Kirby Corporation (“Kirby”) (NYSE: KEX) today announced net
earnings attributable to Kirby for the first quarter ended March
31, 2019 of $44.3 million, or $0.74 per share, compared with
earnings of $32.5 million, or $0.54 per share, for the 2018 first
quarter. Excluding certain one-time charges, 2018 first
quarter net earnings attributable to Kirby were $37.9 million, or
$0.63 per share. Consolidated revenues for the 2019 first
quarter were $744.6 million compared with $741.7 million reported
for the 2018 first quarter.
David Grzebinski, Kirby’s President and Chief
Executive Officer, commented, “Kirby’s first quarter results were
challenged by temporary weakness in marine transportation which
resulted from record delay days. Our distribution and services
segment performed well, helping to offset the results from our
marine businesses.
“In inland marine transportation, our quarter’s
results were heavily impacted by unusually poor operating
conditions throughout the U.S. waterway network which negatively
impacted our earnings by approximately $0.05 per share. Although we
anticipated weather-related delays in the first quarter, this year
we experienced significantly more than expected with persistent fog
along the Gulf Coast, extended periods of ice on the Illinois
River, and near record high water conditions on the Mississippi
River. Additionally, there were significant navigational delays
resulting from lock maintenance and the closure of the Houston Ship
Channel in March due to a fire at a chemical storage facility.
These conditions resulted in an approximate 80% increase in delay
days from the more normal year ago quarter. However, customer
demand remained strong throughout the quarter, and barge
utilization strengthened into the mid-90% range on average. I
would like to thank our mariners and shore staff who performed
extremely well despite these very difficult operating conditions,
remaining focused on safety and serving the needs of our
customers.
“In mid-March, we closed the acquisition of
Cenac Marine Services, LLC’s (“Cenac”) marine transportation fleet.
Cenac brings to Kirby a young fleet of well-maintained 30,000
barrel tank barges and new modern towboats, as well as
highly-trained and first class mariners. With tight market
conditions across the inland industry, the Cenac acquisition is
well-timed and will improve our ability to service our customers
and enhance our long-term earnings potential.
“In coastal marine transportation, market
conditions improved modestly. During the quarter, barge
utilization rates increased into the low 80% range, and we renewed
term contracts higher in the mid-single digits. However,
operating margins remained slightly negative in the first quarter
as a result of some extended shipyard periods for several of our
larger vessels.
“Distribution and services performed well during
the first quarter with sequential double-digit improvement in
revenue and operating income. Compared to the fourth quarter,
our manufacturing teams completed an increased number of new
pressure pumping units and equipment for domestic customers, as
well as deliveries of oilfield equipment to international
customers. However, this was partially offset by lower
sequential sales of new engines, transmissions and parts to
oilfield customers. In commercial and industrial, results
were favorably impacted by continued improvement in the marine and
power generation sectors,” Mr. Grzebinski concluded.
Segment Results – Marine
TransportationMarine transportation revenues for the 2019
first quarter were $368.1 million compared with $340.4 million for
the 2018 first quarter. Operating income for the 2019 first
quarter was $35.4 million compared with $16.2 million for the 2018
first quarter.
In the inland market, average barge utilization
was in the mid-90% range during the quarter. Operating
conditions were unfavorable due to poor winter weather conditions,
flooding on the Mississippi River, and closures of key waterways as
a result of lock maintenance projects and a fire at a chemical
storage facility on the Houston Ship Channel. These conditions
resulted in 4,613 delay days which represented an 82% increase
compared to the 2018 first quarter. Spot market and term contract
pricing improved during the quarter, with spot rates increasing in
the mid-to-high single digit range sequentially and approximately
20% year-over-year. Average term contract pricing on expiring
contracts increased in the mid-single digits. Revenues in the
inland market increased approximately 12% compared to the 2018
first quarter primarily due to the contribution from 2018
acquisitions and improved pricing, partially offset by the impact
of poor operating conditions. The operating margin for the inland
business was in the low to mid-double digits during the
quarter.
In the coastal market, barge utilization rates
improved to the low 80% range during the 2019 first quarter.
Compared to the 2018 first quarter, spot market pricing was
approximately 10% to 15% higher, and term contracts repriced
modestly higher in the mid-single digits during the quarter.
Revenues in the coastal market were down slightly year-on-year,
primarily due to increased shipyard days on several large vessels
and adverse impacts from poor weather conditions on the Gulf Coast.
However, the coastal operating loss was reduced year-on-year as a
result of higher pricing and cost reductions implemented during
2018. During the quarter, the coastal operating margin was in the
negative low to mid-single digits.
The marine transportation segment’s 2019 first
quarter operating margin was 9.6% compared with 4.8% for the 2018
first quarter. Excluding certain one-time charges including
$3.3 million of Higman acquisition expenses and $2.4 million of
expenses related to an amendment to the employee stock plan, 2018
first quarter operating margin was 6.4%.
Segment Results – Distribution and
ServicesDistribution and services revenues for the 2019
first quarter were $376.5 million compared with $401.3 million for
the 2018 first quarter. Operating income for the 2019 first
quarter was $37.6 million compared with $37.0 million for the 2018
first quarter.
In the oil and gas market, revenues and
operating income declined compared to the 2018 first quarter
primarily due to reduced activity in the oilfield which resulted in
lower customer demand for new and overhauled transmissions, parts
and service. Additionally, the manufacturing business reported
lower year-on-year revenue and operating income as a result of
lower new pressure pumping unit and equipment deliveries.
During the quarter, the oil and gas operating margin was in
the low double digits.
In the commercial and industrial market,
revenues and operating income increased compared to the 2018 first
quarter primarily due to continued improved demand for diesel
engines, parts and service in the marine business in the Gulf
Coast, Midwest, and Florida. Revenues and operating income in
the power generation market also improved as a result of increased
demand for back-up power systems. During the quarter, the
commercial and industrial operating margin was in the mid-to-high
single digits.
The distribution and services operating margin
was 10.0% for the 2019 first quarter and benefited from a favorable
mix of new equipment sales in the oil and gas manufacturing
business and reduced costs. This compares to operating margin of
9.2% for the 2018 first quarter which included $1.2 million of
non-cash expenses related to an amendment to the employee stock
plan.
Cash GenerationEBITDA of $126.6
million for the 2019 first quarter compares with EBITDA of $106.3
million for the 2018 first quarter. Cash flow was used to
fund capital expenditures of $60.9 million during the 2019 first
quarter, which included $7.9 million for new inland towboat
construction, $6.9 million for progress payments on the
construction of three 5000 horsepower coastal ATB tugboats, $1.8
million for final costs on the new 155,000 barrel coastal ATB that
delivered in the 2018 fourth quarter, $34.9 million primarily for
upgrades to existing inland and coastal fleets, and $9.4 million
related to projects in distribution and services.
During the quarter, Kirby entered into an
amended and restated credit agreement with a group of banks which
extended the term of Kirby’s $850 million revolving credit facility
until March 27, 2024 and added a new five-year term loan in the
amount of $500 million. The new term loan is repayable in quarterly
installments commencing June 30, 2020 in increasing percentages of
the original principal amount of the loan. Total debt as of March
31, 2019 was $1,667.5 million, and Kirby’s debt-to-capitalization
ratio was 33.8%.
2019 OutlookCommenting on the
2019 full year outlook and guidance, Mr. Grzebinski said, “Our
earnings guidance range for the year remains $3.25 to $3.75 per
share. Although the first quarter was adversely impacted by
unusually high delay days in our inland marine business, we
anticipate improved results in marine as we progress through the
remainder of 2019. In distribution and services, the first
quarter results were strong; however, the outlook for the second
half of 2019 remains uncertain.”
In the inland marine transportation market,
strong customer activity and growing volumes from the petrochemical
complex, are expected to yield high barge utilization levels in the
mid-90% range. For the second quarter, operating conditions have
been and are expected to remain somewhat challenged by high water
conditions on the Mississippi River and continued navigational
delays at certain locks and in the Houston Ship Channel. However,
with improved weather conditions and higher pricing, inland revenue
is expected to increase sequentially with operating margins
improving from first quarter levels.
In the coastal market, barge utilization is
expected to be in the low to mid-80% range during 2019, driven by
slightly improving customer demand and probable additional industry
retirements of aging barges. Pricing is expected to continue to
improve modestly. For the second quarter, coastal revenues
are expected to increase driven by reduced shipyard time and
seasonal improvements in the Pacific. Coastal operating
margins are expected to be around breakeven in the second
quarter.
In the distribution and services segment, the
outlook for the full year remains uncertain in the oil and gas
market. Although oil prices and activity have improved since year
end, and new takeaway capacity is coming to the Permian, forecasts
for the second half of 2019 are unclear. In commercial and
industrial, revenues and operating income are expected to remain
healthy with strong demand for back-up power systems and specialty
equipment rentals continuing in the coming quarters.
Overall, in the second quarter, distribution and
services revenue is expected to be flat to slightly down compared
to the first quarter. In manufacturing, activity is expected
to be lower with reduced orders, and the timing of deliveries for
units currently under construction could potentially shift into the
third quarter. This is expected to be offset by further
improvement in power generation. Operating margin is expected to
decline due to changing mix of sales between higher margin oil and
gas manufacturing equipment and lower margin power generation
equipment.
Kirby 2019 capital spending outlook is expected
to be in the $225 to $245 million range. Capital spending guidance
includes approximately $45 million in progress payments on new
marine vessels, which includes three 5000 horsepower coastal
tugboats and thirteen 2600 horsepower inland towboats.
Approximately $155 to $165 million is associated with capital
upgrades and improvements to existing inland and coastal marine
equipment (including approximately $25 million for coastal ballast
water treatment systems) and marine facility improvements. The
balance of approximately $30 million largely relates to new
machinery and equipment, rental fleet growth, facility
improvements, and information technology projects in the
distribution and services segment.
Conference CallA conference
call is scheduled for 7:30 a.m. Central Standard Time today,
Thursday, May 2, 2019, to discuss the 2019 first quarter
performance as well as the outlook for the remainder of 2019.
To listen to the conference call webcast, please visit the Investor
Relations section of Kirby’s website at http://kirbycorp.com. A
slide presentation for this conference call will be posted on
Kirby’s website approximately 15 minutes before the start of the
call. For listeners who wish to participate in the question
and answer session of the conference call webcast, you may access
the call by dialing (866) 691-5839 within the U.S. and Canada or +1
(409) 216-0840 internationally. The conference ID for the call is
7394316. A replay of the webcast will be available for a
period of one year by visiting the Investor Relations section of
Kirby’s website.
GAAP to Non-GAAP Financial
MeasuresThe financial and other information to be
discussed in the conference call is available in this press release
and in a Form 8-K filed with the Securities and Exchange
Commission. This press release and the Form 8-K includes a
non-GAAP financial measure EBITDA, which Kirby defines as net
earnings attributable to Kirby before interest expense, taxes on
income, depreciation and amortization, impairment of long-lived
assets, and impairment of goodwill. A reconciliation of EBITDA with
GAAP net earnings attributable to Kirby is included in this press
release. This press release also includes non-GAAP financial
measures which exclude certain one-time items, including earnings
before taxes on income (excluding one-time items), net earnings
attributable to Kirby (excluding one-time items), and diluted
earnings per share (excluding one-time items). A reconciliation of
these measures with GAAP is included in this press release.
Management believes that the exclusion of certain one-time items
from these financial measures enables it and investors to assess
and understand operating performance, especially when comparing
those results with previous and subsequent periods or forecasting
performance for future periods, primarily because management views
the excluded items to be outside of Kirby’s normal operating
results. This press release also includes marine transportation
performance measures, consisting of ton miles, revenue per ton
mile, towboats operated and delay days. Comparable
performance measures for the 2018 year and quarters are available
at in the Investor Relations section of Kirby’s website,
http://kirbycorp.com, under Financials.
Forward-Looking
StatementsStatements contained in this press release with
respect to the future are forward-looking statements. These
statements reflect management’s reasonable judgment with respect to
future events. Forward-looking statements involve risks and
uncertainties. Actual results could differ materially from
those anticipated as a result of various factors, including
cyclical or other downturns in demand, significant pricing
competition, unanticipated additions to industry capacity, changes
in the Jones Act or in U.S. maritime policy and practice, fuel
costs, interest rates, weather conditions and timing, magnitude and
number of acquisitions made by Kirby. Forward-looking
statements are based on currently available information and Kirby
assumes no obligation to update any such statements. A list
of additional risk factors can be found in Kirby’s annual report on
Form 10-K for the year ended December 31, 2018.
About Kirby CorporationKirby
Corporation, based in Houston, Texas, is the nation’s largest
domestic tank barge operator transporting bulk liquid products
throughout the Mississippi River System, on the Gulf Intracoastal
Waterway, coastwise along all three United States coasts, and in
Alaska and Hawaii. Kirby transports petrochemicals, black
oil, refined petroleum products and agricultural chemicals by tank
barge. In addition, Kirby participates in the transportation
of dry-bulk commodities in United States coastwise trade.
Through the distribution and services segment, Kirby provides
after-market service and parts for engines, transmissions,
reduction gears, and related equipment used in oilfield services,
marine, power generation, on-highway, and other industrial
applications. Kirby also rents equipment including
generators, forklifts, pumps, and compressors for use in a variety
of industrial markets, and manufactures and remanufactures oilfield
service equipment, including pressure pumping units, for land-based
oilfield service customers.
|
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS |
|
|
|
|
First
Quarter |
|
|
|
2019 |
|
|
2018 |
|
|
(unaudited, $ in thousands
exceptper share amounts) |
Revenues: |
|
|
Marine
transportation |
$ |
368,121 |
|
$ |
340,403 |
|
Distribution and
services |
|
376,500 |
|
|
401,285 |
|
|
|
744,621 |
|
|
741,688 |
|
Costs and expenses: |
|
|
Costs of sales and
operating expenses |
|
536,655 |
|
|
553,317 |
|
Selling, general
and administrative |
|
72,796 |
|
|
76,796 |
|
Taxes, other than
on income |
|
9,998 |
|
|
8,535 |
|
Depreciation and
amortization |
|
55,223 |
|
|
54,218 |
|
Gain on disposition
of assets |
|
(2,157 |
) |
|
(1,898 |
) |
|
|
672,515 |
|
|
690,968 |
|
|
|
|
Operating
income |
|
72,106 |
|
|
50,720 |
|
Other income
(expense) |
|
(568 |
) |
|
1,591 |
|
Interest expense |
|
(13,201 |
) |
|
(9,780 |
) |
|
|
|
Earnings before
taxes on income |
|
58,337 |
|
|
42,531 |
|
Provision for taxes on
income |
|
(13,880 |
) |
|
(9,865 |
) |
|
|
|
Net earnings |
|
44,457 |
|
|
32,666 |
|
Less: Net earnings
attributable to noncontrolling interests |
|
(161 |
) |
|
(195 |
) |
Net earnings
attributable to Kirby |
$ |
44,296 |
|
$ |
32,471 |
|
|
|
|
Net earnings per share
attributable to Kirby common stockholders: |
|
|
Basic |
$ |
0.74 |
|
$ |
0.54 |
|
Diluted |
$ |
0.74 |
|
$ |
0.54 |
|
Common stock outstanding
(in thousands): |
|
|
Basic |
|
59,709 |
|
|
59,392 |
|
Diluted |
|
59,823 |
|
|
59,493 |
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED FINANCIAL
INFORMATION |
|
|
|
First Quarter |
|
|
|
2019 |
|
|
2018 |
|
|
(unaudited, $ in thousands) |
EBITDA: (1) |
|
|
Net earnings
attributable to Kirby |
$ |
44,296 |
|
$ |
32,471 |
|
Interest
expense |
|
13,201 |
|
|
9,780 |
|
Provision for taxes
on income |
|
13,880 |
|
|
9,865 |
|
Depreciation and
amortization |
|
55,223 |
|
|
54,218 |
|
|
$ |
126,600 |
|
$ |
106,334 |
|
|
|
|
Capital expenditures |
$ |
60,932 |
|
$ |
40,961 |
|
Acquisitions of businesses
and marine equipment |
$ |
247,470 |
|
$ |
429,977 |
|
|
|
|
|
|
March 31, |
|
|
|
2019 |
|
|
2018 |
|
|
(unaudited, $ in thousands) |
|
|
|
Long-term debt, including
current portion |
$ |
1,667,474 |
|
$ |
1,423,294 |
|
Total equity |
$ |
3,265,408 |
|
$ |
3,141,868 |
|
Debt to capitalization
ratio |
|
33.8 |
% |
|
31.2 |
% |
|
|
|
|
|
|
|
MARINE TRANSPORTATION
STATEMENTS OF EARNINGS |
|
|
|
|
First Quarter
|
|
|
|
2019 |
|
|
2018 |
|
|
(unaudited, $ in thousands) |
|
|
|
Marine transportation
revenues |
$ |
368,121 |
|
$ |
340,403 |
|
|
|
|
Costs and expenses: |
|
|
Costs of sales and
operating expenses |
|
246,190 |
|
|
238,785 |
|
Selling, general
and administrative |
|
33,217 |
|
|
35,576 |
|
Taxes, other than
on income |
|
7,966 |
|
|
6,522 |
|
Depreciation and
amortization |
|
45,324 |
|
|
43,340 |
|
|
|
332,697 |
|
|
324,223 |
|
|
|
|
Operating
income |
$ |
35,424 |
|
$ |
16,180 |
|
|
|
|
Operating
margins |
|
9.6 |
% |
|
4.8 |
% |
|
|
DISTRIBUTION AND SERVICES STATEMENTS OF
EARNINGS |
|
|
|
|
First Quarter |
|
|
|
2019 |
|
|
2018 |
|
|
(unaudited, $ in thousands) |
|
|
|
Distribution and services
revenues |
$ |
376,500 |
|
$ |
401,285 |
|
|
|
|
Costs and expenses: |
|
|
Costs of sales and
operating expenses |
|
290,465 |
|
|
314,532 |
|
Selling, general
and administrative |
|
37,391 |
|
|
37,754 |
|
Taxes, other than
on income |
|
2,017 |
|
|
2,002 |
|
Depreciation and
amortization |
|
9,018 |
|
|
10,032 |
|
|
|
338,891 |
|
|
364,320 |
|
|
|
|
Operating
income |
$ |
37,609 |
|
$ |
36,965 |
|
|
|
|
Operating
margins |
|
10.0 |
% |
|
9.2 |
% |
|
|
OTHER COSTS AND EXPENSES |
|
|
|
|
First Quarter |
|
|
|
2019 |
|
|
2018 |
|
|
(unaudited, $ in thousands) |
|
|
|
General corporate
expenses |
$ |
3,084 |
|
$ |
4,323 |
|
|
|
|
Gain on disposition of
assets |
$ |
2,157 |
|
$ |
1,898 |
|
|
|
|
ONE-TIME CHARGES AND
BENEFITS
The 2018 first quarter GAAP results include
certain one-time charges. There were no one-time charges in
the 2019 first quarter. The following is a reconciliation of
GAAP earnings to non-GAAP earnings, excluding the one-time items
for earnings before tax (pre-tax), net earnings attributable to
Kirby (after-tax), and diluted earnings per share (per share):
|
First Quarter 2018 |
|
Pre-Tax |
|
After-Tax |
|
Per Share |
|
(unaudited, $ in millions except per share
amounts) |
|
|
GAAP earnings |
$ |
42.5 |
|
$ |
32.4 |
|
$ |
0.54 |
Higman transaction fees & expenses |
|
3.3 |
|
|
2.5 |
|
|
0.04 |
Amendment to employee stock plan |
|
3.9 |
|
|
3.0 |
|
|
0.05 |
Earnings, excluding one-time items(2) |
$ |
49.7 |
|
$ |
37.9 |
|
$ |
0.63 |
MARINE TRANSPORTATION PERFORMANCE
MEASUREMENTS |
|
|
|
|
|
First Quarter |
|
|
|
2019 |
|
2018 |
|
|
|
|
|
Inland Performance
Measurements: |
|
|
|
Ton Miles (in
millions) (3) |
|
3,146 |
|
3,182 |
|
Revenue/Ton Mile
(cents/tm) (4) |
|
9.0 |
|
8.0 |
|
Towboats operated
(average) (5) |
|
286 |
|
262 |
|
Delay Days
(6) |
|
4,613 |
|
2,528 |
|
Average cost per
gallon of fuel consumed |
$ |
1.93 |
$ |
2.04 |
|
|
|
|
|
Barges (active): |
|
|
|
Inland tank
barges |
|
1,061 |
|
993 |
|
Coastal tank
barges |
|
51 |
|
55 |
|
Offshore dry-cargo
barges |
|
4 |
|
5 |
|
Barrel Capacities (in
millions): |
|
|
|
Inland tank
barges |
|
23.6 |
|
21.9 |
|
Coastal tank
barges |
|
4.9 |
|
5.2 |
|
(1) Kirby has historically evaluated its
operating performance using numerous measures, one of which is
EBITDA, a non-GAAP financial measure. Kirby defines EBITDA as
net earnings attributable to Kirby before interest expense, taxes
on income, depreciation and amortization, impairment of long-lived
assets, and impairment of goodwill. EBITDA is presented
because of its wide acceptance as a financial indicator.
EBITDA is one of the performance measures used in Kirby’s incentive
bonus plan. EBITDA is also used by rating agencies in
determining Kirby’s credit rating and by analysts publishing
research reports on Kirby, as well as by investors and investment
bankers generally in valuing companies. EBITDA is not a
calculation based on generally accepted accounting principles and
should not be considered as an alternative to, but should only be
considered in conjunction with, Kirby’s GAAP financial
information.
(2) Kirby uses certain non-GAAP financial
measures to review performance excluding certain one-time items
including: earnings before taxes on income, excluding one-time
items; net earnings attributable to Kirby, excluding one-time
items; and diluted earnings per share, excluding one-time
items. Management believes that the exclusion of certain
one-time items from these financial measures enables it and
investors to assess and understand operating performance,
especially when comparing those results with previous and
subsequent periods or forecasting performance for future periods,
primarily because management views the excluded items to be outside
of the company's normal operating results. These non-GAAP
financial measures are not calculations based on generally accepted
accounting principles and should not be considered as an
alternative to, but should only be considered in conjunction with,
Kirby’s GAAP financial information.
(3) Ton miles indicate fleet productivity
by measuring the distance (in miles) a loaded tank barge is
moved. Example: A typical 30,000 barrel tank barge
loaded with 3,300 tons of liquid cargo is moved 100 miles, thus
generating 330,000 ton miles.
(4) Inland marine transportation revenues
divided by ton miles. Example: First quarter 2019
inland marine transportation revenues of $283,085,000 divided by
3,146,000,000 inland marine transportation ton miles = 9.0
cents.
(5) Towboats operated are the average
number of owned and chartered towboats operated during the
period.
(6) Delay days measures the lost time
incurred by a tow (towboat and one or more tank barges) during
transit. The measure includes transit delays caused by
weather, lock congestion and other navigational factors.
Contact:
Eric Holcomb
713-435-1545
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