Kirby Corporation Announces 2019 Fourth Quarter and Full Year Results and Signs Agreement to Purchase the Inland Tank Barge Fleet of Savage Inland Marine
- 2019 fourth quarter GAAP earnings per share of
$0.05 , or earnings per share of$0.58 excluding one-time charges of$0.53 per share - One-time pre-tax charges of
$40.3 million or$0.53 per share primarily relates to severance and oil and gas related inventory write-downs - Kirby has signed an agreement to acquire the inland tank barge fleet of Savage Inland Marine for approximately
$278 million - 2020 full year earnings per share guidance of
$2.60 to $3.40
For the 2019 full year, Kirby reported net earnings attributable to Kirby of
Kirby’s 2019 fourth quarter and full year results were impacted by one-time pre-tax charges of
Kirby also announced the signing of a definitive agreement to acquire the inland tank barge fleet of Savage Inland Marine (“Savage”) for approximately
“In inland marine transportation, we experienced favorable market conditions with barge utilization rates in the low 90% range and pricing increases on term contract renewals. As anticipated, however, the efficiency of our operations declined with the onset of winter weather conditions and major lock maintenance closures which contributed to a 33% increase in delay days as compared to the third quarter. Additionally, the quarter’s results were impacted by higher planned barge maintenance.
“The purchase of Savage’s inland tank barge and towboat fleet represents an excellent strategic addition to Kirby’s inland marine fleet with young, well-maintained vessels. In the last few years, Savage has built a diverse and well-respected inland marine transportation business with a strong presence in towing, bunkering, and fleeting along the
“In coastal, we continued to experience strong customer demand and tightening market conditions with reduced availability of equipment, particularly in the Atlantic and
“In distribution and services, results in our oil and gas related businesses declined with many of our key customers cutting their spending and activity levels through the quarter and holidays. In manufacturing, our financial results were heavily impacted by very few orders and weak demand for remanufacturing. Similarly, sales of oilfield related equipment, parts, and service in our distribution businesses were also at reduced levels. Although we believe there will be an increase in oilfield activity levels in 2020, the outlook for our business remains challenging in the near-term as our customers continue to rationalize their pressure pumping fleets and focus on cash flow. As a result, we implemented additional workforce reductions and adjusted the value of oilfield and pressure pumping related inventory to align with current market conditions.
“In the commercial and industrial market, we acquired
Segment Results – Marine Transportation
Marine transportation revenues for the 2019 fourth quarter were
In the inland market, barge utilization was in the low 90% range during the quarter and was adversely impacted by reduced chemical plant and refinery utilization and extended turnarounds for some major customers. Operating conditions were negatively impacted by significant wind and fog, as well as lock maintenance closures along the
In the coastal market, barge utilization rates were in the mid-80% range and benefited from strong customer demand and several spot market barges which were placed on term contracts during the 2019 fourth quarter. Compared to the 2018 fourth quarter, spot market pricing increased approximately 10%, and expiring term contracts repriced higher in a range between 5% and 15%. Revenues in the coastal market were up moderately year-on-year primarily due to increased pricing and higher barge utilization. During the quarter, coastal represented approximately 22% of marine transportation revenue and had an operating margin in the mid-to high single digits. Coastal operating income was favorably impacted by lower operating expenses which were partially offset by one-time severance and early retirement expense of
Segment Results – Distribution and Services
Distribution and services revenues for the 2019 fourth quarter were
In the oil and gas market, revenues and operating income declined compared to the 2018 fourth quarter primarily due to reduced activity in the oilfield which resulted in lower customer demand for new and overhauled transmissions, parts and service in the distribution businesses. The manufacturing group also reported lower year-on-year revenue and an operating loss as a result of reduced orders and deliveries of new and remanufactured pressure pumping equipment. During the quarter, the oil and gas businesses incurred one-time severance and early retirement charges of
In the commercial and industrial market, revenues increased compared to the 2018 fourth quarter primarily due to improvement in the power generation, commercial marine, and on-highway businesses. Operating income declined modestly due to service and product sales mix. During the quarter, the commercial and industrial market represented approximately 53% of distribution and services revenue and had an operating margin in the mid-single digits.
Cash Generation
EBITDA of
2020 Outlook
Commenting on the 2020 full year outlook and guidance, Mr. Grzebinski said, “Our earnings guidance range for the year is
In the inland marine transportation market, 2020 guidance contemplates favorable market conditions with continued growth in customer demand, increased volumes from new petrochemical plants, and modest net new barge construction in the industry. These factors are expected to result in barge utilization rates in the low to mid-90% range throughout the year. Combined with the anticipated contribution from Savage, inland revenues are expected to increase in the low double digits to mid-teens percentage range year-on-year with an overall operating margin in the high teens.
In the coastal market, barge utilization is expected to improve into the mid-to high 80% range driven by strong customer demand and tight industry capacity. Kirby’s retirement of four aging coastal barges, three of which are large capacity vessels that would have required ballast water treatment systems, as well as anticipated activity reductions in the coal transportation business will have an impact on the full year. As a result, coastal revenues are expected to only be flat to slightly up year-on-year with positive operating margins in the low to-mid single digits.
In distribution and services, 2020 revenues are expected to decline 12% to 17% compared to 2019. In the oil and gas market, activity levels are expected to remain restrained in the near term, particularly in manufacturing as customers continue to rationalize excess capacity in their pressure pumping fleets. In oil and gas distribution, sales of transmissions, engines, and parts, as well as service activities are expected to increase from 2019 fourth quarter levels as the year progresses, but the magnitude of the improvement will be dependent on oilfield activity levels. In commercial and industrial, revenues are expected to increase with share growth in the on-highway and industrial markets, including the Thermo-King business with the acquisition of Convoy. Overall, operating margins in distribution and services are expected to be positive in the low to mid-single digits.
Kirby expects 2020 capital spending to be in the
Mr. Grzebinski concluded, “2019 was an exciting, but challenging year at Kirby. In marine, I’m pleased with the hard work and performance of our teams which delivered significant year-on-year financial improvement in both inland and coastal, successfully integrated Cenac, and safely navigated and overcame historic high-water conditions. In 2020, the marine business is poised to deliver positive growth in revenue and earnings, and the addition of Savage will further strengthen our fleet and earnings power for the future. In distribution and services, although the oil and gas market was challenging for much of 2019, we took the necessary actions to right-size our operations and to ensure we emerge from the oilfield downturn as a stronger company. Pent-up demand continues to grow, and it is only a matter of time until the oilfield market recovers and our activity levels increase. When it does, we will be well-positioned to capture the improvement. In commercial and industrial, the Convoy Thermo King acquisition will further expand the diversity of the segment and contribute favorably to segment profitability. And lastly, anticipated growth in cash flow from operations and significant reductions in capital expenditures will enable us to continue to pay down debt and improve our balance sheet even further, as well as provide flexibility to pursue additional acquisition opportunities that may arise.”
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 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
About
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
| Fourth Quarter | Year | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands, except per share amounts) | |||||||||||||
| Revenues: | |||||||||||||
| Marine transportation | $ | 402,010 | $ | 382,537 | $ | 1,587,082 | $ | 1,483,143 | |||||
| Distribution and services | 253,917 | 338,956 | 1,251,317 | 1,487,554 | |||||||||
| Total revenues | 655,927 | 721,493 | 2,838,399 | 2,970,697 | |||||||||
| Costs and expenses: | |||||||||||||
| Costs of sales and operating expenses | 471,382 | 520,580 | 2,030,046 | 2,160,946 | |||||||||
| Selling, general and administrative | 106,311 | 64,981 | 312,913 | 304,397 | |||||||||
| Taxes, other than on income | 10,447 | 9,641 | 41,933 | 39,251 | |||||||||
| Depreciation and amortization | 54,861 | 57,332 | 219,632 | 224,972 | |||||||||
| Impairment of long-lived assets | — | 82,705 | — | 82,705 | |||||||||
| Impairment of goodwill | — | 2,702 | — | 2,702 | |||||||||
| Lease cancellation costs | — | 2,403 | — | 2,403 | |||||||||
| (Gain) loss on disposition of assets | (3,251 | ) | 390 | (8,152 | ) | (1,968 | ) | ||||||
| Total costs and expenses | 639,750 | 740,734 | 2,596,372 | 2,815,408 | |||||||||
| Operating income (loss) | 16,177 | (19,241 | ) | 242,027 | 155,289 | ||||||||
| Other income | 1,110 | 1,140 | 3,787 | 5,726 | |||||||||
| Interest expense | (12,968 | ) | (12,191 | ) | (55,994 | ) | (46,856 | ) | |||||
| Earnings (loss) before taxes on income | 4,319 | (30,292 | ) | 189,820 | 114,159 | ||||||||
| (Provision) benefit for taxes on income | (1,347 | ) | 5,961 | (46,801 | ) | (35,081 | ) | ||||||
| Net earnings (loss) | 2,972 | (24,331 | ) | 143,019 | 79,078 | ||||||||
| Less: Net earnings attributable to noncontrolling interests | (195 | ) | (106 | ) | (672 | ) | (626 | ) | |||||
| Net earnings (loss) attributable to Kirby | $ | 2,777 | $ | (24,437 | ) | $ | 142,347 | $ | 78,452 | ||||
| Net earnings (loss) per share attributable to Kirby common stockholders: | |||||||||||||
| Basic | $ | 0.05 | $ | (0.41 | ) | $ | 2.38 | $ | 1.31 | ||||
| Diluted | $ | 0.05 | $ | (0.41 | ) | $ | 2.37 | $ | 1.31 | ||||
| Common stock outstanding (in thousands): | |||||||||||||
| Basic | 59,799 | 59,645 | 59,750 | 59,557 | |||||||||
| Diluted | 59,998 | 59,645 | 59,909 | 59,689 | |||||||||
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
| Fourth Quarter | Year | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| EBITDA: (1) | |||||||||||||
| Net earnings (loss) attributable to Kirby | $ | 2,777 | $ | (24,437 | ) | $ | 142,347 | $ | 78,452 | ||||
| Interest expense | 12,968 | 12,191 | 55,994 | 46,856 | |||||||||
| Provision (benefit) for taxes on income | 1,347 | (5,961 | ) | 46,801 | 35,081 | ||||||||
| Impairment of long-lived assets | — | 82,705 | — | 82,705 | |||||||||
| Impairment of goodwill | — | 2,702 | — | 2,702 | |||||||||
| Depreciation and amortization | 54,861 | 57,332 | 219,632 | 224,972 | |||||||||
| $ | 71,953 | $ | 124,532 | $ | 464,774 | $ | 470,768 | ||||||
| Capital expenditures | $ | 64,096 | $ | 70,109 | $ | 248,164 | $ | 301,861 | |||||
| Acquisitions of businesses and marine equipment | $ | 4,951 | $ | 34,670 | $ | 262,491 | $ | 533,897 | |||||
| December 31, | |||||||||||||
| 2019 | 2018 | ||||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| Long-term debt, including current portion | $ | 1,369,767 | $ | 1,410,188 | |||||||||
| Total equity | $ | 3,371,592 | $ | 3,216,301 | |||||||||
| Debt to capitalization ratio | 28.9 | % | 30.5 | % | |||||||||
MARINE TRANSPORTATION STATEMENTS OF EARNINGS
| Fourth Quarter | Year | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| Marine transportation revenues | $ | 402,010 | $ | 382,537 | $ | 1,587,082 | $ | 1,483,143 | |||||
| Costs and expenses: | |||||||||||||
| Costs of sales and operating expenses | 263,162 | 253,825 | 1,034,758 | 997,979 | |||||||||
| Selling, general and administrative | 31,306 | 27,965 | 122,202 | 122,421 | |||||||||
| Taxes, other than on income | 8,183 | 9,215 | 34,538 | 33,020 | |||||||||
| Depreciation and amortization | 44,881 | 47,041 | 179,742 | 182,307 | |||||||||
| Total costs and expenses | 347,532 | 338,046 | 1,371,240 | 1,335,727 | |||||||||
| Operating income | $ | 54,478 | $ | 44,491 | $ | 215,842 | $ | 147,416 | |||||
| Operating margin | 13.6 | % | 11.6 | % | 13.6 | % | 9.9 | % | |||||
DISTRIBUTION AND SERVICES STATEMENTS OF EARNINGS
| Fourth Quarter | Year | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| (unaudited, $ in thousands) | |||||||||||||||
| Distribution and services revenues | $ | 253,917 | $ | 338,956 | $ | 1,251,317 | $ | 1,487,554 | |||||||
| Costs and expenses: | |||||||||||||||
| Costs of sales and operating expenses | 208,220 | 266,755 | 995,288 | 1,162,967 | |||||||||||
| Selling, general and administrative | 37,279 | 34,074 | 145,473 | 149,756 | |||||||||||
| Taxes, other than on income | 2,255 | 415 | 7,357 | 6,177 | |||||||||||
| Depreciation and amortization | 8,831 | 9,476 | 35,998 | 39,349 | |||||||||||
| Total costs and expenses | 256,585 | 310,720 | 1,184,116 | 1,358,249 | |||||||||||
| Operating income (loss) | $ | (2,668 | ) | $ | 28,236 | $ | 67,201 | $ | 129,305 | ||||||
| Operating margin | (1.1 | )% | 8.3 | % | 5.4 | % | 8.7 | % | |||||||
OTHER COSTS AND EXPENSES
| Fourth Quarter | Year | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| General corporate expenses | $ | 3,359 | $ | 3,768 | $ | 13,643 | $ | 35,590 | |||||
| Impairment of long-lived assets | — | 82,705 | — | 82,705 | |||||||||
| Impairment of goodwill | — | 2,702 | — | 2,702 | |||||||||
| Lease cancellation costs | — | 2,403 | — | 2,403 | |||||||||
| Inventory write-downs | 35,525 | — | 35,525 | — | |||||||||
| (Gain) loss on disposition of assets | $ | (3,251 | ) | $ | 390 | $ | (8,152 | ) | $ | (1,968 | ) | ||
ONE TIME CHARGES AND BENEFITS
The 2019 and 2018 fourth quarter and full year GAAP results include certain one-time charges. The following is a reconciliation of GAAP earnings to non-GAAP earnings, excluding the one-time items for earnings before tax (pre-tax), net earnings attributable to Kirby (after-tax), and diluted earnings per share (per share):
| Fourth Quarter 2019 | Fourth Quarter 2018 | ||||||||||||||||
| Pre-Tax | After-Tax | Per Share | Pre-Tax | After-Tax | Per Share | ||||||||||||
| (unaudited, $ in millions except per share amounts) | |||||||||||||||||
| GAAP earnings | $ | 4.3 | $ | 2.8 | $ | 0.05 | $ | (30.3 | ) | $ | (24.4 | ) | $ | (0.41 | ) | ||
| Inventory write-down | 35.5 | 28.0 | 0.47 | — | — | — | |||||||||||
| Severance and early retirement expense | 4.8 | 3.7 | 0.06 | — | — | — | |||||||||||
| Impairment of long-lived assets | — | — | — | 85.1 | 67.2 | 1.12 | |||||||||||
| Impairment of goodwill | — | — | — | 2.7 | 2.1 | 0.04 | |||||||||||
| Earnings, excluding one-time items(2) | $ | 44.6 | $ | 34.5 | $ | 0.58 | $ | 57.5 | $ | 44.9 | $ | 0.75 | |||||
| Full Year 2019 | Full Year 2018 | ||||||||||||||||
| Pre-Tax | After-Tax | Per Share | Pre-Tax | After-Tax | Per Share | ||||||||||||
| (unaudited, $ in millions except per share amounts) | |||||||||||||||||
| GAAP earnings | $ | 189.8 | $ | 142.3 | $ | 2.37 | $ | 114.2 | $ | 78.5 | $ | 1.31 | |||||
| Inventory write-down | 35.5 | 28.0 | 0.47 | — | — | — | |||||||||||
| Severance and early retirement expense | 4.8 | 3.7 | 0.06 | — | — | — | |||||||||||
| Impairment of long-lived assets | — | — | — | 85.1 | 67.2 | 1.12 | |||||||||||
| Impairment of goodwill | — | — | — | 2.7 | 2.1 | 0.04 | |||||||||||
| Executive Chairman retirement | — | — | — | 18.1 | 18.1 | 0.30 | |||||||||||
| Higman transaction fees & expenses | — | — | — | 3.3 | 2.5 | 0.04 | |||||||||||
| Amendment to employee stock plan | — | — | — | 3.9 | 3.0 | 0.05 | |||||||||||
| Earnings, excluding one-time items(2) | $ | 230.1 | $ | 174.0 | $ | 2.90 | $ | 227.3 | $ | 171.4 | $ | 2.86 | |||||
MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS
| Fourth Quarter | Year | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| Inland Performance Measurements: | |||||||||||||
| Ton Miles (in millions) (3) | 3,800 | 3,677 | 14,611 | 14,501 | |||||||||
| Revenue/Ton Mile (cents/tm) (4) | 8.2 | 7.9 | 8.4 | 7.7 | |||||||||
| Towboats operated (average) (5) | 299 | 285 | 299 | 278 | |||||||||
| Delay Days (6) | 3,031 | 3,249 | 13,259 | 10,046 | |||||||||
| Average cost per gallon of fuel consumed | $ | 2.05 | $ | 2.42 | $ | 2.06 | $ | 2.20 | |||||
| Barges (active): | |||||||||||||
| Inland tank barges | 1,053 | 1,003 | |||||||||||
| Coastal tank barges | 49 | 53 | |||||||||||
| Offshore dry-cargo barges | 4 | 4 | |||||||||||
| Barrel capacities (in millions): | |||||||||||||
| Inland tank barges | 23.4 | 21.8 | |||||||||||
| Coastal tank barges | 4.7 | 5.1 | |||||||||||
(1) 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 attributable to Kirby before interest expense, taxes on income, depreciation and amortization, impairment of long-lived assets, and impairment of goodwill. 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.
(2) Kirby uses certain non-GAAP financial measures to review performance excluding certain one-time items including: earnings before taxes on income, excluding one-time items; net earnings attributable to Kirby, excluding one-time items; and diluted earnings per share, excluding one-time items. Management believes that the exclusion of certain one-time items from these financial measures enables it and investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of the company's normal operating results. 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) 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.
(4) Inland marine transportation revenues divided by ton miles. Example: Fourth quarter 2019 inland marine transportation revenues of
(5) Towboats operated are the average number of owned and chartered towboats operated during the period.
(6) 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