JULY 24, 2013 — Kirby Corporation (NYSE: KEX), the largest U.S. domestic tank barge operator, reported second quarter results that saw net earnings $63.1 million, or $1.11 per share, compared with $47.6 million, or $.85 per share, for the 2012 second quarter. Consolidated revenues for the quarter were $563.9 million compared with $511.8 million reported for the 2012 second quarter.
The second quarter results included a $6.1 million before taxes, or $.07 per share, credit reducing the fair value of the contingent earnout liability associated with the acquisition of United Holdings LLC ("United") in April 2011. In addition, the 2013 second quarter included an estimated $.03 per share negative impact from high water on the Mississippi and Illinois Rivers throughout the quarter, and the closure of the Algiers Lock, a major lock on the Gulf Intracoastal Waterway near New Orleans.
Joe Pyne, Kirby's Chairman and Chief Executive Officer, commented, "Our second quarter results benefited from continued strong demand and favorable pricing in our inland and coastal marine transportation markets. We were also able to manage through the high water and lock closure issues with only an estimated $.03 per share negative impact. Our land-based diesel engine services market remained weak. However, there are signs the cycle has bottomed."
Kirby reported net earnings for the 2013 first six months of $119.7 million, or $2.10 per share, compared with $98.5 million, or $1.76 per share, for the first six months of 2012. Consolidated revenues for the 2013 first six months were $1.12 billion compared with $1.08 billion for the first six months of 2012.
Segment Results – Marine Transportation
Marine transportation revenues for the 2013 second quarter were $423.9 million compared with $342.2 million for the 2012 second quarter. Operating income for the 2013 second quarter was $97.6 million compared with $71.7 million for the 2012 second quarter.
The inland marine transportation markets remained strong with fleet utilization in the 90% to 95% range and continued favorable pricing trends. High water on the Mississippi and Illinois Rivers throughout the quarter resulted in increased transit times and additional horsepower requirements. In addition, the closure of the Algiers Lock due to structural damage during the entire second quarter created heavy congestion and multi-day delays in the New Orleans area, and also resulted in delays at the Bayou Sorrels and Port Allen Locks.
The coastal marine transportation markets also remained strong with fleet utilization in the 90% range compared with 75% for the second quarter of 2012, leading to higher term and spot contract pricing. The higher utilization resulted from increased demand for crude oil and gas condensate movements and expansion of the coastal customer base to include inland's major customers with coastal requirements. As anticipated, the second quarter was negatively impacted by a heavy fleet maintenance schedule, and resulting lost revenue days and higher expenditures.
The marine transportation operating margin for the 2013 second quarter was 23.0% compared with 21.0% for the second quarter of 2012. The 2013 second quarter margin reflected the overall strong inland and coastal demand and equipment utilization, and higher term and spot contract pricing, partially offset by the negative impact of the high water and lock issues and higher maintenance impact of the coastal fleet.
Segment Results – Diesel Engine Services
Diesel engine services revenues for the 2013 second quarter were $140.0 million compared with $169.7 million for the 2012 second quarter. Operating income for the 2013 second quarter was $14.9 million, including a $6.1 million credit to the United contingent earnout liability, compared with operating income of $15.1 million for the 2012 second quarter.
The decline in revenue primarily reflected a continued weakness in demand for the manufacture of pressure pumping units, and lower sales and service of land-based engines, transmissions and parts. The market for the remanufacturing of older pressure pumping units remained steady. The marine diesel engine services market benefited from large service projects for inland and coastal customers, as well as service work for international drilling rigs.
The diesel engine services operating margin was 10.7% for the 2013 second quarter, including the positive impact of the $6.1 million credit to the contingent earnout liability, compared with 8.9% for the 2012 second quarter.
Cash flow remained strong during the 2013 first six months, with EBITDA of $288.9 million compared with $242.8 million for the 2012 first six months. The cash flow was used in part to fund capital expenditures of $168.2 million, including $106.3 million for new inland tank barge and towboat construction, $12.3 million for progress payments on the construction of two offshore dry-bulk barge and tug units completed during the 2013 second quarter, and $49.6 million primarily for upgrades to the existing inland and coastal fleets. Total debt as of June 30, 2013 was $1.02 billion and Kirby's debt-to-capitalization ratio was 35.7%.
Commenting on the 2013 third quarter and full year market outlook and guidance, Mr. Pyne said, "Our earnings guidance for the 2013 third quarter is $1.05 to $1.15 per share compared with $.95 per share reported for the 2012 third quarter. For the 2013 year, we are raising our guidance to $4.15 to $4.35 to reflect the net effect of the earnout credit and the impact of the high water and lock issues. This compares with $3.73 per share for the 2012 year. Our third quarter guidance range reflects continued strong demand across all inland marine transportation markets, 90% to 95% utilization levels, and favorable pricing trends. We anticipate continued improvement in our coastal marine transportation markets, 90% utilization levels, and improving pricing trends. For our diesel engine services segment, we continue to believe we are at the bottom of the cycle in our land-based market and should begin to see some improvement later this year or early 2014. Our guidance assumes our marine diesel and power generation sectors will remain consistent with the 2013 first half."
Mr. Pyne continued, "Our 2013 capital spending guidance range is currently $230 to $240 million, including approximately $135 million for the construction of 68 inland tank barges and three inland towboats, and approximately $12 million in progress payments on the construction of two offshore articulated dry-bulk barge and tugboat units placed in service in the 2013 second quarter. The balance of $83 to $93 million is primarily capital upgrades and improvements to existing inland and coastal marine equipment. The increase from the previous capital spending guidance range of $190 to $200 million is primarily related to new construction contracts signed in the 2013 second quarter for 52 inland tank barges to be delivered beginning in the 2013 fourth quarter and into the 2014 first half, plus additional capital upgrades to our existing marine transportation fleet, principally the coastal fleet."