KIRBY CORPORATION HOUSTON, July 27, 2016 /PRNewswire/ -- Kirby Corporation ("Kirby") (NYSE: KEX) today announced net earnings attributable to Kirby for the second quarter ended June 30, 2016 of $38.9 million, or $0.72 per share, compared with $58.1 million, or $1.04 per share, for the 2015 second quarter. Consolidated revenues for the 2016 second quarter were $441.6 million compared with $543.2 million reported for the 2015 second quarter.
David Grzebinski, Kirby's President and Chief Executive Officer, commented, "Our results for the second quarter were largely in-line with our expectations. In our inland marine transportation market, we benefitted from barges acquired in mid-April, as well as strong utilization levels early in the quarter. However, these positive developments were partially offset by tank barge utilization that declined later in the quarter. In our coastal marine transportation market, overall dynamics were similar to the first quarter, with some customers electing to source equipment on short-term, or spot, contracts, and with pricing and volume trends relatively unchanged."
Mr. Grzebinski continued, "Within our diesel engine services segment, market conditions were similar to those we experienced during the first quarter. In the land-based market, we received an increased number of orders for pressure pumping unit service and remanufacturing work, which could ultimately prove to be early signs of an overall market recovery. However, we continued to experience weak demand for the sale of engines, transmissions and parts and did not receive orders for new pressure pumping units. In our marine diesel engine markets, we experienced further deferrals of major overhaul projects in most of our marine markets and continued weakness in the Gulf of Mexico oilfield services market."
Segment Results - Marine Transportation
Marine transportation revenues for the 2016 second quarter were $378.3 million compared with $425.1 million for the 2015 second quarter. Operating income for the 2016 second quarter was $72.7 million compared with $97.0 million for the 2015 second quarter.
Demand for inland tank barge transportation of petrochemicals was stable, while demand for black oil, crude oil and agricultural chemicals was weaker both on a year-over-year and sequential basis. Refined product volume increased as a result of the acquisition completed in April. Kirby's inland tank barge utilization was in the high-80% to low-90% range during the quarter. Spot market pricing began to firm in April, with some carriers seeking a sequential rate increase, but the momentum did not carry-through as utilization dipped later in the quarter. Term contract renewals also priced at lower levels relative to last year. Operating conditions during the quarter were seasonally normal, although flooding and high currents at floodgates and river crossings along the Gulf Intracoastal Waterway did lead to some delays and periods of congestion along the Gulf Coast.
In the coastal marine transportation market, demand for the transportation of black oil and petrochemicals was stable, although an increase in the amount of equipment trading in the spot market led to increased idle time and voyage costs. Demand for the transportation of refined products declined, primarily as a result of weak distillate and gasoline demand in the Northeast which was mainly the result of high product inventory levels. Utilization for the coastal tank barge fleet was in the mid-80% range. Also during the quarter, Kirby took delivery of the second newbuild 185,000 barrel coastal articulated tank barge and tugboat unit (ATB) which entered service under a long-term customer contract in mid-June.
The marine transportation segment's 2016 second quarter operating margin was 19.2% compared with 22.8% for the second quarter of 2015.
Segment Results - Diesel Engine Services
Diesel engine services revenues for the 2016 second quarter were $63.3 million with a $2.0 million operating loss, compared with 2015 second quarter revenues of $118.1 million and operating income of $4.9 million.
The lower revenues and operating loss as compared to the second quarter of 2015 were primarily due to a lack of pressure pumping unit manufacturing and lower sales of engines, transmissions and parts in the land-based diesel engine services market. Results in the marine diesel engine services markets additionally contributed to the decline, a result of customer deferrals of major maintenance projects and continued weakness in the Gulf of Mexico oilfield services market. Demand in the power generation market was stable during the quarter.
The diesel engine services operating margin was (3.1)% for the 2016 second quarter compared with 4.2% for the 2015 second quarter.
Cash Generation
EBITDA of $230.3 million for the 2016 first six months contributed to Kirby's cash flow from operations during the 2016 first six months, which compares with EBITDA of $292.9 million for the 2015 first six months. Cash flow was used to fund capital expenditures of $111.0 million, including $3.6 million for new inland tank barge and towboat construction, $53.9 million for progress payments on the construction of three new coastal ATBs, two 4900 horsepower coastal tugboats and a 35,000 barrel coastal petrochemical tank barge, and $53.5 million primarily for upgrades to the existing inland and coastal fleets. In addition to these capital expenditures, during the 2016 second quarter, $81 million was used to purchase the SEACOR inland tank barge fleet, $13.5 million was used to purchase a leased coastal tank barge from the lessor and $26.5 million was used to purchase four coastal tugboats. Total debt as of June 30, 2016 was $798.7 million and Kirby's debt-to-capitalization ratio was 25.4%.
Outlook
Commenting on the 2016 third quarter and full year market outlook and guidance, Mr. Grzebinski said, "Our earnings guidance for the 2016 third quarter is $0.50 to $0.65 per share compared with $1.04 per share in the 2015 third quarter. In July we experienced utilization in the low-to-mid 80% range across our inland marine system. Our third quarter guidance range contemplates inland marine transportation utilization in the low-to-mid 80% range for the low end and high-80% range for the high end. In our coastal market, we expect utilization in the low-to-mid-80% range, as we continue to anticipate having more coastal equipment trade in the spot market. In our diesel engine services markets, we expect results in the marine and power generation markets to be largely consistent with the first half of the year, including depressed market conditions in the Gulf of Mexico oilfield services market. In our land-based diesel engine services market, we expect the challenging market conditions of this year to continue."
Mr. Grzebinski continued, "We are lowering our full year earnings per share guidance to a range of $2.40 to $2.70 from the previous guidance range of $2.80 to $3.20 to reflect a potential continuation of the deterioration in the inland marine market seen in July. We believe the weakness in July has been related to a confluence of several factors, including high terminal and refinery inventory levels, as well as softer utilization that is common in mid-summer as operating conditions improve. Should the inland marine transportation market materially improve, we will update our guidance accordingly. In our coastal market, utilization and pricing have held at levels slightly better than we expected earlier in the year, but we continue to expect headwinds related to the transition of equipment on term contracts into the spot market, which leads to lower utilization and an increase in non-revenue generating repositioning costs. In our diesel engine services markets, at the midpoint of guidance we expect the trends from the first half of 2016 to remain largely unchanged in the second half of the year."
Kirby expects 2016 capital spending to be unchanged in the $230 to $250 million range. Capital spending guidance includes approximately $10 million for the construction of seven inland tank barges and one inland towboat to be delivered in 2016. The capital spending guidance range also includes approximately $100 million in progress payments on new coastal equipment, including one 185,000 barrel coastal ATB, two 155,000 barrel coastal ATBs, two 4900 horsepower coastal tugboats, and a new coastal petrochemical tank barge. The balance of $120 to $140 million is primarily for capital upgrades and improvements to existing inland and coastal marine equipment and facilities, as well as diesel engine services facilities.
Conference Call
A conference call is scheduled for 7:30 a.m. central time tomorrow, Thursday, July 28, 2016, to discuss the 2016 second quarter performance as well as the outlook for the 2016 third quarter and full year. The conference call number is 888-317-6003 for domestic callers and 412-317-6061 for international callers. The confirmation number is 3909824. An audio playback will be available at 1:00 p.m. central time on Thursday, July 28, 2016, through 5:00 p.m. central time on Thursday, August 4, 2016, by dialing 877-344-7529 for domestic callers and 412-317-0088 for international callers. The replay access code is 10088682. A live audio webcast of the conference call will be available to the public and a replay available after the call by visiting Kirby's website at http://www.kirbycorp.com/.
GAAP to Non-GAAP Financial Measures
The 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 include a non-GAAP financial measure, EBITDA, which Kirby defines as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization. A reconciliation of EBITDA with GAAP net earnings attributable to Kirby is included in this press release. This earnings press release includes marine transportation performance measures, consisting of ton miles, revenue per ton mile, towboats operated and delay days. Comparable performance measures for the 2015 year and quarters are available at Kirby's website, http://www.kirbycorp.com/, under the caption Performance Measurements in the Investor Relations section.
Forward-Looking Statements
Statements 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, 2015 filed with the Securities and Exchange Commission.
About Kirby Corporation
Kirby 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. Kirby also operates offshore dry-bulk barge and tugboat units engaged in the offshore transportation of dry-bulk cargoes in the United States coastal trade. Through the diesel engine services segment, Kirby provides after-market service for medium-speed and high-speed diesel engines and reduction gears used in marine and power generation applications. Kirby also distributes and services diesel engines, transmissions and pumps, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, for land-based oilfield service and oil and gas operator and producer markets.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
Second Quarter Six Months
-------------- ----------
2016 2015 2016 2015
---- ---- ---- ----
(unaudited, $ in thousands except per share amounts)
Revenues:
Marine
transportation $378,303 $425,053 $756,646 $844,958
Diesel engine
services 63,279 118,103 143,669 285,871
------ ------- ------- -------
441,582 543,156 900,315 1,130,829
------- ------- ------- ---------
Costs and expenses:
Costs of sales and
operating expenses 276,897 343,745 565,807 728,526
Selling, general
and administrative 42,842 49,165 93,303 100,209
Taxes, other than
on income 5,468 5,378 10,872 9,923
Depreciation and
amortization 49,661 46,825 98,285 92,591
Gain on disposition
of assets (94) (91) (161) (1,646)
--- --- ---- ------
374,774 445,022 768,106 929,603
------- ------- ------- -------
Operating income 66,808 98,134 132,209 201,226
Other income
(expense) 179 (303) 314 (243)
Interest expense (4,513) (4,759) (8,706) (10,009)
------ ------ ------ -------
Earnings before
taxes on income 62,474 93,072 123,817 190,974
Provision for taxes
on income (23,365) (34,696) (46,224) (71,187)
------- ------- ------- -------
Net earnings 39,109 58,376 77,593 119,787
Less: Net earnings
attributable to
noncontrolling
interests (167) (301) (552) (634)
---- ---- ---- ----
Net earnings
attributable to
Kirby $38,942 $58,075 $77,041 $119,153
------- ------- ------- --------
Net earnings per share attributable to Kirby common
stockholders:
Basic $0.72 $1.04 $1.43 $2.14
Diluted $0.72 $1.04 $1.43 $2.13
Common stock outstanding (in thousands):
Basic 53,451 55,315 53,446 55,446
Diluted 53,526 55,432 53,505 55,565
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------
Second Quarter Six Months
-------------- ----------
2016 2015 2016 2015
---- ---- ---- ----
(unaudited, $ in thousands)
EBITDA: (1)
Net earnings
attributable to
Kirby $38,942 $58,075 $77,041 $119,153
Interest expense 4,513 4,759 8,706 10,009
Provision for taxes
on income 23,365 34,696 46,224 71,187
Depreciation and
amortization 49,661 46,825 98,285 92,591
------ ------ ------ ------
$116,481 $144,355 $230,256 $292,940
-------- -------- -------- --------
Capital
expenditures $60,525 $93,619 $111,048 $190,152
Acquisitions of
businesses and
marine equipment $120,991 $ - $120,991 $41,250
June 30,
--------
2016 2015
---- ----
(unaudited, $ in thousands)
Long-term debt, including current portion $798,687 $803,986
Total equity $2,350,679 $2,255,843
Debt to capitalization ratio 25.4% 26.3%
MARINE TRANSPORTATION STATEMENTS OF EARNINGS
--------------------------------------------
Second Quarter Six Months
-------------- ----------
2016 2015 2016 2015
---- ---- ---- ----
(unaudited, $ in thousands)
Marine
transportation
revenues $378,303 $425,053 $756,646 $844,958
-------- -------- -------- --------
Costs and expenses:
Costs
of
sales
and
operating
expenses 228,592 251,784 455,344 500,868
Selling,
general
and
administrative 26,600 28,660 59,297 57,393
Taxes,
other
than
on
income 4,953 4,816 9,791 8,947
Depreciation
and
amortization 45,432 42,782 89,693 84,470
------ ------ ------ ------
305,577 328,042 614,125 651,678
------- ------- ------- -------
Operating
income $72,726 $97,011 $142,521 $193,280
------- ------- -------- --------
Operating
margins 19.2% 22.8% 18.8% 22.9%
---- ---- ---- ----
DIESEL ENGINE SERVICES STATEMENTS OF EARNINGS
---------------------------------------------
Second Quarter Six Months
-------------- ----------
2016 2015 2016 2015
---- ---- ---- ----
(unaudited, $ in thousands)
Diesel
engine
services
revenues $63,279 $118,103 $143,669 $285,871
------- -------- -------- --------
Costs and expenses:
Costs
of
sales
and
operating
expenses 48,305 91,961 110,463 227,658
Selling,
general
and
administrative 13,178 17,603 28,309 37,335
Taxes,
other
than
income 502 549 1,053 947
Depreciation
and
amortization 3,262 3,059 6,618 6,157
----- ----- ----- -----
65,247 113,172 146,443 272,097
------ ------- ------- -------
Operating
income
(loss) $(1,968) $4,931 $(2,774) $13,774
------- ------ ------- -------
Operating
margins (3.1)% 4.2% (1.9)% 4.8%
----- --- ----- ---
OTHER COSTS AND EXPENSES
------------------------
Second Quarter Six Months
-------------- ----------
2016 2015 2016 2015
---- ---- ---- ----
(unaudited, $ in thousands)
General
corporate
expenses $4,044 $3,899 $7,699 $7,474
------ ------ ------ ------
Gain on
disposition
of assets $94 $91 $161 $1,646
--- --- ---- ------
(
MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS
----------------------------------------------
Second Quarter Six Months
-------------- ----------
2016 2015 2016 2015
---- ---- ---- ----
Inland Performance
Measurements:
Ton Miles (in
millions) (2) 2,792 3,261 5,540 6,359
Revenue/Ton Mile
(cents/tm) (3) 8.8 8.6 8.9 8.7
Towboats operated
(average) (4) 241 251 241 250
Delay Days (5)
(5) 2,035 2,076 4,271 4,454
Average cost per
gallon of fuel
consumed $1.35 $2.03 $1.31 $2.04
Barges (active):
Inland tank barges 901 912
Coastal tank
barges 69 69
Offshore dry-
cargo barges 6 6
Barrel capacities
(in millions):
Inland tank barges 18.3 18.1
Coastal tank
barges 6.1 6.0
)
(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. 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) 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.
(3) Inland marine transportation
revenues divided by ton miles.
Example: Second quarter 2016
inland marine transportation
revenues of $245,670,000 divided
by 2,792,000,000 inland marine
transportation ton miles = 8.8
cents.
(4) Towboats operated are the average
number of owned and chartered
towboats operated during the
period.
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
(5) navigational factors.
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SOURCE Kirby Corporation
