July 27, 2006
Kirby reports record earnings, buts Capital Towing
Kirby Corporation (NYSE: KEX) reported record net earnings for the second quarter ended June 30, 2006 of $23,333,000, or $.44 per share, compared with $18,447,000, or $.36 per share, for the second quarter of 2005. Consolidated revenues for the 2006 second quarter were $243,292,000, a 22% increase compared with $199,276,000 for the 2005 second quarter.
Record net earnings for the first six months of 2006 were $45,913,000, or $.86 per share, compared with $31,726,000, or $.62 per share, for the first six months of 2005. Consolidated revenues for the first six months of 2006 were $468,195,000, a 22% increase compared with $383,720,000 for the first half of 2005.
On April 25, 2006, the Board of Directors declared a two-for-one stock split of Kirby's common stock. Stockholders of record on May 10, 2006 received one additional share of common stock for each share of common stock held on that day, with a distribution date of May 31, 2006. All references to number of shares and per share information in this press release have been adjusted to reflect the stock split.
Marine transportation revenues and operating income for the 2006 second quarter increased 20% and 24%, respectively, compared with the 2005 second quarter. For the first six months of 2006, revenue and operating income increased 20% and 34%, respectively, compared with the 2005 first six months. The record marine transportation results for both periods reflected continued strong petrochemical and black oil products volumes and higher rates on contract renewals and spot market pricing.
The 2006 second quarter earnings were negatively impacted by an estimated $.03 to $.04 per share from diesel fuel cost recovery clauses in certain marine transportation long-term contracts. The 2006 first quarter earnings were positively impacted by an estimated $.03 to $.04 per share from fuel cost recovery clauses under the same long-term contracts. For the first six months of 2006, the estimated impact of the diesel fuel cost recovery clauses was neutral. The results were also negatively impacted by a shortage of towboats which resulted in delays and wage increases for vessel personnel. The marine transportation operating margin for the 2006 second quarter was 18.6% compared with 18.0% for the 2005 second quarter.
Diesel engine services revenues and operating income for the 2006 second quarter increased 37% and 71%, respectively, compared with the 2005 second quarter. For the first six months of 2006, revenues and operating income increased 34% and 68%, respectively, compared with the 2005 first six months. The record diesel engine services results reflected continued strong marine, offshore oil service, power generation and railroad markets, as well as the acquisition of Global Power Holding Company ("Global") on June 7, 2006. The record results were also positively impacted by higher service rates and parts pricing implemented during 2005 and in the 2006 first half. The operating margin for the 2006 second quarter was 15.0% compared with 12.1% for the 2005 second quarter.
Kirby announced on June 14, 2006, that it had increased its bank revolving credit facility from $150 million to $250 million. The amended credit facility extended the maturity date to June 14, 2011 and provides for an increase in the facility from $250 million up to a maximum of $325 million, subject to the consent of the lending banks.
Joe Pyne, Kirby's President and Chief Executive Officer, commented, "During the 2006 second quarter, our marine transportation segment experienced continued strong utilization, with essentially no spare capacity in our petrochemical, black oil and refined products fleets. Pricing continues to improve. Our diesel engine services segment also performed at record levels."
Commenting on the 2006 third quarter market conditions, Pyne said, "Currently, our marine transportation fleet is fully utilized with no spare capacity. We see no reason why this full utilization will not continue for the balance of 2006 and into 2007. We anticipate a continued tight labor market and we are aggressively recruiting and training vessel personnel, and addressing vessel personnel pay scales. We anticipate towboat availability to remain tight, and we are addressing this issue with the purchase of Capital, as well as aggressively recruiting qualified charter boat operators. Although there are some headwinds imposed by the current horsepower and crewing constraints, these constraints are manageable. We feel these constraints will continue to put pressure on pricing and the pricing velocity levels going forward should be equal to or above 2005 and 2006 levels. We anticipate our diesel engine services segment's markets will remain strong, but we do expect a summer slowdown that is typical for this segment."
Pyne further commented, "Our 2006 third quarter forecast is $.42 to $.47 per share, a 24% to 38% increase over reported 2005 third quarter net earnings of $.34 per share, which included an estimated $.05 per share negative impact from Hurricanes Katrina and Rita. For the 2006 year, we are maintaining our net earnings guidance of $1.69 to $1.79, reflecting a 27% to 35% increase over the 2005 net earnings of $1.33 per share. Capital spending guidance for 2006 is in the $125 to $135 million range and includes approximately $55 million for the construction of 21 tank barges and four towboats."