Kirby Corporation Announces Record 2006 Second Quarter and Six Months Results29 July 2006
Kirby Corporation (NYSE: KEX) ("Kirby") today announced 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.
On July 24, 2006, Kirby signed an agreement to purchase the assets of Capital Towing Limited ("Capital") for approximately $15 million in cash. Capital owns 11 inland towboats, six of which are currently on charter to Kirby. One towboat is currently under charter to another company and that charter expires within 30 days. The remaining four are under charters with other companies with terms expiring within the next ten months. The six towboats currently under charter to Kirby will be purchased at closing and the remaining five towboats will be purchased upon expiration of their present charters. The acquisition will be financed through Kirby's $250 million revolving credit facility. Kirby and Capital have entered into a charter agreement whereby Capital will continue to operate the towboats. The vessel crews will remain employees of Capital. Kirby also recently signed a letter of intent for the construction of two 1800 horsepower towboats for delivery in the fourth quarter of 2007.
On July 21, 2006, Kirby purchased the assets of Marine Engine Specialists, Inc. ("MES") for $3.6 million, subject to post-closing inventory adjustments. MES is a Gulf Coast high-speed diesel engine services provider, operating a factory-authorized full service distributorship for John Deere, as well as a service provider for Detroit Diesel. Financing of the acquisition was through Kirby's $250 million revolving credit facility.
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. The unsecured credit facility has a variable interest rate based on the London Interbank Offered Rate ("LIBOR") and varies with Kirby's senior debt rating and the level of debt outstanding. The current variable interest rate spread is 40 basis points over LIBOR. As of June 30, 2006, Kirby had $82.5 million outstanding under its revolving credit facility, primarily resulting from the purchase of Global. As of June 30, 2006, Kirby's debt to capitalization ratio was 32.0% compared with 25.9% as of March 31, 2006.
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, Mr. 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."
Mr. 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."
This earnings press release includes marine transportation performance measures for both the 2006 and 2005 second quarters and first six months. The performance measures include ton miles, revenues per ton mile, towboats operated and delay days. Comparable performance measures for the 2005 and 2004 years and quarters are available at Kirby's web site under the caption Performance Measurements in the Investor Relations section. Kirby's homepage can be accessed by visiting http://www.kirbycorp.com .
A conference call is scheduled at 10:00 a.m. central time tomorrow, Thursday, July 27, 2006, to discuss the 2006 second quarter and first six months, and the outlook for the 2006 third quarter and year. The conference call number is 888-328-2514 for domestic callers and 706-679-3262 for international callers. The leader's name is Steve Holcomb. An audio playback will be available at 12:00 p.m. central time on July 27 through 6:00 p.m. on Friday, August 25, 2006, by dialing 800-642-1687 for domestic callers and 706- 645-9291 for international callers. The conference ID number is 2758959. The conference call can also be accessed by visiting Kirby's homepage at http://www.kirbycorp.com/ or at http://audioevent.mshow.com/304065 . A replay will be available on each of those web sites following the conference call.
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 before interest expense, taxes on income, depreciation and amortization. A reconciliation of EBITDA for the 2006 and 2005 second quarters and first six months with GAAP net earnings for the same periods is included in the Condensed Consolidated Financial Information in this press release.
Kirby Corporation, based in Houston, Texas, operates inland tank barges and towing vessels, transporting petrochemicals, black oil products, refined petroleum products and agricultural chemicals throughout the United States inland waterway system. Kirby also operates four ocean-going barge and tug units transporting dry-bulk commodities in United States coastwise trade. Through the diesel engine services segment, Kirby provides after-market service for large medium-speed and high-speed diesel engines and reduction gears used in marine, power generation and railroad applications.
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, 2005, filed with the Securities and Exchange Commission.
CONFERENCE CALL INFORMATION
Date: Thursday, July 27, 2006 Leader: Steve Holcomb
Time: 10:00 a.m. central time Passcode: Kirby
U.S.: 888-328-2514 Int'l: 706-679-3262
Website: http://www.kirbycorp.com or http://audioevent.mshow.com/304065
A summary of the results for the second quarter and first six months follows:
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Second Quarter Six Months
2006 2005 2006 2005
(unaudited, $ in thousands except per share amounts)
Revenues:
Marine transportation $204,088 $170,742 $393,471 $327,952
Diesel engine services 39,204 28,534 74,724 55,768
243,292 199,276 468,195 383,720
Costs and expenses:
Costs of sales and
operating expenses 157,595 128,267 301,973 248,194
Selling, general and
administrative 26,518 22,228 50,279 43,187
Taxes, other than
on income 3,403 2,909 6,590 6,095
Depreciation and
amortization 15,515 13,964 30,605 28,945
Gain on disposition
of assets (785) (1,795) (942) (1,987)
202,246 165,573 388,505 324,434
Operating income 41,046 33,703 79,690 59,286
Equity in earnings of
marine affiliates 87 707 553 4
Loss on debt retirement --- (1,144) --- (1,144)
Other expense (134) (400) (68) (716)
Interest expense (3,304) (3,113) (6,002) (6,259)
Earnings before taxes
on income 37,695 29,753 74,173 51,171
Provision for taxes
on income (14,362) (11,306) (28,260) (19,445)
Net earnings $23,333 $18,447 $45,913 $31,726
Net earnings per share
of common stock:
Basic $.44 $.37 $ .88 $.64
Diluted $.44 $.36 $ .86 $.62
Common stock outstanding
(in thousands):
Basic 52,450 49,890 52,268 49,814
Diluted 53,411 51,284 53,208 51,224
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Second Quarter Six Months
2006 2005 2006 2005
(unaudited, $ in thousands except per share amounts)
EBITDA: (A)
Net earnings $23,333 $18,447 $45,913 $31,726
Interest expense 3,304 3,113 6,002 6,259
Provision for taxes
on income 14,362 11,306 28,260 19,445
Depreciation and
amortization 15,515 13,964 30,605 28,945
$56,514 $46,830 $110,780 $86,375
Capital expenditures $42,760 $39,540 $64,386 $63,563
Acquisitions of business
and marine equipment $100,533 $7,000 $116,773 $7,000
June 30,
2006 2005
(unaudited, $ in thousands)
Long-term debt, including
current portion $285,434 $217,638
Stockholders' equity $606,047 $471,808
Debt to capitalization ratio 32.0% 31.6%
MARINE TRANSPORTATION STATEMENTS OF EARNINGS
Second Quarter Six Months
2006 2005 2006 2005
(unaudited, $ in thousands)
Marine transportation
revenues $204,088 $170,742 $393,471 $327,952
Costs and expenses:
Costs of sales and
operating expenses 129,507 106,795 248,478 206,447
Selling, general and
administrative 18,777 17,260 36,939 33,572
Taxes, other than on
income 3,133 2,757 6,144 5,807
Depreciation and
amortization 14,673 13,247 28,971 27,522
166,090 140,059 320,532 273,348
Operating income $37,998 $30,683 $72,939 $54,604
Operating margins 18.6% 18.0% 18.5% 16.7%
DIESEL ENGINE SERVICES STATEMENTS OF EARNINGS
Second Quarter Six Months
2006 2005 2006 2005
(unaudited, $ in thousands)
Diesel engine services
revenues $39,204 $28,534 $74,724 $55,768
Costs and expenses:
Costs of sales and
operating expenses 28,078 21,473 53,485 41,742
Selling, general and
administrative 4,640 3,240 8,562 6,350
Taxes, other than income 136 95 223 205
Depreciation and
amortization 475 283 814 561
33,329 25,091 63,084 48,858
Operating income $5,875 $3,443 $11,640 $6,910
Operating margins 15.0% 12.1% 15.6% 12,4%
OTHER COSTS AND EXPENSES
Second Quarter Six Months
2006 2005 2006 2005
(unaudited, $ in thousands)
General corporate
expenses $3,612 $2,218 $5,831 $4,215
Gain on disposition
of assets $785 $1,795 $942 $1,987
MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS
Second Quarter Six Months
2006 2005 2006 2005
Ton Miles (in millions) (B) 4,096 4,135 7,891 7,873
Revenue/Ton Mile
(cents/tm) (C) 4.7 4.1 4.8 4.2
Towboats operated
(average) (D) 241 241 240 241
Delay Days (E) 1,378 1,790 3,849 5,079
Average cost per gallon
of fuel consumed $1.99 $1.55 $1.92 $1.44
Tank barges:
Active 897 887
Inactive 62 65
Barrel capacities (in millions):
Active 16.7 16.6
Inactive 1.2 1.2
(A) 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 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.
(B) 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.
(C) Inland marine transportation revenues divided by ton miles. Example:
Second quarter 2006 inland marine revenues of $193,905,000 divided by
4,096,000,000 ton miles = 4.7 cents
(D) Towboats operated are the average number of owned and chartered
towboats operated during the period.
(E) Delay days measures the lost time incurred by a tow (towboat and tank
barges) during transit. The measure includes transit delays caused
by weather, lock congestion and other navigational factors.
Source: prnewswire
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