ITEM 1. BUSINESS.
KLLM Transport Services, Inc. (through its wholly-owned subsidiary, KLLM, Inc., hereinafter referred to as "the Company") is an irregular-route common carrier that specializes in providing high-quality transportation service in North America. The Company primarily serves the continental United States, Canada and Mexico. A Delaware corporation, the Company is the successor, by merger, to KLLM Distributing, Inc. ("KLLM Distributing"), a Mississippi corporation, incorporated in 1964. The Company owns all of the outstanding shares of KLLM, Inc., a Texas corporation, which owns (either in fee or as lessee) and operates substantially all of the Company's tractors and trailers and holds all of the operating rights presently used in the Company's business.
The Company offers transportation services for both temperature-controlled and dry commodities. It strives to provide dependable and timely service designed to meet the specialized needs of its customers. Protective service is provided on commodities such as food, medical supplies and cosmetics. Service offerings include over-the-road long haul, regional, and dedicated fleet transportation. These services are provided with both Company-operated and owner-operated equipment.
The Company currently owns (or leases) and operates substantially all of its fleet. On December 31, 1999, the Company's fleet consisted of 1,422 Company-operated tractors and 260 owner-operated tractors, 1,948 temperature-controlled trailers and 793 dry-van trailers. Capital expenditures, net of proceeds from trade-ins during 1999, were approximately $17,535,000. Net capital expenditures in 1998 were $4,823,000. Net capital expenditures in 2000 are expected to be approximately $28,400,000.
MARKETING AND OPERATIONS
The Company specializes in providing high-quality transportation services in North America. The Company seeks customers who value its premium services, who need a certain number of trucks each week and who require dependable service in meeting schedule requirements.
The Company's full-time staff of six (6) salespersons, along with certain executives, is responsible for developing new accounts. Once a customer relationship is established, the primary Company contact is an operations manager who is either dedicated to the customer or who is responsible to a geographic territory. Working from the Company's corporate headquarters in Mississippi and Louisiana, these managers contact existing customers to solicit additional business.
The Company has driver terminal operations in Georgia, Louisiana, California, Indiana, Pennsylvania and Mississippi. Maintenance facilities are located in Mississippi, Louisiana, Texas and Georgia.
The Company's largest 25, 10 and 5 customers accounted for approximately 65%, 49%, and 39%, respectively, of its revenue for the year ended December 31, 1999. During 1999, one customer accounted for more than 10% of the Company's revenues.
MAINTENANCE
The Company has a comprehensive preventive maintenance program for its tractors and trailers, which is carried out at its Jackson, Mississippi, Bastrop, Louisiana and Atlanta, Georgia facilities. The Company's policy is to purchase standardized tractors and trailers manufactured to Company specifications. Standardization enables the Company to control the cost of its spare parts inventory and streamline its preventive maintenance program.
Manufacturers of tractors are required to certify that new tractors meet federal emissions standards, and the Company receives this certification on each new tractor it acquires. Environmental protection measures require the Company to adhere to a fuel and oil spill prevention plan and to comply with regulations concerning the discharge of waste oil. The Company believes it is in compliance with all applicable provisions relating to the protection of the environment. Management does not anticipate that compliance with these provisions will have a material effect on the Company's capital expenditures, earnings or competitive position.
PERSONNEL
Drivers are recruited at the Mississippi and California driver terminal locations. On December 31, 1999, the Company employed 1,418 drivers and had a total of 1,851 employees. None of the Company's employees is represented by a collective bargaining unit.
COMPETITION
The Company competes primarily with other long-haul truckload carriers and with internal shipping conducted by existing and potential customers. The Company also competes with other irregular-route long-haul truckload carriers, and to a lesser extent, the railroads, for freight loads. Although the increased competition resulting from a combination of deregulation, weak market demand, and a shortage of qualified drivers has created some pressure to reduce rates, the Company competes primarily on the basis of its quality of service and efficiency.
TRADEMARK
The Company's service mark, the KLLM logo, is registered with the United States Patent and Trademark Office.
SEASONALITY
In the freight transportation industry generally, results of operations 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.
ITEM 2.
ITEM 2. PROPERTIES.
The Company's corporate office is located in Richland, Mississippi, a suburb of Jackson. All driver-related executive and administrative functions, including safety, driver training, maintenance and driver recruiting are housed in this location. The Company owns a portion of the land on which this facility is located. The remainder is owned by the Liles and Lee families (or entities or trusts controlled by those families), major shareholders of the Company. The Company owns all of the improvements, consisting of approximately 31,200 square feet of office space and approximately 40,000 square feet of equipment repair and maintenance space. The Company has an option to purchase the Liles and Lee part of the land for $390,257.
The Company owns a maintenance and driver terminal facility near Dallas, Texas This facility, which consists of approximately 8,000 square feet of office space and 13,700 square feet of equipment repair and maintenance space, is located on approximately nine acres of land.
The Company also owns a maintenance and driver terminal operation in Atlanta, Georgia. This facility, which includes two buildings containing approximately 5,000 square feet of office space and 20,000 square feet of maintenance space, is located on approximately sixteen acres of land.
Additionally, the Company's dry-van operation in Bastrop, Louisiana is situated on 20 acres of land. The facilities located thereon include approximately 8,000 square feet of office space and 36,500 square feet of maintenance space.
The remaining driver terminal facilities are leased by the Company pursuant to various short-term leases.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various claims and routine litigation incidental to its business. Although the amount of ultimate liability, if any, with respect to these matters cannot be determined, management believes that these matters will not have a materially adverse effect on the Company's consolidated financial position.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
"Market and Dividend Information" on page 6 of the Company's 1999 Annual Report to Shareholders is incorporated herein by reference in response to this item.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
"Selected Financial and Operating Data" on page 4 of the Company's 1999 Annual Report to Shareholders is incorporated herein by reference in response to this item.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
"Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 7 - 10 of the Company's 1999 Annual Report to Shareholders is incorporated herein by reference in response to this item, except that the estimated net capital expenditures is expected to be approximately $28,400,000 rather than the $40,700,000 on page 10 of the Company's 1999 Annual Report. You should read the following discussion and analysis and the discussion and analysis incorporated by reference from the Company's 1999 Annual Report in conjunction with "Item 6. Selected Financial Data" and "Item 8. Financial Statements and Supplementary Data" incorporated herein by reference from the Company's 1999 Annual Report, which may contain forward-looking statements relating to our future financial performance, business strategy, financing plans and other future events that involve uncertainties and risks. The Company's actual results could differ materially from the results anticipated by such forward-looking statements as a result of many known and unknown factors, including but not limited to those discussed below, those discussed in "-Factors Affecting Future Performance" in the Company's 1999 Annual Report and those discussed elsewhere in this report and the Company's 1999 Annual Report.
IN ADDITION TO THE "-FACTORS AFFECTING FUTURE PERFORMANCE" INCORPORATED HEREIN BY REFERENCE FROM THE COMPANY'S 1999 ANNUAL REPORT, ANOTHER FACTOR AFFECTING FUTURE PERFORMANCE IS THAT THE COMPANY HAS ADOPTED MEASURES THAT HAVE ANTI-TAKEOVER EFFECTS, WHICH MAY DISCOURAGE TRANSACTIONS THAT MAY BE BENEFICIAL TO STOCKHOLDERS.
Under the Company's Certificate of Incorporation, the Board of Directors may issue Preferred Stock, with any rights the Company wishes to assign them, without stockholder action. The Company has also adopted a Stockholder Rights Plan under which the Company has distributed rights to purchase shares of its Participating Preferred Stock to its stockholders. If certain triggering events occur, the holders of the rights will be able to purchase shares of Common Stock at a price substantially discounted from the then applicable market price of the Common Stock.
The Company has also entered into or anticipates entering into Change of Control Agreements with certain employees of the Company which, upon certain triggering events, will cause the Company to pay such employees, in the aggregate, approximately $1,876,600.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
"Market Risk" on page 9 of the Company's 1999 Annual Report to Shareholders is incorporated herein by reference in response to this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Report of Independent Auditors and the consolidated financial statements included on pages 11 - 22 of the Company's 1999 Annual Report to Shareholders are incorporated herein by reference in response to this item.
"Selected Quarterly Data (Unaudited)" on page 5 of the Company's 1999 Annual Report to Shareholders is incorporated herein by reference in response to this item.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the caption, "Election of Directors--Nominees for Director," of the Company's definitive proxy statement for its scheduled May 26, 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item.
The information under the caption, "Election of Directors--Management," of the Company's definitive proxy statement for its scheduled May 26, 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item.
The information under the caption, "Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's definitive proxy statement for its scheduled May 26, 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The information under the captions, "Executive Compensation; Director Compensation; Compensation Committee Report on Executive Compensation; Compensation Committee Interlocks and Insider Participation; Stock Option Plan; Employee Stock Purchase Plan ("ESPP") and Performance Graph" of the Company's definitive proxy statement for its scheduled May 26, 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the caption "Election of Directors--Stock Ownership," of the Company's definitive proxy statement for its scheduled May 26, 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the caption "Certain Transactions" of the Company's definitive proxy statement for its scheduled May 26, 2000 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, is incorporated herein by reference in response to this item.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
a. The following documents are filed, as part of this report or incorporated by reference herein:
1. Financial Statements
The following consolidated financial statements of the Company and its subsidiaries, included in the Company's Annual Report, are incorporated by reference in Item 8:
Consolidated Balance Sheets-January 1, 1999 and December 31, 1999.
Consolidated Statements of Operations--Years ended January 2, 1998, January 1, 1999 and December 31, 1999.
Consolidated Statements of Stockholders' Equity--Years ended January 2, 1998, January 1, 1999 and December 31, 1999.
Consolidated Statements of Cash Flows--Years ended January 2, 1998, January 1, 1999 and December 31, 1999.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
3. Listing of Exhibits
(i) Exhibits filed pursuant to Item 601 of Regulation S-K
EXHIBIT NUMBER DESCRIPTION ------- -----------
3.1 Bylaws of Registrant 1
3.2 Certificate of Incorporation (as amended) 2
10.1 Amended & Restated Stock Option Plan 3
10.2 KLLM, Inc. Retirement Plan and Trust (as amended) 4
10.3 1986 Lease with Mr. Lee and Mr. Liles Covering Corporate Headquarters 1
10.4 Employee Stock Purchase Plan (as amended)5
10.7 KLLM, Inc. Cafeteria Plan 6
10.9 Option to purchase real property on which terminal facility is located from Messrs. Liles and Lee 4
10.11 Revolving Credit Agreement by andamong KLLM, Inc., NationsBank of Georgia, National Association, The First National Bank of Chicago, Deposit Guaranty National Bank, and ABN Amro Bank, N.V. 7
10.15 1996 Stock Option Plan 8
10.16 Amended and Restated 1996 Stock Purchase Plan 8
10.17 1998 Non-Employee Director Stock Compensation Plan 9
10.18 Stockholder Protection Rights Agreement dated February 13, 1997 between KLLM Transport Services, Inc. and KeyCorp Shareholder Services, Inc.,as Rights Agent 10
10.19 Change in Control Agreement
13 1999 Annual Report (only portions incorporated by reference are deemed filed)
21 List of Subsidiaries of the Registrant
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1 Incorporated herein by reference to Registrant's Registration Statement on Form S-1 as filed on July 2, 1986 (Registration No. 33-5881, File No. 0-14759).
2 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended January 1, 1989 (File No. 0-14759).
3 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 0-14759).
4 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 0-14759).
5 Incorporated herein by reference from Fourth Post-Effective Amendment to Registration Statement on Form S-8 as filed on November 30, 1990 (Registration No. 33-14545).
6 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 0-14759).
7 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 30, 1994 (File No. 0-14759).
8 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended January 3, 1997 (File No. 0-14759).
9 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended January 2, 1998 (File No. 0-14759).
10 Incorporated herein by reference to Registrant's Form 8-A12G\A as filed on February 24, 1997 (File No. 001-12751).
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
(b) Reports on Form 8-K filed in the fourth quarter of 1999:
None
(c) Exhibits--The response to this portion of Item 14 is submitted as a separate section of this report.
(d) Financial Statements Schedules--The response to this portion of Item 14 is submitted as a separate section of this report.
INFORMATION REGARDING THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN and THE COMPANY'S AMENDED AND RESTATED 1996 STOCK PURCHASE PLAN INCLUDED PURSUANT TO RULE 15d-21.
1. Full title of the Plans:
KLLM Transport Services, Inc. Employee Stock Purchase Plan
KLLM Transport Services, Inc. Amended and Restated 1996 Stock Purchase Plan
2. Name of issuer of the securities held pursuant to the Plans and the address of its principal executive office:
KLLM Transport Services, Inc. 135 Riverview Drive Richland, Mississippi 39218
3. Financial Statements and Exhibits
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.
KLLM TRANSPORT SERVICES, INC.
Date: March 30, 2000 By: /s/ Jack Liles ------------------------- ------------------------------------- Jack Liles Chairman of the Board, President, and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date: March 30, 2000 /s/ Jack Liles ------------------------- ------------------------------------- Jack Liles Chairman of the Board, President, and Chief Executive Officer
Date: March 30, 2000 /s/ James L. Young ------------------------- ------------------------------------- James L. Young Secretary and Director
Date: ------------------------- ------------------------------------- David L. Metzler Director
Date: March 30, 2000 /s/ Walter P. Neely ------------------------- ------------------------------------- Walter P. Neely Director
Date: ------------------------- ------------------------------------- Leland R. Speed Director
Date: March 30, 2000 /s/ Steven L. Dutro ------------------------- ------------------------------------- Steven L. Dutro Senior Vice President and Chief Financial Officer
Date: March 30, 2000 /s/ A. K. Northrop ------------------------- ------------------------------------- A. K. Northrop Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, the Board of Directors, administrators of the KLLM Transport Services, Inc. Employee Stock Purchase Plan and the KLLM Transport Services, Inc. Amended and Restated 1996 Stock Purchase Plan, have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
KLLM TRANSPORT SERVICES, INC. EMPLOYEE STOCK PURCHASE PLAN and KLLM TRANSPORT SERVICES, INC. AMENDED AND RESTATED 1996 STOCK PURCHASE PLAN
Date: March 30, 2000 By: /s/ Jack Liles ------------------------- ------------------------------------- Jack Liles Chairman of the Board, President, and Chief Executive Officer
ITEM 14(a)(2) and (c) FINANCIAL STATEMENT SCHEDULES
KLLM TRANSPORT SERVICES, INC. and SUBSIDIARIES SCHEDULE II - VALUATION and QUALIFYING ACCOUNTS Years Ended January 2, 1998, January 1, 1999, and December 31, 1999
This schedule contains summary financial information extracted from the consolidated financial statements for the three years ended December 31, 1999 and is qualified in its entirely by reference to such financial statements.
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION -------------- -----------
3.1 Bylaws of Registrant 1
3.2 Certificate of Incorporation (as amended) 2
10.1 Amended and Restated Stock Option Plan 3
10.2 KLLM, Inc. Retirement Plan and Trust (as amended) 4
10.3 1986 Lease with Mr. Lee and Mr. Liles Covering Corporate Headquarters 1
10.4 Employee Stock Purchase Plan (as amended) 5
10.7 KLLM, Inc. Cafeteria Plan 6
10.9 Option to purchase real property on which terminal facility is located from Messrs. Liles and Lee 4
10.11 Revolving Credit Agreement by and among KLLM, Inc., NationsBank of Georgia, National Association, The First National Bank of Chicago, Deposit Guaranty National Bank, and ABN Amro Bank, N. V. 7
10.15 1996 Stock Option Plan 8
10.16 Amended and Restated 1996 Stock Purchase Plan 8
10.17 1998 Non-Employee Director Stock Compensation Plan 9
10.18 Stockholder Protection Rights Agreement dated February 13, 1997 between KLLM Transport Services, Inc. and KeyCorp Shareholder Services, Inc., as Rights Agent 10
10.19 Change in Control Agreement
13 1999 Annual Report (Only portions incorporated by reference are deemed filed)
- ----------
1 Incorporated herein by reference to Registrant's Registration Statement on Form S-1 as filed on July 2, 1986 (Registration No. 33-5881, File No. 0-14759).
2 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended January 1, 1989 (File No. 0-14759).
3 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 0-14759).
4 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 0-14759).
5 Incorporated herein by reference from Fourth Post-Effective Amendment to Registration Statement on Form S-8 as filed on November 30, 1990 (Registration No. 33-14545).
6 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 0-14759).
7 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended December 30, 1994 (File No. 0-14759).
8 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended January 3, 1997 (File No. 0-14759).
9 Incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended January 2, 1998 (File No. 0-14759).
10 Incorporated herein by reference to Registrant's Form 8-A12G\A as filed on February 24, 1997 (File No. 001-12751).
21 List of Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP
27 Financial Data Schedule