FORM 10-Q

                    SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
              EXCHANGE ACT OF 1934

              For the quarterly period ended    September 30, 1999
                                              --------------------
                               OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
              EXCHANGE ACT OF 1934


Commission File Number    0-12058
                          -------

                            KENAN TRANSPORT COMPANY
              ------------------------------------------------------
               (Exact name of registrant as specified in its charter)


             North Carolina                     56-0516485
     -------------------------------         --------------------
     (State  or other  jurisdiction  of      (IRS  Employer
       incorporation or organization)        Identification No.)


               University Square - West, 143 W. Franklin Street
                 Chapel Hill, North Carolina, 27516-3910
          ------------------------------------------------------------
          (Address of principal executive offices, including Zip Code)


                                 (919) 967-8221
          -----------------------------------------------------------
          (Registrant's telephone number, including Area Code)


    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  (or for such shorter  period  that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                         Yes    X        No
                              -----          -----


     Indicate the number of shares outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

                  Class                   Outstanding at August 31, 1999
          ---------------------------    --------------------------------
           Common stock, no par value             2,421,562


<PAGE>



                              KENAN TRANSPORT COMPANY

                                       INDEX
                                                                       Page
                                                                     --------
Part I - Financial Information

        Consolidated Balance Sheets as of September 30, 1999 and
           December 31, 1998                                             1

        Consolidated Statements of Income for the three
           and nine months ended September 30, 1999 and 1998             2

        Consolidated Statements of Cash Flows for the
           nine months ended September 30, 1999 and 1998                 3

        Notes to Consolidated Financial Statements                     4 - 6

        Management's Discussion and Analysis of Financial
           Condition and Results of Operations                         7 - 9



Part II - Other Information

        Item 4 - Submission of Matters to a Vote of
           Security Holders                                             10

        Item 6 - Exhibits and Reports on Form 8-K                       10

        Signatures                                                      11

        Index to Exhibits                                               12


<PAGE>


                       PART I - FINANCIAL INFORMATION

                         KENAN TRANSPORT COMPANY
                       CONSOLIDATED BALANCE SHEETS
                         (Dollars in thousands)
<TABLE>
<CAPTION>

                                              September 30,        December 31,
                                                1999                 1998
ASSETS                                       (Unaudited)           (Note 1)
-------------------------------------------------------------------------------
<S>                                          <C>                  <C>

Current Assets
    Cash and cash equivalents                $    10,955          $     8,023
    Accounts receivable, net                      11,210               10,441
    Operating supplies and parts                     622                  572
    Prepayments
        Tires                                      2,116                1,851
        Insurance, licenses and other              1,706                1,353
        Deferred income taxes                      2,135                2,164
                                           ...................................
           Total Current Assets                   28,744               24,404

Operating Property
    Land                                           3,464                3,464
    Buildings and leasehold improvements          11,469               11,412
    Revenue equipment                             77,734               72,703
    Other equipment                                6,795                6,490
                                           ...................................
                                                  99,462               94,069
    Accumulated depreciation                     (39,408)             (36,444)
                                           ...................................
        Net Operating Property                    60,054               57,625

Intangible Assets, Net                            10,512               10,944
Other Assets                                       1,988                1,671
                                           ...................................
                                              $  101,298          $    94,644
                                           ==================================

LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------
Current Liabilities
    Capital lease obligations                $       970          $     1,108
    Accounts payable                               8,097                2,784
    Wages and employee benefits payable            6,930                9,331
    Claims payable                                 4,648                3,942
    Income taxes payable                             396                   --
                                           ...................................
        Total Current Liabilities                 21,041               17,165

Long-Term Debt                                     8,000               10,000
Capital Lease Obligations                          3,430                2,056
Deferred Income Taxes                             11,394               11,243

Stockholders' Equity
    Common stock; no par; 20,000,000 shares
        authorized; 2,421,562 shares issued
        and outstanding                            4,400                4,400
    Deferred incentive compensation                 (784)                (956)
    Retained earnings                             53,817               50,736
                                           ...................................
                                                  57,433               54,180
                                           ...................................
                                             $   101,298          $    94,644
                                           ====================================
</TABLE>

The Notes to  Consolidated  Financial  Statements  are an integral part of these
balance sheets.

                                                   Page 1



<PAGE>




                                 KENAN TRANSPORT COMPANY
                          CONSOLIDATED STATEMENTS OF INCOME
                 (Unaudited and in thousands except per share amounts)

<TABLE>
<CAPTION>

                                               Three Months Ended                  Nine Months Ended
                                                 September 30,                       September 30,
                                              -------------------                ----------------------
                                               1999              1998               1999            1998
----------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>             <C>                <C>

Operating Revenue                            $   35,547       $   34,104       $    103,524      $   96,692

Operating Expenses
    Wages and employee benefits                  18,526           17,787             53,852          49,516
    Fuel and other operating expenses             7,776            6,849             21,967          20,164
    Depreciation and amortization                 2,660            2,649              8,007           7,764
    Taxes and licenses                            1,813            1,838              5,522           5,313
    Claims and insurance                          1,396            1,350              4,178           3,662
    Equipment rents                               1,321            1,418              4,085           3,851
------------------------------------------------------------------------------------------------------------
                                                 33,492           31,891             97,611          90,270
------------------------------------------------------------------------------------------------------------
Operating Income                                  2,055            2,213              5,913           6,422

Interest Expense                                   (221)            (191)              (663)           (558)
Interest Income and Other Expenses, Net             227               74                708             138
------------------------------------------------------------------------------------------------------------
Income before Provision for Income Taxes          2,061            2,096              5,958           6,002
Provision for Income Taxes                          812              855              2,338           2,432
------------------------------------------------------------------------------------------------------------
Net Income                                   $    1,249       $    1,241       $      3,620      $    3,570
============================================================================================================


Basic and diluted earnings per share         $      .51       $      .51       $       1.49      $     1.48

Operating ratio                                   94.2%            93.5%              94.3%           93.4%

Dividends paid per share                     $    .0750       $    .0725       $      .2200      $    .2125

</TABLE>


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.

                                    Page 2



<PAGE>




                                 KENAN TRANSPORT COMPANY
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Nine Months Ended September 30, 1999 and 1998
                          (Unaudited and dollars in thousands)


                                                    1999                 1998
-------------------------------------------------------------------------------

Cash Provided by (Applied to):
    Operations                                  $   14,346            $  11,265
    Purchases of operating property, net            (7,824)              (6,858)
    Business acquisition                                --               (7,880)
    Debt and capital lease obligations, net         (3,051)               5,838
    Dividends                                         (539)                (519)
--------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents            2,932                1,846
Beginning Cash and Cash Equivalents                  8,023                3,422
--------------------------------------------------------------------------------
Ending Cash and Cash Equivalents                $   10,955            $   5,268
================================================================================


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.



                                    Page 3



<PAGE>



                                 KENAN TRANSPORT COMPANY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)


1.      Basis of Presentation
--------------------------
        The  accompanying  consolidated  financial  statements  are  prepared in
conformity  with  generally  accepted  accounting  principles  and  include  the
accounts  of  Kenan   Transport   Company  and  its  wholly  owned   subsidiary,
Petro-Chemical   Transport,  Inc.  All  significant  intercompany  accounts  and
transactions have been eliminated.

        The financial  information included herein is unaudited;  however,  such
information  reflects all  adjustments  (consisting  solely of normal  recurring
adjustments)  that  are,  in the  opinion  of  management,  necessary  to a fair
statement of the results for the interim periods presented.

        The balance  sheet at December  31, 1998 has been taken from the audited
financial statements at that date.

        The results of operations for the three and nine months ended  September
30, 1999 and 1998 are not  necessarily  indicative of the results to be expected
for the full year.


2.    Recent Accounting Pronouncements
-------------------------------------
        In June 1998, the Financial  Accounting  Standards Board issued SFAS No.
133,  "Accounting  for Derivative  Instruments  and Hedging  Activities,"  which
requires  that upon  adoption all  derivative  instruments  be recognized in the
balance  sheet at fair value and that changes in such fair values be  recognized
in earnings unless specific  hedging  criteria are met. Changes in the values of
derivatives  that meet these hedging  criteria will  ultimately  offset  related
earnings  effects of the hedged items;  effects of certain changes in fair value
are recorded in other comprehensive income pending recognition in earnings.  The
Company  will  adopt the  Statement  when  required  on  January  1,  2001.  The
application of Statement 133 is not expected to have a significant impact on the
Company's financial position or results of operations.


3.      Business Acquisitions
------------------------------
     On February 28, 1998, the Company acquired 100% of the outstanding stock of
Petro-Chemical  Transport,  Inc.  (PCT),  a  wholly  owned  subsidiary  of CITGO
Petroleum  Corporation.  PCT is a  tank  truck  carrier  serving  the  petroleum
industry in the Southeast,  Midwest and on the West Coast. The acquisition,  net
of cash acquired,  required a cash investment totaling  $7,880,000.  The Company
financed the acquisition through its line of credit facility.

        The  acquisition  has been  accounted  for using the purchase  method of
accounting.  The accompanying  consolidated statements of income include results
of  operations  of PCT  beginning  March  1,  1998.  The  purchased  assets  and
liabilities assumed have been recorded in the Company's financial  statements at
their  estimated  fair market  values.  The excess of the purchase cost over the
fair value of net assets acquired in the  acquisition  (goodwill) is included in
intangible assets in the accompanying  consolidated  balance sheets and is being
amortized over 20 years on a straight-line basis.



                                        Page 4




<PAGE>




                              KENAN TRANSPORT COMPANY
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (continued)



        The  following  unaudited pro forma  summary  presents the  consolidated
results of operations of the Company,  as if the  acquisition had occurred as of
January 1, 1998. The pro forma  information does not purport to be indicative of
what would have occurred had the acquisition  been made as of January 1, 1998 or
of results that may occur in the future  (dollars in thousands  except per share
amounts).

        Pro-Forma Information (unaudited)
        -----------------------------------------------------------------
<TABLE>
<CAPTION>

                                          Three Months Ended            Nine Months Ended
                                             September 30                  September 30
                                          -------------------           -----------------
                                            1999          1998            1999          1998
        ---------------------------------------------------------------------------------------
        <S>                               <C>           <C>            <C>            <C>

        Revenue                           $35,547       $34,104         $103,524      $103,499
        Net income                          1,249         1,241            3,620         3,726
        Basic and diluted
          earnings per share                  .51           .51             1.49          1.54

</TABLE>

4.      Earnings Per Share
--------------------------
        A reconciliation of net income and the weighted average number of shares
outstanding  used in  calculating  basic  and  diluted  earnings  per  share  is
presented in the table below (in thousands, except per share amounts):

<TABLE>
<CAPTION>

                                        Three Months Ended               Nine Months Ended
                                           September 30                    September 30
                                        -------------------              -----------------
                                         1999          1998              1999          1998
                                 ------------------------------------------------------------
        <S>                        <C>               <C>              <C>            <C>

        Net Income                 $   1,249         $   1,241        $   3,620      $  3,570
                                 =============================================================

        Weighted Average Shares:

          Basic shares                 2,422             2,422            2,422         2,412

          Dilutive effect of
            stock options                 --                --               --             1
                                 -------------------------------------------------------------
          Diluted shares               2,422             2,422            2,422         2,413
                                 =============================================================
        Basic and diluted
          earnings per share       $    0.51         $    0.51        $    1.49      $   1.48

</TABLE>



                                        Page 5




<PAGE>





                                   KENAN TRANSPORT COMPANY
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                       (continued)



5.      Long-Term Debt
-------------------
        The  Company  has  an  unsecured  $20,000,000  Reducing   Line-of-Credit
Facility.    The   facility   replaces   the   Company's   previous   $7,000,000
line-of-credit.  Funds  available  under the line  reduce  $500,000  per quarter
beginning July 1, 1998 to a minimum line of $10,000,000. The facility matures in
March 2003.  Interest  under the  facility  is  variable  based on LIBOR plus an
applicable  margin. At September 30, 1999 and December 31, 1998, the Company had
$8,000,000  and  $10,000,000,  respectively,  outstanding  under the new  credit
facility.

        The Company has entered into a simple  interest  rate swap  agreement to
manage  costs and risks  associated  with  changing  interest  rates.  Under the
agreement,  the Company exchanges at specific  intervals the difference  between
the fixed and variable  rate  interest  amounts  calculated  by reference to the
notional  amount with any  differential  recorded as an  adjustment  to interest
expense.  The agreement  effectively changes a portion of the Company's interest
rate  exposure on the  line-of-credit  from a floating  rate to a fixed rate. At
September 30, 1999,  the notional  principal  amount of this  agreement  totaled
$5,000,000. The agreement matures in March 2003.

        The Company does not hold or issue  derivative  instruments  for trading
purposes.



                                     Page 6



<PAGE>




                                KENAN TRANSPORT COMPANY
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS


        The  following  is  management's  discussion  and  analysis  of  certain
significant  factors that have  affected the  Company's  financial  position and
operating  results  during the periods  included in the  accompanying  financial
statements.


Results of Operations

        Revenue  for the  third  quarter  of 1999 was  $35,547,000  compared  to
$34,104,000 for the third quarter of 1998. Net income was $1,249,000 compared to
$1,241,000  in 1998.  Earnings  per share  were $.51  during the period for each
year. Miles operated decreased 1% from the third quarter of 1998.

        Operating  expenses for the third quarter of 1999  increased  $1,601,000
(5%) over the third  quarter of 1998.  The  increase in  operating  expenses was
primarily due to increases in driver pay rates,  training  costs of new drivers,
and fuel prices.  Fuel prices for the third  quarter of 1999  increased 30% from
the third  quarter of 1998.  The Company's  operating  ratio for the quarter was
94.2% compared to 93.5% in 1998.

        Revenue for the first nine months of 1999 was $103,524,000 compared to
$96,692,000 for 1998. Net income was $3,620,000 compared to $3,570,000 in 1998.
Earnings per share were $1.49 compared to $1.48 during the same period last
year. Miles operated increased 1% from the first nine months of 1998.

        The first nine months revenue  increased  $6,832,000  (7%) over 1998 due
primarily to the Company's  acquisition of PCT.  Revenue for PCT was $33,826,000
in  1999,  which  includes  revenues  for the  full  nine  months,  compared  to
$23,825,000  in 1998,  which  includes  revenues from the time of acquisition at
February 28, 1998 through September 30, 1998.

        Operating   expenses   for  the  first  nine  months  of  1999   totaled
$97,611,000,  an  increase of  $7,341,000  (8%) over 1998 due  primarily  to the
Company's  acquisition  of PCT and  increases  in driver pay rates and  training
costs. The operating ratio increased to 94.3% from 93.4% in 1998.

        The average balances of outstanding  debt and capital lease  obligations
during the third  quarter of 1999 and 1998 were  approximately  $13,550,000  and
$11,980,000,  respectively.  Interest expense was $221,000 for the third quarter
of 1999 compared to $191,000 in 1998.


Liquidity and Capital Resources

        At September 30, 1999, cash and cash equivalents totaled $10,955,000, an
increase of $2,932,000 from December 31,1998.  Working capital of $7,703,000 was
up  $464,000  from  year-end  1998.  At  September  30,  1999,  the  Company had
outstanding debt and capital lease obligations  totaling $12,400,000 compared to
$13,164,000 at December 31, 1998.



                                     Page 7


<PAGE>



                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                          CONDITION AND RESULTS OF OPERATIONS
                                     (continued)


        The  Company  has  fourth  quarter  cash  commitments  of  approximately
$5,700,000 for tractor and trailer  replacements.  Management believes that cash
flows from operations and the Company's bank  line-of-credit  will be sufficient
to  fund  these  planned   expenditures,   as  well  as  1999  working   capital
requirements, expansion opportunities and other corporate needs.


Environmental Matters

        The  Company's  operations  require  the  storage of fuel for use in its
tractors in both underground and aboveground tanks. The Company has a program to
maintain  its  fuel  storage   facilities  in  compliance   with   environmental
regulations.  Under the  program,  the Company  incurs  costs to replace  tanks,
remediate soil  contamination  resulting from overfills,  spills and leaks,  and
monitor  facilities  on an ongoing  basis.  These costs are recorded  when it is
probable  that a  liability  has been  incurred  and the  related  amount can be
reasonably  estimated.  Such  costs  have not been  and are not  expected  to be
material to the Company's operations or liquidity.


Year 2000

        The "Year 2000"  issue  results  from  computer  systems  that store and
process data using two-digit fields to represent the year rather than four-digit
fields.  Consequently,  some computer  systems may not process dates beyond 1999
causing  businesses to be at risk of computer  system  failures that may disrupt
their  operations.  Computer systems termed Year 2000 compliant have been tested
and certified to correctly process dates in the year 2000 and beyond.

        In 1998,  the Company  established a program to ensure that its critical
internal  systems and selected  third  parties (key product  loading  locations,
suppliers  and  customers)  would be ready for Year 2000 and, if not, to develop
contingency plans.

        The  Company's  internal  systems  include both  information  technology
("IT") systems and non-IT systems.  The critical IT systems consist of financial
and operational software and hardware,  and the critical non-IT systems consists
of embedded technology in telecommunications  equipment and tractors. The phases
of the Company's  program for evaluating its internal systems include  assessing
the systems, upgrading critical systems that are not Year 2000 ready, internally
testing all critical IT systems and obtaining  written  assurances  from vendors
for all  critical  non-IT  systems.  As of September  30, 1999,  the Company has
completed 100% of its Year 2000 program for all of its critical internal systems
and believes that the systems are Year 2000 compliant.

        The  Company is also  continuing  to assess the Year 2000  readiness  of
selected third parties by analyzing the responses to questionnaires  sent to the
third parties. The goal is to ensure that no interruptions of service that would
adversely  affect  the  Company's  business  will occur as a result of Year 2000
issues  at those  companies  on  which  the  Company's  business  is  materially
dependent. The Company has completed approximately 85% of this phase and has not
received any responses  that reveal a material third party that is not expecting
to be Year 2000 compliant. The Company is diligently monitoring the responses of
the  selected  third  parties  and  will  formulate   contingency   plans  where
significant exposures are identified.



                                                   Page 8


<PAGE>



                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                           CONDITION AND RESULTS OF OPERATIONS
                                      (continued)


        The total cost of  remediation  for Year 2000 of the Company's  critical
internal  systems and to determine  the Year 2000  readiness  of selected  third
parties is  estimated  to be  $250,000.  The Company has  incurred  and expensed
substantially  all of the total  estimated cost related to Year 2000  readiness.
Overall,  management  believes  that the  Year  2000  will not pose  significant
operational  problems  for the Company or cause  significant  costs beyond those
already expensed.

        The most reasonably likely worst case scenario for the Company is that a
number of key product loading locations, suppliers and customers would be unable
to  operate  due to Year 2000  related  system  failures.  If a large  number of
product loading locations and suppliers are unable to operate, the Company would
experience a delay in loading products for delivery to customers.  The inability
of the  Company  to  operate  efficiently  would  result in a loss of  revenues,
partially mitigated by reduced costs.

        The Company  believes that it has an effective  plan in place to resolve
the Year 2000 issue in a timely  manner.  However,  due to the unusual nature of
the Year 2000 issue,  it is difficult to predict with certainty what will happen
after December 31, 1999.


Market Risk

        Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency rates and other relevant market rates
or price  changes.  In the  ordinary  course of  business,  Kenan is  exposed to
interest  rate risks and the Company  regularly  evaluates  its exposure to this
risk.  The Company  does not hold or issue  derivative  instruments  for trading
purposes.

        The fair  value of the  interest  rate  swap  agreement  represents  the
estimated receipts or payments that would be made to terminate the agreement. At
September 30, 1999,  the Company would have  received  approximately  $23,000 to
terminate  the  agreement.  Assuming a 100 basis  point  reduction  in the LIBOR
interest rate curve,  the fair value of the interest rate swap  agreement  would
decrease by approximately $156,000.


Forward-Looking Statements

        Statements  in this document  that are not  historical  facts are hereby
identified  as  forward-looking  statements  for the  purpose of the safe harbor
provided by Section 21E of the  Securities  Exchange Act of 1934 and Section 27A
of  the  Securities  Act  of  1933.  The  Company  cautions  readers  that  such
forward-looking statements,  including without limitation, those relating to the
Company's  future business  prospects,  revenues,  working  capital,  liquidity,
capital needs,  interest costs and income,  wherever they occur in this document
or in other statements  attributable to the Company are estimates reflecting the
best judgement of the Company's senior  management and involve a number of risks
and  uncertainties  that could cause actual  results to differ  materially  from
those suggested by the forward-looking statements.

        Disclosures  concerning  Year 2000 issues also  contain  forward-looking
statements  that  include  assessments,   timetables  and  cost  estimates.  The
incremental  costs of the Year 2000  project  and the time by which the  Company
believes it will  complete  the Year 2000  modifications,  as well as new system
initiatives that are Year 2000 compliant and third party  compliance,  are based
upon  management's  best estimates.  There exists the  possibility  that factors
outside of  management's  control  may have a material  impact on the  Company's
operations.

                                                   Page 9


<PAGE>




                          PART II - OTHER INFORMATION


Item 4.        Submission of Matters to a Vote of Security Holders
-------        ---------------------------------------------------
               None

Item 5.        Exhibits and Reports on Form 8-K
-------        ---------------------------------
  (a)          The Exhibits to this Form 10-Q are listed on the accompanying
               index to Exhibits.

  (b)          The following reports on Form 8-K have been filed during the
               quarter ended September 30, 1999:

               None


                                     Page 10



<PAGE>


                                  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.


                                         KENAN TRANSPORT COMPANY
                                              (Registrant)



DATE:      November 12, 1999              BY:/s/  William L. Boone
                                          ----------------------------
                                           Vice President-Finance and
                                           Chief Financial Officer


                                 Page 11



<PAGE>



                              INDEX TO EXHIBITS

The exhibits filed as part of this report are listed below:


Exhibit
Number                            Description
--------       -------------------------------------------------------
   11          Statement Re Computation of Per Share Earnings

   27          Financial Data Schedule for the quarter ending September 30,1999.


                                                   Page 12