JUNE 22, 2012 – Tank barge giant Kirby Corporation (NYSE: KEX) announced today that it expects 2012 second quarter net earnings to be in the $.80 to $.85 per share range, below its previously announced earnings guidance range of $.97 to $1.02 per share, but above 2011 second quarter earnings of $.77 per share. For the 2012 year, Kirby is revising its earnings guidance to $3.45 to $3.70 per share, below previously announced guidance range of $3.85 to $4.05 per share, but above 2011 year earnings of $3.33 per share.
Among a number of reasons for the lowered guidance: higher maintenance expenditures at coastal tank barge operation Kirby Offshore Marine, the former K-Sea Transportation Partners LLC. Kirby says it has determined that the fleet was not maintained to Kirby's standards and that additional funds must be spent to bring this equipment up to Kirby standards
The $3.45 to $3.70 per share 2012 year guidance range includes a $.05 per share first quarter charge to the United Holdings contingent earnout liability, but does not include any future earnout charges, and includes $.03 per share of first and second quarter severance charges associated with the integration of Kirby Offshore Marine into Kirby.
Chairman and Chief Executive Officer Joe Pyne commented, "Our lower guidance reflects deterioration in the manufacturing area and softness in the oil field related engine and transmission sales and service and parts sales at United Holdings, our land-based diesel engine services operation. The lower guidance also reflects higher maintenance expenditures, lower than anticipated general and administrative savings and an additional severance charge at Kirby Offshore Marine, formerly K-Sea Transportation Partners LLC, our coastal tank barge operation. Also, during the second quarter our inland tank barge business experienced lower petrochemical volumes from a major customer due to both scheduled and unscheduled plant maintenance at multiple facilities, and some Mississippi River System low water operating problems. While numerous negative issues have resulted in the lowering of our 2012 second quarter earnings guidance, for the 2012 year the primary difference between our low end guidance of $3.45 per share and high end guidance of $3.70 per share is the level of United's oil field related business in the second half of the year."
The current low price of natural gas has resulted in a significant decline in the exploration of United States land-based natural gas shale formations, and a corresponding reduction in the number of fracturing units being employed. As a result, new orders received for the manufacturing of hydraulic fracturing units fell more rapidly than Kirby's original guidance anticipated. Partially offsetting this decline in manufacturing is demand for fracturing units to be remanufactured during 2012. The transition from manufacturing to remanufacturing of fracturing units is occurring, but it will take several quarters to obtain optimal efficiency.
Kirby Offshore Marine
Since the purchase of the coastal fleet in July 2011, Kirby has determined that the fleet was not maintained to Kirby's standards and as a result additional funds must be spent to bring this equipment up to Kirby standards, some of which will be capitalized and some expensed. The estimated amount to be expensed and lost revenue days will impact earnings by $.08 per share for 2012, $.02 in the second quarter. Also, during the second quarter the Northeast and New York Harbors markets softened, resulting in lower equipment utilization levels and more competitive bidding for available movements.
Kirby Inland Marine and Kirby Engine Systems
The legacy inland marine transportation market remains positive, with utilization in the 90 to 95 percent range and continued upward pricing trends. The 2012 second quarter results will be negatively impacted by both scheduled and unscheduled maintenance at multiple facilities of a major customer and some Mississippi River System low water operating problems. Despite the temporarily lower petrochemical volumes from a major customer, results for the legacy inland marine transportation operation for the 2012 second quarter and first six months are projected to be well above comparable 2011 results, with higher operating margins. In addition, the legacy diesel engine services medium-speed and high-speed marine markets, including the Gulf Coast oil services market, and the power generation market continue to improve and their 2012 second quarter and first six months results are projected to be above comparable 2011 results, reflecting higher operating margins.