Kirby reports third quarter results

Written by Nick Blenkey
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NOVEMBER 2, 2017 — Kirby Corporation (NYSE: KEX) yesterday reported net earnings for the third quarter ended September 30, 2017 of $28.6 million, or $0.52 per share, compared with $32.0 million, or $0.59 per share, for the 2016 third quarter. Consolidated revenues for the 2017 third quarter were $541.3 million compared with $434.7 million reported for the 2016 third quarter.

“Our third quarter results were better than expected as the negative impact from hurricanes was more than offset by the combination of some cost recoveries from marine customers for delays, a rebound in volume demand after the hurricanes, and strength in our distribution and services segment, including Stewart & Stevenson LLC,” said President and CEO David Grzebinski. “Inland utilization increased following Hurricane Harvey as pent-up demand and a stronger pricing environment for our customers’ products led to more liquid barge moves. Although this increase in utilization may be temporary, utilization has remained firm into the fourth quarter.”

Marine Transportation

Marine transportation revenues for the 2017 third quarter were $318.8 million compared with $359.0 million for the 2016 third quarter. Operating income for the 2017 third quarter was $36.0 million compared with $55.5 million for the 2016 third quarter. The cost and delay impact of Hurricanes Harvey and Irma was approximately $0.07 per share. Approximately $0.04 per share was offset by some cost recoveries from customers for delays, and elevated utilization in the inland business for the remainder of the quarter due primarily to pent-up demand, increased need for logistical solutions, and a higher pricing environment for customers’ products.

In the inland market, barge utilization was in the mid-80% to mid-90% range for the quarter. Operating conditions during the quarter were good prior to Hurricane Harvey’s arrival on the U.S. Gulf Coast at the end of August. For the remainder of the quarter operating conditions were considerably challenged. Unrelated upriver infrastructure challenges in September also increased delay days. Demand for inland tank barge transportation of petrochemicals and black oil was higher compared to the 2016 third quarter, while demand for the transportation of refined petroleum products was slightly lower. Both term and spot contract pricing were at lower levels relative to the third quarter of 2016, and spot contract pricing was stable sequentially. The operating margin for the inland business was in the mid-to-high teens.

In the coastal market, utilization was in the low 60% to mid-60% range as the market weakened further in the third quarter and barges continued to move from term contracts into the spot market. Revenues from the transportation of refined petroleum products, black oil, and crude oil were lower than the 2016 third quarter, while revenues from the transportation of petrochemicals were stable. The operating margin for the coastal business was in the negative mid-single digits.

The marine transportation segment’s 2017 third quarter operating margin was 11.3% compared with 15.4% for the third quarter of 2016 as a result of weaker pricing in both marine markets and increased idle time in the coastal market as more barges operated in the spot market.

Outlook

Commenting on the 2017 fourth quarter and full year market outlook and guidance, Mr. Grzebinski said, “Our earnings guidance for the 2017 fourth quarter is $0.40 to $0.55 per share compared with $0.60 per share for the 2016 fourth quarter, and considers the full effect of the shares issued as part of the S&S acquisition. Our full year earnings guidance is updated to $1.90 to $2.05 per share, compared to prior guidance of $1.80 to $2.10 per share. Fourth quarter and full year guidance contemplates inland marine transportation utilization in the mid-80% range at the low end and mid-90% range at the high end. In our coastal market, we expect utilization in the low 60% to mid-60% range for the fourth quarter. In the coastal market we remain focused on managing costs and optimizing the equipment available for commercial use.”

Kirby expects 2017 capital spending to be in the $175 million to $185 million range, updated from previous guidance of $165 million to $185 million. Capital spending guidance includes approximately $50 million in progress payments on new coastal equipment, including a 155,000 barrel ATB, two 4900 horsepower and six 5000 horsepower coastal tugboats. The balance of $125 to $135 million is primarily for five new inland tank barges and capital upgrades and improvements to existing inland and coastal marine equipment and facilities, as well as distribution and services facilities.

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Kirby reports third quarter results

Written by Nick Blenkey
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Consolidated revenues for the 2015 third quarter were $532.6 million compared with $680.7 million for the 2014 third quarter.

President and CEO David Grzebinski said the results were "largely in line with our expectations."

"Demand across the majority of the products we carry in the inland marine transportation market remained stable with utilization in the 90% to 95% range," he said. "Market pressure from inland tank barges shifting out of crude oil service led to continued modest pressure on contract renewal pricing. Spot prices were generally around contract price levels throughout the quarter. In the coastal marine transportation market, pricing for term contract renewals increased modestly. Our results also reflected the anticipated earnings impact from heavy coastal equipment shipyard activity."

Mr. Grzebinski called market conditions in Kirby's land-based diesel engine services business, as continuing to be challenging due to the decline in the price of crude oil and, consequently, the low utilization levels of the oilfield service industry pressure pumping fleet.

In the marine diesel engine services and power generation markets, results reflect continuing soft activity in the Gulf of Mexico oilfield service market, but otherwise stable levels of demand.

MARINE TRANSPORTATION

Marine transportation revenues for the 2015 third quarter were $418.3 million compared with $448.7 million for the 2014 third quarter. Operating income for the 2015 third quarter was $93.7 million compared with $112.1 million for the 2014 third quarter.

Kirby's inland marine transportation business maintained tank barge utilization in the 90% to 95% range.

Demand for inland barge transportation of petrochemicals, refined products and black oil products, excluding crude oil, was consistent with the second quarter. Demand for barges moving crude oil and condensate during the quarter was lower both sequentially and year over year.

Operating conditions were challenging due to scheduled lock closures along the Gulf Intracoastal Waterway and high water conditions during the first part of the third quarter. Delays related to lock outages contributed to a 40% increase in delay days relative to the prior year quarter and a decline in ton miles. In addition to increased delay days, fuel prices, which were down 38% year-over-year, contributed to the year over year decline in revenue.

Demand in the coastal marine transportation market for the transportation of refined petroleum products, black oil, and petrochemicals was relatively stable, although demand for equipment for crude oil transportation declined sequentially and year over year.

Coastal fleet utilization remained in the 90% to 95% range and operating conditions were seasonally normal during the third quarter. A continued heavy shipyard schedule impacted operating results.

The marine transportation segment's 2015 third quarter operating margin was 22.4% compared with 25.0% for the third quarter of 2014 as a result of higher labor costs, including pension, lower inland marine transportation rates, increased shipyard activity and higher depreciation expense in the coastal business, and the impact of fuel price escalators on inland marine affreightment contracts.

CASH FLOW

Kirby continued to generate strong cash flow during the 2015 first nine months with EBITDA of $437.5 million compared with $484.6 million for the 2014 first nine months. Operating cash flow was used in part to fund capital expenditures of $265.2 million for the 2015 first nine months, including $66.6 million for new inland tank barge and towboat construction, $75.2 million for progress payments on the construction of four new coastal articulated tank barge and tugboat units ("ATBs"), $3.4 million for progress payments on the construction of two 4900 horsepower coastal tugboats, $1.6 million for progress payments on the construction of a new coastal petrochemical barge and $118.4 million primarily for upgrades to existing inland and coastal fleets.

Additionally, Kirby spent $41.3 million to acquire six pressure barges in the first quarter and a total of $202.2 million on share repurchases in the first nine months of 2015.

Total debt as of September 30, 2015 was $810.4 million versus $716.7 million on December 31, 2014, and Kirby's debt-to-capitalization ratio was 26.4%.

OUTLOOK

Mr. Grzebinski said, "Our earnings guidance range for the 2015 fourth quarter is $0.93 to $1.03 per share and we are revising our full year 2015 guidance range to $4.10 to $4.20 per share [down from the prior guidance of $4.10 to $4.35 per share]. In our inland marine transportation market, our fourth quarter outlook reflects continued modest pricing pressure. Utilization in Kirby's inland fleet, however, is projected to remain in the 90% to 95% range. In our coastal marine transportation market, although we've seen some industry spot availability related to the uncertainty around crude supplies, we expect supply and demand to remain consistent with the first nine months of the year and Kirby's fleet utilization to remain above 90%. Our guidance assumes normal fourth quarter operating conditions for both the inland and coastal marine transportation markets, including the winter cessation of most operations in Alaska."

Mr. Grzebinski said demand is expected to remain weak in the land-based diesel engine services market and the offshore oil services portion of the marine diesel engine services market, but is expected to remain relatively stable in the marine and power generation markets.

CAPITAL SPENDING

Kirby expects 2015 capital spending to be in the $320 to $330 million range, an increase of $5 million from earlier capital spending guidance. Contributing to this is a shipbuilding contract entered into the quarter for a 35,000 barrel coastal petrochemical tank barge. The vessel will enter service under contract with an existing customer on delivery, expected in early 2017.

The capital spending guidance range includes approximately $70 million for the construction of 38 inland tank barges and three inland towboats, all expected to be delivered in 2015.The capital spending guidance range also includes approximately $100 million in progress payments on new coastal equipment, including two 185,000 barrel coastal ATBs, two 155,000 barrel coastal ATBs, two 4900 horsepower coastal tugboats and the new coastal petrochemical tank barge.The balance of $150 to $160 million is primarily for capital upgrades and improvements to existing inland and coastal marine equipment and facilities, as well as diesel engine services facilities.

OCTOBER 28, 2015 – Kirby Corporation (NYSE: KEX), the largest tank barge operator in the U.S., today reported net earnings for the third quarter ended September 30, 2015 of $56.8 million, or $1.04 per share, compared with $76.7 million, or $1.34 per share, for the 2014 third quarter.

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