Kirby Corporation Announces 2022 First Quarter Results
- First quarter 2022 earnings per share of
$0.29 - Marine transportation impacted by the COVID-19 Omicron variant in January and February, reducing earnings by approximately
$0.10 per share - Inland marine experienced significant market improvement in March with barge utilization increasing above 90% since mid-March
- Increased oil and gas demand sequentially boosted distribution and services results despite continued supply chain constraints
- Quarterly earnings expected to improve as the year progresses
“Inland marine was significantly challenged by the Omicron variant during the first two months of the quarter, as increased cases of the virus among Kirby’s mariners and quarantine protocols led to considerable crewing challenges, lost revenue, and increased operating costs. This ultimately contributed to a sequential reduction in inland operating margin for the quarter. Despite these challenging circumstances, market conditions rapidly improved in March as cases of the Omicron variant dissipated and refinery utilization ramped up. These conditions contributed to Kirby’s barge utilization increasing to over 90% since mid-March. With this improvement and increased spot market and term contract rates, inland operating margins increased into the low double digits during March.
“In coastal marine, demand for refined products and black oil transportation modestly improved in the first quarter, driving increased barge utilization and some small rate gains. However, the impact of the Omicron variant on operations and reduced coal shipments in our offshore dry cargo business resulted in lower revenues and an operating loss for the quarter. At the end of the quarter, we announced a new business, Kirby Offshore Wind, and its award to provide barge transportation services for offshore wind towers and turbines to Maersk Supply Service (“Maersk”) for the Empire Wind project in
“In distribution and services, activity was strong throughout much of the segment with sequential and year-on-year revenue and operating income growth. In oil and gas, we experienced increased demand for new transmissions and received incremental orders for new environmentally friendly pressure pumping equipment and frac-related power generation equipment. However, as anticipated, supply chain constraints continued, delaying deliveries of new manufactured equipment into future quarters. In commercial and industrial, demand was solid, with increased year-on-year activity across our businesses.”
Segment Results – Marine Transportation
Marine transportation revenues for the 2022 first quarter were
In the inland market, average 2022 first quarter barge utilization was in the mid-80% range compared to the mid-70% range in the 2021 first quarter. In January and February, inland operations were significantly constrained by the Omicron variant, resulting in reduced barge utilization, crewing challenges, lost revenue and increased costs. Operating conditions on the inland waterways were also affected by poor winter weather, including significant wind and fog along the
In coastal, market conditions improved modestly during the quarter, with Kirby’s barge utilization increasing into the low 90% range. Pricing in the spot market and term contract renewals also increased in the mid-single digits sequentially and year-on-year. Despite these improvements, revenues in the coastal market only increased modestly when compared to the 2021 first quarter primarily due to the Company’s exit from
Segment Results – Distribution and Services
Distribution and services revenues for the 2022 first quarter were
In the commercial and industrial market, revenues and operating income increased compared to the 2021 first quarter, primarily due to improved economic activity across the
In the oil and gas market, revenues and operating income improved compared to the 2021 first quarter due to higher oilfield activity which resulted in increased demand for new transmissions and parts in the distribution business. Although manufacturing was heavily impacted by supply chain delays, the business continued to experience increased year-on-year demand with incremental orders and deliveries of new environmentally-friendly pressure pumping equipment and power generation equipment for electric fracturing. Overall, oil and gas revenues increased 71% compared to the 2021 first quarter and represented approximately 42% of segment revenues. Oil and gas operating margins were in the low single digits.
Cash Generation
For the 2022 first quarter, EBITDA was
2022 Outlook
Commenting on the 2022 full year outlook,
In inland marine, favorable market conditions have contributed to Kirby’s barge utilization being at or modestly above 90% since mid-March. This improvement is expected to continue going forward, driven by high refinery and petrochemical plant utilization, increased volumes from new petrochemical plants, and minimal new barge construction across the industry. As a result, the Company expects continued improvements in the spot market, which currently represents approximately 35% of inland revenues. Term contracts are also expected to continue to reset higher to reflect improved market conditions for the duration of the year. Increases in fuel costs are expected to contribute to increased rebill revenue with no margin. Overall, inland revenues are expected to grow by 15% to 20% year-on-year with steady increases throughout the year as market conditions tighten further and contracts renew higher. Material inflation to costs, including significantly rising fuel prices, are expected to be headwinds but will be largely mitigated when escalations in contracts occur during the second half of the year. Barring cost inflation and rising fuel costs as well as the timing of contract escalations and fuel rebills, we expect near term operating margins to be in the low double digits and gradually improve as the year progresses.
In coastal marine, Kirby expects modestly improved customer demand through the balance of the year with Company barge utilization in the 90% range. Rates are also expected to slowly improve, but meaningful gains will be challenged by underutilized barge capacity across the industry. For the full year, with the impact of the Company’s exit from the
In distribution and services, favorable oilfield fundamentals and strong demand in commercial and industrial are expected to continue in 2022. In the oil and gas market, high commodity prices, increasing rig counts, and growing well completions activity are expected to yield strong demand for OEM products, parts, and services in the distribution business. In manufacturing, the Company expects demand for new environmentally friendly pressure pumping and e-frac power generation equipment to be strong, with new orders and increased deliveries of new equipment as the year progresses. However, ongoing supply chain issues and long lead times are expected to persist in the near-term, contributing to some volatility as deliveries of new products are likely to shift between quarters and potentially into 2023. In commercial and industrial, strong markets are expected to yield full year revenue growth in the low double-digit percentage range, with increased activity in power generation, marine repair, and on-highway. In the second and third quarters, the Company expects to benefit from increased seasonal demand in
Kirby expects 2022 capital spending to range between
Conference Call
A conference call is scheduled for
GAAP to Non-GAAP Financial Measures
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
Forward-Looking Statements
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
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
| Three Months | ||||||||||
| 2022 | 2021 | |||||||||
| (unaudited, $ in thousands, except per share amounts) | ||||||||||
| Revenues: | ||||||||||
| Marine transportation | $ | 355,536 | $ | 300,951 | ||||||
| Distribution and services | 255,246 | 195,899 | ||||||||
| Total revenues | 610,782 | 496,850 | ||||||||
| Costs and expenses: | ||||||||||
| Costs of sales and operating expenses | 450,618 | 363,040 | ||||||||
| Selling, general and administrative | 75,765 | 69,629 | ||||||||
| Taxes, other than on income | 9,590 | 8,260 | ||||||||
| Depreciation and amortization | 49,964 | 54,890 | ||||||||
| Gain on disposition of assets | (4,849 | ) | (2,133 | ) | ||||||
| Total costs and expenses | 581,088 | 493,686 | ||||||||
| Operating income | 29,694 | 3,164 | ||||||||
| Other income | 4,308 | 3,791 | ||||||||
| Interest expense | (10,203 | ) | (10,966 | ) | ||||||
| Earnings (loss) before taxes on income | 23,799 | (4,011 | ) | |||||||
| (Provision) benefit for taxes on income | (6,213 | ) | 891 | |||||||
| Net earnings (loss) | 17,586 | (3,120 | ) | |||||||
| Net earnings attributable to noncontrolling interests | (152 | ) | (255 | ) | ||||||
| Net earnings (loss) attributable to Kirby | $ | 17,434 | $ | (3,375 | ) | |||||
| Net earnings (loss) per share attributable to Kirby common stockholders: | ||||||||||
| Basic | $ | 0.29 | $ | (0.06 | ) | |||||
| Diluted | $ | 0.29 | $ | (0.06 | ) | |||||
| Common stock outstanding (in thousands): | ||||||||||
| Basic | 60,173 | 60,016 | ||||||||
| Diluted | 60,463 | 60,016 | ||||||||
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
| Three Months | ||||||||||
| 2022 | 2021 | |||||||||
| (unaudited, $ in thousands) | ||||||||||
| Adjusted EBITDA: (1) | ||||||||||
| Net earnings (loss) attributable to Kirby | $ | 17,434 | $ | (3,375 | ) | |||||
| Interest expense | 10,203 | 10,966 | ||||||||
| Provision (benefit) for taxes on income | 6,213 | (891 | ) | |||||||
| Depreciation and amortization | 49,964 | 54,890 | ||||||||
| $ | 83,814 | $ | 61,590 | |||||||
| Capital expenditures | $ | 35,075 | $ | 14,052 | ||||||
| Acquisitions of businesses | $ | 3,900 | $ | — | ||||||
2022 |
2021 |
|||||||||
| (unaudited, $ in thousands) | ||||||||||
| Cash and cash equivalents | $ | 32,398 | $ | 34,813 | ||||||
| Long-term debt, including current portion | $ | 1,154,735 | $ | 1,163,367 | ||||||
| Total equity | $ | 2,911,865 | $ | 2,888,782 | ||||||
| Debt to capitalization ratio | 28.4 | % | 28.7 | % | ||||||
MARINE TRANSPORTATION STATEMENTS OF EARNINGS
| Three Months | ||||||||||
| 2022 | 2021 | |||||||||
| (unaudited, $ in thousands) | ||||||||||
| Marine transportation revenues | $ | 355,536 | $ | 300,951 | ||||||
| Costs and expenses: | ||||||||||
| Costs of sales and operating expenses | 254,359 | 214,125 | ||||||||
| Selling, general and administrative | 32,336 | 30,578 | ||||||||
| Taxes, other than on income | 7,820 | 6,729 | ||||||||
| Depreciation and amortization | 44,086 | 47,579 | ||||||||
| Total costs and expenses | 338,601 | 299,011 | ||||||||
| Operating income | $ | 16,935 | $ | 1,940 | ||||||
| Operating margin | 4.8 | % | 0.6 | % | ||||||
DISTRIBUTION AND SERVICES STATEMENTS OF EARNINGS
| Three Months | ||||||||||
| 2022 | 2021 | |||||||||
| (unaudited, $ in thousands) | ||||||||||
| Distribution and services revenues | $ | 255,246 | $ | 195,899 | ||||||
| Costs and expenses: | ||||||||||
| Costs of sales and operating expenses | 196,519 | 149,127 | ||||||||
| Selling, general and administrative | 41,922 | 36,488 | ||||||||
| Taxes, other than on income | 1,728 | 1,492 | ||||||||
| Depreciation and amortization | 4,106 | 5,881 | ||||||||
| Total costs and expenses | 244,275 | 192,988 | ||||||||
| Operating income | $ | 10,971 | $ | 2,911 | ||||||
| Operating margin | 4.3 | % | 1.5 | % | ||||||
OTHER COSTS AND EXPENSES
| Three Months | ||||||||||
| 2022 | 2021 | |||||||||
| (unaudited, $ in thousands) | ||||||||||
| General corporate expenses | $ | 3,061 | $ | 3,820 | ||||||
| Gain on disposition of assets | $ | (4,849 | ) | $ | (2,133 | ) | ||||
RECONCILIATION OF FREE CASH FLOW
The following is a reconciliation of GAAP net cash provided by operating activities to non-GAAP free cash flow(2):
| Three Months | ||||||||||
| 2022 | 2021(3) | |||||||||
| (unaudited, $ in millions) | ||||||||||
| Net cash provided by operating activities | $ | 32.2 | $ | 102.6 | ||||||
| Less: Capital expenditures | (35.1 | ) | (14.1 | ) | ||||||
| Free cash flow(2) | $ | (2.9 | ) | $ | 88.5 | |||||
| FY 2022 Projection | FY 2021(3) | |||||||||||
| Low | High | Actual | ||||||||||
| (unaudited, $ in millions) | ||||||||||||
| Net cash provided by operating activities | $ | 420.0 | $ | 480.0 | $ | 321.6 | ||||||
| Less: Capital expenditures | (190.0 | ) | (170.0 | ) | (98.0 | ) | ||||||
| Free cash flow(2) | $ | 230.0 | $ | 310.0 | $ | 223.6 | ||||||
MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS
| First Quarter | ||||||||
| 2022 | 2021 | |||||||
| Inland Performance Measurements: | ||||||||
| 3,168 | 2,981 | |||||||
| Revenue/Ton Mile (cents/tm) (5) | 8.8 | 7.5 | ||||||
| Towboats operated (average) (6) | 263 | 241 | ||||||
| Delay Days (7) | 3,137 | 2,854 | ||||||
| Average cost per gallon of fuel consumed | $ | 2.50 | $ | 1.65 | ||||
| Barges (active): | ||||||||
| Inland tank barges | 1,025 | 1,057 | ||||||
| Coastal tank barges | 30 | 44 | ||||||
| Offshore dry-cargo barges | 4 | 4 | ||||||
| Barrel capacities (in millions): | ||||||||
| Inland tank barges | 22.9 | 23.7 | ||||||
| Coastal tank barges | 3.1 | 4.2 | ||||||
| (1) | Kirby has historically evaluated its operating performance using numerous measures, one of which is Adjusted EBITDA, a non-GAAP financial measure. Kirby defines Adjusted EBITDA as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, impairment of long-lived assets, and impairment of goodwill. Adjusted EBITDA is presented because of its wide acceptance as a financial indicator. Adjusted EBITDA is one of the performance measures used in Kirby’s incentive bonus plan. Adjusted 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. Adjusted 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. | |
| (2) | Kirby uses free cash flow, which is defined as net cash provided by operating activities less capital expenditures, to assess and forecast cash flow and to provide additional disclosures on the Company’s liquidity as a result of uncertainty surrounding the impact of the COVID-19 pandemic on global and regional market conditions. Free cash flow does not imply the amount of residual cash flow available for discretionary expenditures as it excludes mandatory debt service requirements and other non-discretionary expenditures. These non-GAAP financial measures are not calculations 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. | |
| (3) | See Kirby’s 2021 10-K for amounts provided by (used in) investing and financing activities. | |
| (4) | 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. | |
| (5) | Inland marine transportation revenues divided by ton miles. Example: First quarter 2022 inland marine transportation revenues of |
|
| (6) | Towboats operated are the average number of owned and chartered towboats operated during the period. | |
| (7) | Delay days measures the lost time incurred by a tow (towboat and one or more tank barges) during transit. The measure includes transit delays caused by weather, lock congestion and other navigational factors. |
Contact:Eric Holcomb 713-435-1545
Source: Kirby Corporation