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, 2000
                                              ----------------------
                                       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 October 31, 2000
          --------------------------- --------------------------------
         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,
           2000 and December 31, 1999                                       1

        Consolidated Statements of Income for the Three
           and Nine Months ended September 30, 2000 and 1999                2

        Condensed Consolidated Statements of Cash Flows for
           the Nine Months ended September 30, 2000 and 1999                3

        Notes to Condensed 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 5 - 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,
                                                                        2000                   1999
ASSETS                                                               (Unaudited)             (Note 1)
------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                   <C>

Current Assets

    Cash and cash equivalents                                         $     3,977           $    7,466
    Accounts receivable, net                                                9,997               10,966
    Operating supplies and parts                                              767                  676
    Prepayments:
        Tires                                                               2,614                2,257
        Insurance, licenses and other                                       1,902                1,484
        Deferred income taxes                                               1,964                1,861
                                                                    -----------------------------------
           Total Current Assets                                            21,221               24,710
                                                                    -----------------------------------
Operating Property

    Land                                                                    3,464                3,464
    Buildings and leasehold improvements                                   11,555               11,496
    Revenue equipment                                                      87,879               79,888
    Other equipment                                                         7,427                6,859
                                                                    -----------------------------------
                                                                          110,325              101,707
    Accumulated depreciation                                              (42,578)             (40,625)
                                                                    -----------------------------------
        Net Operating Property                                             67,747               61,082
                                                                    -----------------------------------

Intangible Assets, net                                                      9,936               10,368
                                                                    -----------------------------------
Other Assets                                                                2,548                2,131
                                                                    -----------------------------------
                                                                      $   101,452           $   98,291
                                                                    ===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------
Current Liabilities

    Capital lease obligations                                         $       779           $      867
    Accounts payable                                                        4,701                4,214
    Wages and employee benefits payable                                     9,068                9,008
    Claims payable                                                          3,457                4,156
                                                                    -----------------------------------
        Total Current Liabilities                                          18,005               18,245
                                                                    -----------------------------------

Long-Term Debt                                                              6,000                6,000
                                                                    -----------------------------------
Capital Lease Obligations                                                   2,647                3,261
                                                                    -----------------------------------
Deferred Income Taxes                                                      13,078               12,434
                                                                    -----------------------------------
Shareholders' Equity

    Common stock; no par; 20,000,000 shares
        authorized; 2,421,562 shares issued
        and outstanding                                                     4,400                4,400
    Retained earnings                                                      57,878               54,678
    Deferred incentive compensation                                          (556)                (727)
                                                                    -----------------------------------
        Total Shareholders' Equity                                         61,722               58,351
                                                                    -----------------------------------
                                                                      $   101,452           $   98,291
                                                                    ===================================
</TABLE>

The Notes to Condensed 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,
                                                         ----------------------               --------------------
                                                         2000              1999               2000            1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>                <C>             <C>

Operating Revenue                                     $    39,598       $   35,547        $   117,204     $   103,524

Operating Expenses

    Wages and employee benefits                            20,309           18,526             60,492          53,852
    Fuel and other operating expenses                       9,051            7,776             26,864          21,967
    Depreciation and amortization                           3,162            2,660              9,119           8,007
    Taxes and licenses                                      1,983            1,813              5,911           5,522
    Claims and insurance                                    1,446            1,396              4,286           4,178
    Equipment rents                                         1,432            1,321              4,276           4,085
----------------------------------------------------------------------------------------------------------------------
                                                           37,383           33,492            110,948          97,611
----------------------------------------------------------------------------------------------------------------------
Operating Income                                            2,215            2,055              6,256           5,913

Interest Expense                                             (166)            (221)              (499)           (663)
Interest Income and Other Expenses, Net                       271              227                455             708
----------------------------------------------------------------------------------------------------------------------
Income before Provision for Income Taxes                    2,320            2,061              6,212           5,958
Provision for Income Taxes                                    919              812              2,455           2,338
----------------------------------------------------------------------------------------------------------------------
Net Income                                            $     1,401       $    1,249        $     3,757     $     3,620

======================================================================================================================


Basic and diluted earnings per share                  $       .58       $      .51         $     1.55     $      1.49

Operating ratio                                              94.4%            94.2%              94.7%           94.3%

Dividends declared per share                          $     .0775       $    .0750         $    .2275     $     .2200

</TABLE>

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

                                                               Page 2


<PAGE>


                             KENAN TRANSPORT COMPANY

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For
                the Nine Months Ended September 30, 2000 and 1999

                      (Unaudited and dollars in thousands)


                                                    2000                 1999
--------------------------------------------------------------------------------

Cash Provided by (Used in):
    Operations                                $    13,121            $  14,346
    Purchases of operating property, net          (15,351)              (7,824)
    Debt and capital lease obligations, net          (702)              (3,051)
    Dividends                                        (557)                (539)
--------------------------------------------------------------------------------
Net (Decrease) Increase in Cash
    and Cash Equivalents                           (3,489)               2,932
Beginning Cash and Cash Equivalents                 7,466                8,023
--------------------------------------------------------------------------------
Ending Cash and Cash Equivalents              $     3,977            $  10,955
================================================================================



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

                                     Page 3


<PAGE>



                             KENAN TRANSPORT COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.      Basis of Presentation
-----------------------------
        The  accompanying   condensed   consolidated  financial  statements  are
prepared in conformity  with  accounting  principles  generally  accepted in the
United States (GAAP) 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 condensed  consolidated  financial  statements  included herein have
been  prepared  by Kenan  Transport  Company  (the  "Company"),  without  audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The  Consolidated  Balance Sheet as of December 31, 1999 has been taken from the
audited  financial  statements  as of that date.  Certain  information  and note
disclosures  normally  included in financial  statements  prepared in accordance
with GAAP have been condensed or omitted pursuant to such rules and regulations,
although  the Company  believes  that the  disclosures  are adequate to make the
information  presented not misleading.  These condensed  consolidated  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements and notes thereto  included in the Company's  latest annual report on
Form 10-K for the year ended December 31, 1999.

        The condensed  consolidated financial statements included herein reflect
all adjustments  (none of which are other than normal  recurring  accruals) that
are, in the opinion of  management,  necessary  for a fair  presentation  of the
information included.

        The results of operations for the three and nine months ended  September
30, 2000 and 1999 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 Statement
of Financial  Accounting  Standards  (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.  SFAS No. 137 subsequently  deferred the
effective  date of SFAS No. 133 for the Company to January 1, 2001.  The Company
will adopt SFAS No. 133 at that time.  The  application  of Statement 133 is not
expected to have a  significant  impact on the Company's  financial  position or
results of operations.

                                     Page 4


<PAGE>




                             KENAN TRANSPORT COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

3.      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
                                                 -------------------              -------------------
                                                  2000          1999              2000          1999
                                                 ----------------------------------------------------
       <S>                                      <C>             <C>              <C>           <C>

        Net Income                              $ 1,401        $  1,249         $  3,757      $ 3,620
                                                 ====================================================

        Weighted Average Shares Outstanding:

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

          Dilutive effect of
            stock options                             1              --               --           --
                                                 ----------------------------------------------------
          Diluted shares                          2,423           2,422            2,422        2,422
                                                 ====================================================
        Basic and diluted
          earnings per share                   $   0.58        $   0.51         $   1.55      $  1.49

        Weighted Average Stock
          Options Outstanding
          (in thousands)                            429             329              384          329
</TABLE>

4.      Long-Term Debt
----------------------
On February 13, 1998, the Company negotiated an unsecured  $20,000,000  Reducing
Line-of-Credit  Facility (the facility) with a bank.  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 on borrowings under
the facility is variable based on LIBOR plus an applicable  margin.  The Company
had $6,000,000 outstanding under the facility at September 30, 2000 and December
31, 1999. As of September 30, 2000, the Company had an unused line of $9,500,000
available  under the  facility.  The credit  agreement  contains  the  following
financial  covenants:  (1) Funds from  Operations to Funded Debt Ratio,  and (2)
Funded Debt to  Capitalization  Ratio.  The Company was in  compliance  with the
covenants as of September 30, 2000 and December 31, 1999.

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,
2000, the notional  principal amount of this agreement totaled  $5,000,000.  The
agreement  matures in March 2003.  The average  variable  rates during the first
nine  months of 2000 and 1999 were 6.7% and 5.5%,  respectively,  compared  to a
fixed rate of 6.5% for these periods.

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

                                     Page 5
<PAGE>

                             KENAN TRANSPORT COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)


5.      Nonqualified Stock Options
----------------------------------
On May 1, 2000, 100,000 nonqualified stock options were awarded to key employees
under the Company's 1998 Long-Term  Incentive Plan. The options have an exercise
price of $21.00,  which is equal to the fair  value of a share of the  Company's
stock at the date of grant.  The  options  have a  ten-year  term  with  vesting
periods of one to three years from the date of grant.

The Company  applies  Accounting  Principles  Board Opinion No. 25 (APB No. 25),
"Accounting  for Stock  Issued to  Employees,"  in  accounting  for stock option
awards.  In  accordance  with APB No. 25, the  Company  properly  did not record
compensation expense for the 100,000 stock options granted on May 1, 2000.


                                     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

        For the third  quarter of 2000,  revenue  was  $39,598,000  compared  to
$35,547,000  for the third  quarter of 1999,  an 11% increase from year to year.
Net income was  $1,401,000  compared to $1,249,000  in 1999.  Earnings per share
were $.58 compared to $.51 during the periods for each year.

     Miles operated  increased 6% from the third quarter of 1999.The increase in
miles  operated was due to adding new  customers and growth within the existing,
targeted  customer  base.  Price  adjustments  to offset the increased  costs of
higher fuel prices and driver pay and benefits  contributed  to a 5% increase in
revenue for the third quarter of 2000 compared to 1999.

        Operating  expenses for the third quarter of 2000  increased  $3,891,000
(12%) over the third  quarter of 1999.  The increase in  operating  expenses was
primarily due to increases in miles operated,  higher fuel prices, and increases
in driver pay rates and benefit costs. Fuel expense increased  $1,229,000 due to
56% higher fuel prices and the  increase in miles  operated.  Wages and employee
benefits  increased  $1,783,000  primarily due to the increase in volume and the
Company  increasing  driver  wages and  providing  higher  benefits  in order to
continue  attracting and retaining  professional  drivers.  The Company's  third
quarter operating ratio was 94.4% compared to 94.2% in 1999.

        Interest  expense was $166,000 for the third quarter of 2000 compared to
$222,000 in 1999.  The average  balances of  outstanding  debt and capital lease
obligations  during  the  third  quarter  of 2000  and 1999  were  approximately
$9,500,000 and $13,600,000, respectively.

        For the first nine months of 2000, revenue was $117,204,000  compared to
$103,524,000  for  1999,  a 13%  increase  from  year to year.  Net  income  was
$3,757,000  compared  to  $3,620,000  in 1999.  Earnings  per share  were  $1.55
compared to $1.49 during the same period last year.

     Miles operated  increased 8% from the first nine months of 1999.  Operating
expenses for the first nine months of 2000 totaled $110,948,000,  an increase of
$13,337,000  (14%) due primarily to the higher volume and increases in wages and
employee benefits and fuel costs.  Wages and employee benefits expense increased
$6,640,000  (12%),  and fuel expense  increased  $4,364,000  (89%). In addition,
depreciation  expense for tractors and trailers increased  $1,129,000  primarily
due  to  replacing  older  equipment  and  operating   leases  acquired  in  the
acquisitions  of Transport  South and  Petro-Chemical  Transport  with new owned
equipment. Price adjustments to offset the increased costs of higher fuel prices
and driver pay and  benefits  contributed  to a 5%  increase  in revenue for the
first nine months of 2000 compared to 1999.

                                     Page 7


<PAGE>

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


Liquidity and Capital Resources

        At September 30, 2000, cash and cash equivalents totaled  $3,977,000,  a
decrease of  $3,489,000  from  December 31, 1999.  The decrease in cash and cash
equivalents  was primarily  due to the purchase of tractors and trailers  during
the first nine  months  under the  Company's  replacement  program  designed  to
maintain an efficient,  highly productive  fleet. In addition,  25 tractors that
were operated under  operating  leases were replaced with owned  equipment.  The
additional cash used to pay for the new tractors and trailers was generated from
cash provided by operations.  Working  capital of $3,216,000 was down $3,249,000
from year-end 1999. At September 30, 2000, the Company had outstanding  debt and
capital  lease  obligations  totaling  $9,426,000  compared  to  $10,128,000  at
December 31, 1999.

        The Company has fourth  quarter net cash  commitments  of  approximately
$1,300,000 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  2000  working   capital
requirements, expansion opportunities and other corporate needs.

Inflation

        The Company's condensed  consolidated  financial statements are prepared
based on historical dollars and are not intended to show the impact of inflation
or  changing  prices.  With the  exception  of  driver  wages  and fuel  prices,
inflation  and changing  prices have not had a material  effect on the Company's
financial position and results of operations.

Environmental Matters

        The Company stores fuel in underground and aboveground  tanks for use in
certain of its  terminal  facilities.  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.

                                     Page 8


<PAGE>

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


Market Risk

        Market risk is the potential loss arising from adverse changes in market
rates and prices,  such as currency  exchange  rates and other  relevant  market
rates or price  changes.  In the  ordinary  course of  business,  the Company 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 estimated 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, 2000, the Company would have received approximately
$43,000 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 have decreased by approximately $112,000.

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.

        The Company's  future  operating  results may be affected by a number of
factors that include but are not limited to: general economic conditions such as
inflation  and  interest  rates;  competitive  conditions  within the  Company's
markets,  including  adverse  changes in demand for trucking  services,  pricing
pressure, availability of drivers and fuel prices; the Company's ability to sell
its services  profitably,  increase market share and manage expenses relative to
revenue  growth;  changes in governmental  regulation;  changes in the trucking,
transportation  and  logistic  industries;  and changes in the  Company's  labor
relations or other unforeseeable circumstances.

                                     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, 2000:

        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 10, 2000                   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
--------       -------------------------------------------------------
27             Financial Data Schedule for the nine months ending
               September 30, 2000.

                                     Page 12