-----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, MbPAwtdrPKBjotwN88uvZE547OMtJ6adGWaTk4mE4GBmvd1d2WOhWfKvSXBPERjw lD6K0aGHEOWYR+az45CIvQ== 0000950144-99-012989.txt : 19991117 0000950144-99-012989.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950144-99-012989 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991001 FILED AS OF DATE: 19991115 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: 99751358 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 October 1, 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 [ ] 4,096,834 Common Shares were outstanding as of October 1, 1999. 2 KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES INDEX
Page Number ------ PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Condensed Consolidated Balance Sheets October 1, 1999 (Unaudited) and January 1, 1999 1 Consolidated Statements of Earnings (Unaudited) Thirteen weeks and Thirty-nine weeks ended October 1, 1999 and October 2, 1998 2 Condensed Consolidated Statements of Cash Flows (Unaudited) Thirty-nine weeks ended October 1, 1999 and October 2, 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
October 1, January 1, 1999 1999 --------- --------- (Unaudited) (Note) (In thousands) ASSETS Current assets: Cash and cash equivalents $ 434 $ 756 Accounts receivable 24,849 21,132 Inventories - at cost 652 597 Prepaid expenses: Tires 3,285 2,758 Other 2,716 2,490 Assets held for sale 1,530 1,530 Deferred income taxes 5,818 5,818 --------- --------- Total current assets 39,284 35,081 Property and equipment 140,631 131,953 Less accumulated depreciation (43,968) (33,741) --------- --------- 96,663 98,212 Other assets 22 69 --------- --------- $ 135,969 $ 133,362 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 12,324 $ 11,745 Accrued claims expense 13,239 15,041 Current maturities of long-term debt 0 2,857 --------- --------- Total current liabilities 25,563 29,643 Long-term debt, less current maturities 45,000 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 - 4,096,834 in 1999 and 4,224,488 in 1998 4,559 4,559 Additional paid-in capital 32,833 32,858 Retained earnings 17,747 18,569 --------- --------- 55,139 55,986 Less common stock in treasury, 461,920 shares in 1999 and 334,266 shares in 1998, at cost (4,213) (3,318) --------- --------- Total stockholders' equity 50,926 52,668 --------- --------- $ 135,969 $ 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 Thirty-Nine Weeks Ended October 1, October 2, October 1, October 2, 1999 1998 1999 1998 --------- --------- --------- --------- (In Thousands, Except Per Share Amounts) OPERATING REVENUE $ 58,893 $ 55,102 $ 175,453 $ 174,405 OPERATING EXPENSES: Salaries, wages and fringe benefits 21,650 17,119 62,007 54,956 Operating supplies and expenses 15,418 13,977 43,534 42,822 Insurance, claims, taxes and licenses 2,248 3,550 8,189 10,738 Depreciation and amortization 4,632 4,595 13,573 13,769 Purchased transportation and equipment rent 12,739 12,588 38,945 38,755 Other 2,718 2,809 8,263 8,523 Gain on sale of revenue equipment (93) (798) (601) (1,005) --------- --------- --------- --------- TOTAL OPERATING EXPENSES 59,312 53,840 173,910 168,558 --------- --------- --------- --------- OPERATING INCOME (LOSS) (419) 1,262 1,543 5,847 Interest and other income (15) (8) (36) (934) Interest expense 793 874 2,504 2,700 --------- --------- --------- --------- 778 866 2,468 1,766 --------- --------- --------- --------- EARNINGS (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (1,197) 396 (925) 4,081 Income taxes (450) 165 (350) 1,640 --------- --------- --------- --------- NET EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM (747) 231 (575) 2,441 Expenses associated with the early extinguishment of debt, net of taxes 0 0 247 0 --------- --------- --------- --------- NET EARNINGS (LOSS) $ (747) $ 231 $ (822) $ 2,441 ========= ========= ========= ========= BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE: From operations $ (0.18) $ 0.05 $ (0.14) $ 0.56 From expenses associated with the early extinguishment of debt 0 0 (0.06) 0 --------- --------- --------- --------- Net earnings (loss) per common share $ (0.18) $ 0.05 $ (0.20) $ 0.56 ========= ========= ========= =========
See accompanying notes. 2 5 KLLM TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Thirty-nine Weeks Ended October 1, October 2, 1999 1998 -------- -------- (In Thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,957 $ 16,232 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (22,798) (19,527) Proceeds from disposition of property, equipment and assets held for sale 10,907 12,550 -------- -------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (11,891) (6,977) CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of common stock for treasury (960) (468) Net increase in borrowings under revolving line of credit 17,000 1,000 Repayment of long-term debt and capital leases (11,428) (8,296) -------- -------- NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,612 (7,764) -------- -------- Net Increase (Decrease) in Cash and Cash Equivalents (322) 1,491 Cash and Cash Equivalents at Beginning of Period 756 670 -------- -------- Cash and Cash Equivalents at End of Period $ 434 $ 2,161 ======== ======== NONCASH FINANCING ACTIVITIES Common stock issued for services $ 40 $ 36 ======== ========
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 third quarter of 1999 ended on Friday, October 1, 1999. NOTE C- CREDIT FACILITIES AND DEBT During the quarter ended October 1, 1999, the Company's unsecured revolving line of credit was amended to increase the line to $60,000,000 and extend the maturity date to April 2001. 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. 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 the Company's 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 third quarter of 1999 increased 7% from the comparable period of 1998 while the number of trucks in operation remained consistent. The increase in operating revenue in the third quarter consisted of a 3% increase from the Company's traditional over-the-road temperature-controlled freight services and a 4% increase from the dry-van over-the-road truckload division. An increase in the utilization of equipment (10%) over the same quarter in 1998, was the primary factor contributing to the increase in revenue. Revenue per total mile decreased 1% compared to the third quarter of 1998. Fuel surcharges added slightly to revenues ($85,000) in the third quarter of 1999. The Company had no fuel surcharges in 1998. Operating revenue during the first nine months of 1999 increased 1% compared to the same period in 1998. The increase in 1999 reflects improvement in equipment utilization during the third quarter offset by the negative impact of the winter weather, during the first quarter, on 1999 revenue. The operating ratio increased from 97.7% to 100.7% for the third quarter of 1999 compared to the same period in 1998. During the first nine months of 1999, the operating ratio increased from 96.7% to 99.1%. During September 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. The result of these increases was a rise in salary, wages and fringe benefits of 26% for the third quarter and 13% for the first nine months of the year compared to 1998. Decreases in accidents, and their related costs, are partially the result of the restructured pay package and its positive effect on the experience level of drivers. Insurance, claims, taxes and licenses were $1,302,000 and $2,549,000 less for the third quarter and the first nine months, respectively, than the same periods in 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. Although operating supplies and expenses increased for the quarter and for the first nine months when compared to the prior year, various components within the category decreased including equipment repair and wreck expense. These decreases were offset by increases in the cost of fuel which had the effect of increasing fuel expense, net of surcharges, by $1,200,000 for the third quarter compared to the same period last year. As a result of the foregoing, operating income decreased by $1,681,000 and $4,304,000 for the third quarter and first nine months of 1999, respectively, when compared to the comparable periods of 1998. For the first nine months of 1999, interest and other income was $898,000 less than last year principally as a result of the sale of the corporate office building during the first quarter of 1998. Net earnings (loss) before extraordinary item decreased $978,000 and $3,016,000 for the third quarter and the first nine months of 1999, respectively, compared to the same periods in 1998. Basic and diluted earnings per share before the extraordinary item, decreased $.24 to a loss of $.18 in the third quarter of 1999 and decreased $.70 to a loss of $.14 for the first nine months 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 thirty-nine weeks ended October 1, 1999, the Company generated $6,957,000 in net cash from operating activities. During the first nine months of 1999, net cash flows used in investing activities by the Company were approximately $12 million. Net capital expenditures for the remainder of 1999, primarily for revenue equipment, are expected to be approximately $7 million. The Company entered into operating leases for 400 trailers and for 65 tractors during the first nine months of 1999. 5 8 The Company has a $60,000,000 unsecured revolving line of credit (the "Revolver") with a syndication of banks. Borrowings under the Revolver of $45,000,000 were outstanding at October 1, 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 1/4% to 1/2% per annum are charged on the unused portion of this line. At October 1, 1999, borrowings under the Revolver was the Company's only long-term debt outstanding. During the second 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 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 $5 million unsecured working capital line of credit with a bank, all of which was available at October 1, 1999. Interest is at a rate based upon the Eurodollar rates with facility fees at 3/8% 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 purchased for $960,000 of which 50,000 shares for $356,000 were purchased 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. While all scheduled changes and modifications have been completed, the Company is testing all applications to ensure a seamless transition to the year 2000. 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 time since that study, the conversion effort and timeline have been updated to reflect progress on the overall project. Consistent with the original Year 2000 conversion timeline, all scheduled changes and modifications have been completed. Currently testing of all applications includes performing detail testing and actually changing the date to the year 2000 in certain systems. The total project has cost 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. 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 issue on their 6 9 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. 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 October 1, 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 October 29, 1999 /s/ Jack Liles --------------------------------------------- Jack Liles Chairman of the Board, President and Chief Executive Officer Date October 29, 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 9-MOS DEC-31-1999 JAN-02-1999 OCT-01-1999 434 0 25,245 396 652 39,284 140,631 43,968 135,969 25,563 0 0 0 4,559 46,367 135,969 0 175,453 0 173,910 0 0 2,468 (925) (350) (575) 0 (247) 0 (822) (0.20) (0.20)
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