857 --------- --------- Total current liabilities 28,026 29,643 Long-term debt and capital leases, less current maturities 41,000 36,571 Deferred income taxes 14,480 14,480 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 1999 and 1998; outstanding shares - 4,095,134 in 1999 and 4,224,488 in 1998 4,559 4,559 Additional paid-in capital 32,840 32,858 Retained earnings 18,494 18,569 --------- --------- 55,893 55,986 Less common stock in treasury, 463,620 shares in 1999 and 334,266 shares in 1998, at cost (4,230) (3,318) --------- --------- Total stockholders' equity 51,663 52,668 --------- --------- $ 135,169 $ 133,362 ========= =========
Note: The balance sheet at January 1, 1999 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. 4 KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Thirteen Weeks Ended Twenty-Six Weeks Ended July 2, July 3, July 2, July 3, 1999 1998 1999 1998 ------------------------- --------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OPERATING REVENUE $ 61,229 $ 60,113 $ 116,560 $ 119,303 OPERATING EXPENSES: Salaries, wages and fringe benefits 21,015 18,081 40,357 37,837 Operating supplies and expenses 14,970 14,514 28,116 28,845 Insurance, claims, taxes and licenses 2,798 3,938 5,941 7,188 Depreciation and amortization 4,574 4,514 8,941 9,174 Purchased transportation and equipment rent 13,855 13,431 26,206 26,167 Other 2,866 2,985 5,545 5,714 Gain on sale of revenue equipment (391) (205) (508) (207) -------- -------- --------- --------- TOTAL OPERATING EXPENSES 59,687 57,258 114,598 114,718 -------- -------- --------- --------- OPERATING INCOME 1,542 2,855 1,962 4,585 Interest and other income (13) (19) (21) (926) Interest expense 908 870 1,711 1,826 -------- -------- --------- --------- 895 851 1,690 900 -------- -------- --------- --------- EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 647 2,004 272 3,685 Income taxes 250 800 100 1,475 -------- -------- --------- --------- NET EARNINGS BEFORE EXTRAORDINARY ITEM 397 1,204 172 2,210 Expenses associated with the early extinguishment of debt, net of taxes 247 0 247 0 ======== ======== ========= ========= NET EARNINGS (LOSS) $ 150 $ 1,204 $ (75) $ 2,210 ======== ======== ========= ========= BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE: From operations $ 0.10 $ 0.28 $ 0.04 $ 0.51 From expenses associated with the early extinguishment of debt (0.06) 0 (0.06) 0 ======== ======== ========= ========= Net earnings (loss) per common share $ 0.04 $ 0.28 $ (0.02) $ 0.51 ======== ======== ========= =========
See accompanying notes. 2 5 KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Twenty-Six Weeks Ended July 2, July 3, 1999 1998 --------- ------- (In Thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,447 $ 10,241 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (16,077) (5,673) Proceeds from disposition of property, equipment and assets held for sale 10,404 5,014 -------- -------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (5,673) (659) CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of common stock for treasury (960) 0 Net increase (decrease) in borrowings under revolving line of credit 13,000 (6,000) Repayment of long-term debt and capital leases (11,428) (3,246) -------- -------- NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 612 (9,246) -------- -------- Net Increase in Cash and Cash Equivalents 386 336 Cash and Cash Equivalents at Beginning of Period 756 670 -------- -------- Cash and Cash Equivalents at End of Period $ 1,142 $ 1,006 ======== ======== NONCASH FINANCING ACTIVITIES Common stock issued for services $ 30 $ 17 ======== ========
See accompanying notes. 3 6 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 June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). The provisions of SFAS No. 133 require all derivatives to be recorded on the balance sheet at fair value. SFAS No. 133 establishes "special accounting" for fair value hedges, cash flow hedges, and hedges of foreign currency exposures of net investments in foreign operations. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Management expects the effect of the adoption of this statement will be insignificant to the results of the consolidated operations and financial position of the Company when it becomes effective for fiscal 2000. NOTE B- FISCAL YEAR The Company has adopted a fiscal year-end on the Friday nearest December 31. Accordingly, the second quarter of 1999 ended on Friday, July 2, 1999. 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. To hedge its exposure to price fluctuations, the Company periodically enters into heating oil (diesel fuel) swap agreements. Agreements to purchase 19% of the remaining 1999 anticipated fuel requirements and approximately 5% of its anticipated fuel requirements for the year 2000 were in place at the end of the quarter. Such agreements are settled monthly and are accounted for as hedges with gains and losses recognized in operating expenses using the accrual method as part of the fuel cost over the hedge period. The Company does not engage in speculative transactions nor does the Company hold or issue derivative instruments for trading purposes. 4 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operating revenue for the second quarter of 1999 increased 2% from the comparable period of 1998 consistent with the increase in the number of trucks in operation. The increase in operating revenue in the second quarter consisted of a 2% decrease from the Company's traditional over-the-road temperature-controlled freight services, net of a 4% increase from the dry-van over-the-road truckload division. The average revenue per mile decreased from $1.14 to $1.12 for the second quarter of 1999 as compared to the same period in 1998. There were no fuel surcharges in either period. Operating revenue decreased 2% from the first six months of 1998 reflecting the impact of winter weather in the first quarter of 1999 compared to the same period in 1998. Operating revenue in the second quarter did not dilute the negative impact of the winter weather on 1999 revenue from the first quarter. The operating ratio increased from 95.3% to 97.5% for the second quarter of 1999 compared to the same period in 1998. During the first six months of 1999, the operating ratio increased from 96.2% to 98.3%. During the third quarter of 1998, the Company implemented a restructured pay package that increased compensation for certain drivers. An increase in the utilization of equipment resulted in more miles which further increased driver wages. For the first half of 1999, insurance, claims, taxes and licenses were $1,247,000 below the first half of 1998. Favorable claims experience combined with the results of aggressive claims management has led to a decrease in the expense rate for insurance and claims. The Company's equipment trade cycle resulted in a gain on the disposition of revenue equipment of $508,000 during the first six months of 1999, an increase of $301,000 over the same period in 1998. As a result of the foregoing, operating income decreased by $1,313,000 and $2,623,000 for the second quarter and first six months of 1999, respectively, when compared to the comparable periods of 1998. For the first six months of 1999, other income was $905,000 greater last year as a result of the sale of the corporate office building during the first quarter of 1998. Net income, before the extraordinary item, decreased $807,000 and $2,038,000 for the second quarter and the first six months of 1999, respectively, compared to the same periods in 1998. Basic and diluted earnings per share before the extraordinary item, decreased from $.28 to $.10 in the second quarter of 1999 and decreased from $.51 to $.04 for the first half of 1999 compared to the same periods in 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are cash flow from operations and its existing credit agreements. During the twenty-six weeks ended July 2, 1999, the Company generated $5,447,000 in net cash from operating activities. During the first six months of 1999, net capital resources required by the Company were approximately $5.7 million. Net capital expenditures for the remainder of 1999, primarily for revenue equipment, are expected to be approximately $13 million, although management may finance a portion of the capital expenditures with operating leases. The Company entered into operating leases for 200 trailers during the first quarter and 400 trailers in the second quarter of 1999. Leases for 65 tractors were also entered into during the second quarter of 1999. The Company has a $50,000,000 unsecured revolving line of credit (the "Revolver") with a syndication of banks. Borrowings under the Revolver of $41,000,000 were outstanding at July 2, 1999. Under the terms of the Revolver, 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 2, 1999, borrowing under the Revolver was the Company's only long-term debt outstanding. Subsequent to the end of the quarter, the Revolver was amended, increasing the line of credit to $60,000,000 and extending the maturity date to April 2001. During the quarter, the Company fully prepaid the 9.11% senior notes (1992 debt) which were due June 2002. Under the terms of the prepayment, fees and other expenses totaling $247,000, net of a $150,000 tax benefit, were incurred. With the prepayment of the 1992 debt, the Company's average effective interest rate for debt outstanding was 5 8 reduced from 6.8% to 6.0%. Expenses relating to the prepayment of the 1992 debt are included in the consolidated statements of earnings as an extraordinary item. Prepayment of the 1992 debt eliminated certain restrictive financial covenants. Working capital needs have generally been met from net cash provided from operating activities. The Company has a $4 million unsecured working capital line of credit with a bank, all of which was available at July 2, 1999. 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 1998, the Company announced plans to purchase up to 150,000 shares of the Company's outstanding stock. During 1999, 134,000 shares were repurchased for $960,000 of which 50,000 shares for $356,000 were repurchased from the Estate of B.C. Lee, Jr., former Chairman of the Board. 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 Some of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognizes a date using "00" as the year 1900 rather than the year 2000. This date problem could cause a system failure or could cause miscalculations which would disrupt operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. During 1999 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, its suppliers, or its customers to adequately prepare for the Year 2000 problem could have an adverse effect on the consolidated operations of the Company. Beginning in mid 1996, the Company established a conversion timeline. Each software system was identified and categorized as year 2000 ready, not-ready and conversion planned, and not-ready with replacement planned. During the two and one-half 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 ninety-five percent complete. At present, management of the Company believes that sufficient resources are in place to complete the effort by the end of the third quarter. 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 is estimated at approximately $700,000 for the purchase of new software and the modification of existing software with $400,000 of the total capitalized and the remaining $300,000 expensed as incurred. Through July 2, 1999, approximately $350,000 had been capitalized and $220,000 had been expensed. To determine the scope of the effort beyond the Company's systems, each operating department of the Company is determining the population of significant suppliers and their level of preparedness. In certain applications, tests have been performed to ensure an uneventful continuation of business. The Company's suppliers, 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 studying contingency plans that may include communication with drivers other than via satellite and manual transactions. 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 equipment inoperable. The Company's diverse customer base provides assurance that the inability of one 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. 6 9 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. FORWARD LOOKING INFORMATION 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 of the date hereof. The Company assumes no obligation to update forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MARKET RISK Market risk relating to the Company's operations result primarily from changes in interest rates and the price of heating oil (diesel fuel), as well as credit risk concentration. The Company does not use financial instruments for trading purposes and is not a party to any leveraged derivatives. The Company's interest expense is sensitive to changes in the general level of U. S. interest rates. 7 10 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 2, 1999. 8 11 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 16, 1999 /s/ Jack Liles --------------------------- ------------------------------------- Jack Liles Chairman of the Board, President and Chief Executive Officer Date August 16, 1999 /s/ Steven L. Dutro -------------------------- ------------------------------------- Steven L. Dutro Senior Vice President and Chief Financial Officer 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JAN-02-1999 JUL-02-1999 1,142 0 24,760 370 771 39,893 134,957 39,703 135,169 28,026 0 0 0 4,559 47,104 135,169 0 116,560 0 114,598 0 0 1,711 272 100 172 0 (247) 0 (75) (0.02) (0.02)
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