Kirby Corporation Announces 2019 Third Quarter Results
- 2019 third quarter earnings per share of
$0.80
- Strong results in marine with improving markets and operating conditions
- Distribution and services impacted by continued weakening in oil and gas related activity
- 2019 full year earnings per share guidance narrowed to
$2.80 to $3.00
“In inland marine transportation, our financial results meaningfully improved as flood waters receded and operating conditions were better. Favorable operating conditions resulted in a 31% reduction in delay days as compared to the 2019 second quarter, which led to efficiencies across our fleet and reduced operating expenses. Customer demand and our barge utilization remained strong during the quarter, and term contracts continued to renew higher. Ultimately, the improvement in operating efficiencies, reduced costs and higher pricing led to inland operating margins that touched 20% during the quarter.
“Coastal marine transportation also provided improved financial results with gains in revenue and operating income. During the quarter, market conditions were favorable, and our barge utilization was stable in the mid-80% range. Our efforts to modernize and increase the efficiencies of the fleet during the downturn, including the purchase of a new articulated tank barge unit (“ATB”), construction of new coastal tugboats, and the retirement of aging equipment, are showing benefits and contributing to better reliability and lower costs. Overall, coastal operating margins were in the high single digits during the third quarter.
“In distribution and services, continued weak activity and spending in the oilfield impacted our oil and gas related businesses throughout the third quarter. During the quarter, we experienced very little activity in our pressure pumping manufacturing and remanufacturing businesses, as well as lower demand for equipment, parts and service sales in our oil and gas related distribution businesses. As a result, we aggressively implemented additional workforce reductions and other cost saving initiatives,” Mr. Grzebinski concluded.
Segment Results – Marine Transportation
Marine transportation revenues for the 2019 third quarter were
In the inland market, operating conditions were generally good with receding flood waters and favorable summer weather conditions resulting in improved operating efficiencies across the fleet. Customer demand was strong across the portfolio with average barge utilization in the low 90% range during the quarter. Pricing improved year-on-year, with spot rates increasing approximately 15% and average rates on expiring term contracts increasing in the low to mid-single digits. Overall, revenues in the inland market increased 10% compared to the 2018 third quarter due to improved pricing and the contribution from the Cenac and CGBM acquisitions. The operating margin for the inland business was 20% for the quarter.
In the coastal market, barge utilization was in the mid-80% range during the 2019 third quarter. Compared to the 2018 third quarter, spot market pricing was approximately 20% higher, and term contracts repriced higher in the mid-single digits. Revenues in the coastal market increased 3% year-on-year, primarily due to improved pricing and higher barge utilization. During the quarter, the coastal operating margin was in the high single digits and benefited from both lower operating expenses as a result of improved efficiencies and higher pricing.
The marine transportation segment’s 2019 third quarter operating margin was 17.6% compared with 12.7% for the 2018 third quarter.
Segment Results – Distribution and Services
Distribution and services revenues for the 2019 third quarter were
In the oil and gas market, revenues and operating income declined compared to the 2018 third quarter due to a significant reduction in
In the commercial and industrial market, revenues and operating income increased compared to the 2018 third quarter primarily due to higher service levels in the marine repair business, as well as increased demand for back-up power generation equipment. During the quarter, the commercial and industrial operating margin was in the high single digits.
The distribution and services 2019 third quarter operating margin was 3.6% compared with 7.4% for the 2018 third quarter.
Cash Generation
EBITDA of
2019 Fourth Quarter Outlook
Commenting on the 2019 full year guidance, Mr. Grzebinski said, “We have narrowed our 2019 earnings guidance to
In the inland marine transportation market, growth in the petrochemical complex on the
In coastal, market conditions are expected to remain favorable with barge utilization in the mid-80% range during the fourth quarter. Pricing is expected to improve on renewing contracts. As previously announced, financial results will be negatively impacted by seasonal activity declines in
In the distribution and services segment, orders for new and remanufactured pressure pumping equipment are expected to remain low during the fourth quarter, but revenue should be modestly higher sequentially due to timing of deliveries. In distribution, new transmission sales and overhauls, as well as parts sales are likely to decline from third quarter levels as oilfield customers maintain their focus on maximizing cash flow and returns. In the commercial and industrial market, revenues and operating income are expected to sequentially decline with the seasonal reduction in power generation rental fleet utilization. Activity in the marine repair business is expected to be stable. Overall, distribution and services revenue is expected to be flat to slightly down sequentially, with breakeven to low single digit operating margins.
Kirby’s 2019 capital spending is expected to be in the
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 | |||||||||||||
| Third Quarter | Nine Months | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands, except per share amounts) | |||||||||||||
| Revenues: | |||||||||||||
| Marine transportation | $ | 412,665 | $ | 382,040 | $ | 1,185,072 | $ | 1,100,606 | |||||
| Distribution and services | 254,144 | 322,805 | 997,400 | 1,148,598 | |||||||||
| Total revenues | 666,809 | 704,845 | 2,182,472 | 2,249,204 | |||||||||
| Costs and expenses: | |||||||||||||
| Costs of sales and operating expenses | 458,514 | 498,421 | 1,558,664 | 1,640,366 | |||||||||
| Selling, general and administrative | 64,656 | 70,032 | 206,602 | 239,416 | |||||||||
| Taxes, other than on income | 10,909 | 10,523 | 31,486 | 29,610 | |||||||||
| Depreciation and amortization | 54,455 | 57,930 | 164,771 | 167,640 | |||||||||
| (Gain) loss on disposition of assets | 374 | (18 | ) | (4,901 | ) | (2,358 | ) | ||||||
| Total costs and expenses | 588,908 | 636,888 | 1,956,622 | 2,074,674 | |||||||||
| Operating income | 77,901 | 67,957 | 225,850 | 174,530 | |||||||||
| Other income | 864 | 1,454 | 2,677 | 4,586 | |||||||||
| Interest expense | (14,310 | ) | (12,345 | ) | (43,026 | ) | (34,665 | ) | |||||
| Earnings before taxes on income | 64,455 | 57,066 | 185,501 | 144,451 | |||||||||
| Provision for taxes on income | (16,305 | ) | (15,116 | ) | (45,454 | ) | (41,042 | ) | |||||
| Net earnings | 48,150 | 41,950 | 140,047 | 103,409 | |||||||||
| Less: Net earnings attributable to noncontrolling interests | (163 | ) | (134 | ) | (477 | ) | (520 | ) | |||||
| Net earnings attributable to Kirby | $ | 47,987 | $ | 41,816 | $ | 139,570 | $ | 102,889 | |||||
| Net earnings per share attributable to Kirby common stockholders: | |||||||||||||
| Basic | $ | 0.80 | $ | 0.70 | $ | 2.33 | $ | 1.72 | |||||
| Diluted | $ | 0.80 | $ | 0.70 | $ | 2.32 | $ | 1.72 | |||||
| Common stock outstanding (in thousands): | |||||||||||||
| Basic | 59,749 | 59,638 | 59,733 | 59,527 | |||||||||
| Diluted | 59,906 | 59,784 | 59,879 | 59,668 | |||||||||
| CONDENSED CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||
| Third Quarter | Nine Months | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| EBITDA: (1) | |||||||||||||
| Net earnings attributable to Kirby | $ | 47,987 | $ | 41,816 | $ | 139,570 | $ | 102,889 | |||||
| Interest expense | 14,310 | 12,345 | 43,026 | 34,665 | |||||||||
| Provision for taxes on income | 16,305 | 15,116 | 45,454 | 41,042 | |||||||||
| Depreciation and amortization | 54,455 | 57,930 | 164,771 | 167,640 | |||||||||
| $ | 133,057 | $ | 127,207 | $ | 392,821 | $ | 346,236 | ||||||
| Capital expenditures | $ | 56,800 | $ | 78,841 | $ | 184,068 | $ | 231,752 | |||||
| Acquisitions of businesses and marine equipment | $ | 4,700 | $ | — | $ | 257,540 | $ | 499,227 | |||||
| September 30, | |||||||||||||
| 2019 | 2018 | ||||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| Long-term debt, including current portion | $ | 1,434,432 | $ | 1,399,931 | |||||||||
| Total equity | $ | 3,374,498 | $ | 3,233,148 | |||||||||
| Debt to capitalization ratio | 29.8 | % | 30.2 | % | |||||||||
| MARINE TRANSPORTATION STATEMENTS OF EARNINGS | |||||||||||||
| Third Quarter | Nine Months | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| Marine transportation revenues | $ | 412,665 | $ | 382,040 | $ | 1,185,072 | $ | 1,100,606 | |||||
| Costs and expenses: | |||||||||||||
| Costs of sales and operating expenses | 257,869 | 248,347 | 771,596 | 744,154 | |||||||||
| Selling, general and administrative | 28,424 | 29,408 | 90,896 | 94,456 | |||||||||
| Taxes, other than on income | 9,230 | 8,624 | 26,355 | 23,805 | |||||||||
| Depreciation and amortization | 44,445 | 47,144 | 134,861 | 135,266 | |||||||||
| Total costs and expenses | 339,968 | 333,523 | 1,023,708 | 997,681 | |||||||||
| Operating income | $ | 72,697 | $ | 48,517 | $ | 161,364 | $ | 102,925 | |||||
| Operating margin | 17.6 | % | 12.7 | % | 13.6 | % | 9.4 | % | |||||
| DISTRIBUTION AND SERVICES STATEMENTS OF EARNINGS | |||||||||||||
| Third Quarter | Nine Months | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| Distribution and services revenues | $ | 254,144 | $ | 322,805 | $ | 997,400 | $ | 1,148,598 | |||||
| Costs and expenses: | |||||||||||||
| Costs of sales and operating expenses | 200,645 | 250,074 | 787,068 | 896,212 | |||||||||
| Selling, general and administrative | 33,608 | 36,965 | 108,194 | 115,682 | |||||||||
| Taxes, other than on income | 1,674 | 1,888 | 5,102 | 5,762 | |||||||||
| Depreciation and amortization | 9,085 | 9,964 | 27,167 | 29,873 | |||||||||
| Total costs and expenses | 245,012 | 298,891 | 927,531 | 1,047,529 | |||||||||
| Operating income | $ | 9,132 | $ | 23,914 | $ | 69,869 | $ | 101,069 | |||||
| Operating margin | 3.6 | % | 7.4 | % | 7.0 | % | 8.8 | % | |||||
| OTHER COSTS AND EXPENSES | |||||||||||||
| Third Quarter | Nine Months | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| (unaudited, $ in thousands) | |||||||||||||
| General corporate expenses | $ | 3,554 | $ | 4,492 | $ | 10,284 | $ | 31,822 | |||||
| (Gain) loss on disposition of assets | $ | 374 | $ | (18 | ) | $ | (4,901 | ) | $ | (2,358 | ) | ||
| ONE-TIME CHARGES AND BENEFITS | ||||||||
| The 2018 first nine months 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): | ||||||||
| First Nine Months 2018 | ||||||||
| Pre-Tax | After-Tax | Per Share | ||||||
| (unaudited, $ in millions except per share amounts) | ||||||||
| GAAP earnings | $ | 144.5 | $ | 102.9 | $ | 1.72 | ||
| 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) | $ | 169.8 | $ | 126.5 | $ | 2.11 | ||
| MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS | |||||||||||||
| Third Quarter | Nine Months | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| Inland Performance Measurements: | |||||||||||||
| Ton Miles (in millions) (3) | 3,958 | 3,721 | 10,811 | 10,824 | |||||||||
| Revenue/Ton Mile (cents/tm) (4) | 8.0 | 7.7 | 8.4 | 7.6 | |||||||||
| Towboats operated (average) (5) | 304 | 282 | 299 | 275 | |||||||||
| Delay Days (6) | 2,284 | 2,534 | 10,228 | 6,797 | |||||||||
| Average cost per gallon of fuel consumed | $ | 2.00 | $ | 2.23 | $ | 2.06 | $ | 2.13 | |||||
| Barges (active): | |||||||||||||
| Inland tank barges | 1,065 | 981 | |||||||||||
| Coastal tank barges | 49 | 54 | |||||||||||
| Offshore dry-cargo barges | 4 | 5 | |||||||||||
| Barrel capacities (in millions): | |||||||||||||
| Inland tank barges | 23.7 | 21.6 | |||||||||||
| 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: Third quarter 2019 inland marine transportation revenues of $316,000,000 divided by 3,958,000,000 inland marine transportation ton miles = 8.0 cents. | |||||||||||||
| (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