UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2019
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number 1-7615
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
(713 ) 435-1000
(Registrant’s telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “Large Accelerated Filer,” “Accelerated Filer,” “Smaller Reporting Company,” and “Emerging Growth Company” in Rule 12b-2 of the Exchange Act.
☒ |
Accelerated Filer |
☐ |
||
Non-Accelerated Filer |
☐ |
Smaller Reporting Company |
||
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
The number of shares outstanding of the registrant’s Common Stock, $0.10 par value per share, on August 1, 2019 was 59,902,000 .
PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, 2019 |
December 31, 2018 |
|||||||
($ in thousands) |
||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
$ |
||||||
Accounts receivable: |
||||||||
Trade – less allowance for doubtful accounts |
||||||||
Other |
||||||||
Inventories – net |
||||||||
Prepaid expenses and other current assets |
||||||||
Total current assets |
||||||||
Property and equipment |
||||||||
Accumulated depreciation |
( |
) |
( |
) |
||||
Property and equipment – net |
||||||||
Operating lease right-of-use assets |
||||||||
Goodwill |
||||||||
Other intangibles, net |
||||||||
Other assets |
||||||||
Total assets |
$ |
$ |
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Bank notes payable |
$ |
$ |
||||||
Income taxes payable |
||||||||
Accounts payable |
||||||||
Accrued liabilities |
||||||||
Current portion of operating lease liabilities |
||||||||
Deferred revenues |
||||||||
Total current liabilities |
||||||||
Long-term debt, net – less current portion |
||||||||
Deferred income taxes |
||||||||
Operating lease liabilities |
||||||||
Other long-term liabilities |
||||||||
Total long-term liabilities |
||||||||
Contingencies and commitments |
||||||||
Equity: |
||||||||
Kirby stockholders’ equity: |
||||||||
Common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income – net |
( |
) |
( |
) |
||||
Retained earnings |
||||||||
Treasury stock – at cost, |
( |
) |
( |
) |
||||
Total Kirby stockholders’ equity |
||||||||
Noncontrolling interests |
||||||||
Total equity |
||||||||
Total liabilities and equity |
$ |
$ |
||||||
See accompanying notes to condensed financial statements.
1
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
($ in thousands, except per share amounts) |
||||||||||||||||
Revenues: |
||||||||||||||||
Marine transportation |
$ |
$ |
$ |
$ |
||||||||||||
Distribution and services |
||||||||||||||||
Total revenues |
||||||||||||||||
Costs and expenses: |
||||||||||||||||
Costs of sales and operating expenses |
||||||||||||||||
Selling, general and administrative |
||||||||||||||||
Taxes, other than on income |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
Gain on disposition of assets |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Total costs and expenses |
||||||||||||||||
Operating income |
||||||||||||||||
Other income |
||||||||||||||||
Interest expense |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Earnings before taxes on income |
||||||||||||||||
Provision for taxes on income |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Net earnings |
||||||||||||||||
Less: Net earnings attributable to noncontrolling interests |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Net earnings attributable to Kirby |
$ |
$ |
$ |
$ |
||||||||||||
Net earnings per share attributable to Kirby common stockholders: |
||||||||||||||||
Basic |
$ |
$ |
$ |
$ |
||||||||||||
Diluted |
$ |
$ |
$ |
$ |
||||||||||||
See accompanying notes to condensed financial statements.
2
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
($ in thousands) |
||||||||||||||||
Net earnings |
$ |
$ |
$ |
$ |
||||||||||||
Other comprehensive income (loss), net of taxes: |
||||||||||||||||
Pension and postretirement benefits |
( |
) |
||||||||||||||
Foreign currency translation adjustments |
( |
) |
( |
) |
( |
) |
||||||||||
Reclassification to retained earnings of stranded tax effects from tax reform |
( |
) |
||||||||||||||
Total other comprehensive income (loss), net of taxes |
( |
) |
( |
) |
||||||||||||
Total comprehensive income, net of taxes |
||||||||||||||||
Net earnings attributable to noncontrolling interests |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Comprehensive income attributable to Kirby |
$ |
$ |
$ |
$ |
||||||||||||
See accompanying notes to condensed financial statements.
3
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30, |
||||||||
2019 |
2018 |
|||||||
($ in thousands) |
||||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ |
$ |
||||||
Adjustments to reconcile net earnings to net cash provided by operations: |
||||||||
Depreciation and amortization |
||||||||
Provision for deferred income taxes |
||||||||
Amortization of unearned share-based compensation |
||||||||
Amortization of leases |
( |
) |
||||||
Amortization of major maintenance costs |
||||||||
Amortization of debt issuance costs |
||||||||
Other |
( |
) |
( |
) |
||||
Decrease in cash flows resulting from changes in operating assets and liabilities, net |
( |
) |
( |
) |
||||
Net cash provided by operating activities |
||||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
( |
) |
( |
) |
||||
Acquisitions of businesses and marine equipment, net of cash acquired |
( |
) |
( |
) |
||||
Proceeds from disposition of assets |
||||||||
Net cash used in investing activities |
( |
) |
( |
) |
||||
Cash flows from financing activities: |
||||||||
Payments on bank credit facilities |
( |
) |
( |
) |
||||
Borrowings on long-term debt |
||||||||
Payments of debt issue costs |
( |
) |
( |
) |
||||
Proceeds from exercise of stock options |
||||||||
Payments related to tax withholding for share-based compensation |
( |
) |
( |
) |
||||
Other |
( |
) |
( |
) |
||||
Net cash provided by financing activities |
||||||||
Increase (decrease) in cash and cash equivalents |
( |
) |
||||||
Cash and cash equivalents, beginning of year |
||||||||
Cash and cash equivalents, end of period |
$ |
$ |
||||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid (received) during the period: |
||||||||
Interest paid |
$ |
$ |
||||||
Income taxes paid (refunded) |
$ |
$ |
( |
) |
||||
Operating cash outflow from operating leases |
$ |
$ |
||||||
Non-cash investing activity: |
||||||||
Capital expenditures included in accounts payable |
$ |
$ |
( |
) |
||||
Cash acquired in acquisition |
$ |
$ |
||||||
Right-of-use assets obtained in exchange for lease obligations |
$ |
$ |
||||||
See accompanying notes to condensed financial statements.
4
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock |
Additional Paid-in- |
Accumulated Other Comprehensive |
Retained |
Treasury Stock |
Noncontrolling |
|||||||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Income |
Earnings |
Shares |
Amount |
Interests |
Total |
||||||||||||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||||||
Issuance of stock for equity awards |
( |
) |
||||||||||||||||||||||||||||||||||
Tax withholdings on equity award vesting |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||
Amortization of unearned share-based compensation |
— |
— |
||||||||||||||||||||||||||||||||||
Total comprehensive income, net of taxes |
— |
— |
||||||||||||||||||||||||||||||||||
Return of investment to noncontrolling interests |
— |
— |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Common Stock |
Additional Paid-in- |
Accumulated Other Comprehensive |
Retained |
Treasury Stock |
Noncontrolling |
|||||||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Income |
Earnings |
Shares |
Amount |
Interests |
Total |
||||||||||||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||||||
Issuance of stock for equity awards |
( |
) |
||||||||||||||||||||||||||||||||||
Tax withholdings on equity award vesting |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Amortization of unearned share-based compensation |
— |
— |
||||||||||||||||||||||||||||||||||
Total comprehensive income, net of taxes |
— |
( |
) |
— |
||||||||||||||||||||||||||||||||
Return of investment to noncontrolling interests |
— |
— |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Balance at June 30, 2018 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
See accompanying notes to condensed financial statements.
5
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock |
Additional Paid-in- |
Accumulated Other Comprehensive |
Retained |
Treasury Stock |
Noncontrolling |
|||||||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Income |
Earnings |
Shares |
Amount |
Interests |
Total |
||||||||||||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||||||
Issuance of stock for equity awards |
( |
) |
||||||||||||||||||||||||||||||||||
Tax withholdings on equity award vesting |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Amortization of unearned share-based compensation |
— |
— |
||||||||||||||||||||||||||||||||||
Total comprehensive income, net of taxes |
— |
— |
||||||||||||||||||||||||||||||||||
Return of investment to noncontrolling interests |
— |
— |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Common Stock |
Additional Paid-in- |
Accumulated Other Comprehensive |
Retained |
Treasury Stock |
Noncontrolling |
|||||||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Income |
Earnings |
Shares |
Amount |
Interests |
Total |
||||||||||||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Adoption of new accounting standards |
— |
( |
) |
— |
( |
) |
||||||||||||||||||||||||||||||
Stock option exercises |
||||||||||||||||||||||||||||||||||||
Issuance of stock for equity awards |
( |
) |
||||||||||||||||||||||||||||||||||
Tax withholdings on equity award vesting |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Amortization of unearned share-based compensation |
— |
— |
||||||||||||||||||||||||||||||||||
Total comprehensive income, net of taxes |
— |
( |
) |
— |
||||||||||||||||||||||||||||||||
Return of investment to noncontrolling interests |
— |
— |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Balance at June 30, 2018 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
See accompanying notes to condensed financial statements.
6
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS FOR PREPARATION OF THE CONDENSED FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by Kirby Corporation (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including significant accounting policies normally included in annual financial statements, have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
(2) ACCOUNTING STANDARDS ADOPTIONS
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-14, “Compensation – Retirement Benefits - Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans” which amends the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing certain requirements, providing clarification on existing requirements and adding new requirements including adding an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact on its disclosures.
In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) which simplifies the subsequent measurement of goodwill by eliminating Step 2 in the goodwill impairment test that required an entity to perform procedures to determine the fair value of its assets and liabilities at the testing date. An entity instead will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 will be applied prospectively and is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The Company adopted ASU 2016-02 on January 1, 2019 under the optional transition method that allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption and will not restate prior periods. The Company also elected certain practical expedients permitted under the transition guidance which allows the Company to carryforward its historical lease classification and for the non-recognition of short-term leases. Adoption of ASU 2016-02 resulted in the recognition of operating lease right-of-use assets for operating leases of $168,149,000 and lease liabilities for operating leases of $175,778,000 on the Company’s Condensed Balance Sheets as of January 1, 2019, with no material impact to the Condensed Statements of Earnings or Cash Flows. The Company did not have any financing leases as of January 1, 2019. See Note 3, Leases for additional information.
(3) LEASES
The Company currently leases various facilities and equipment under cancelable and noncancelable operating leases. The accounting for the Company’s leases may require judgments, which include determining whether a contract contains a lease, the allocation between lease and non-lease components, and determining the incremental borrowing rates. Leases with an initial noncancelable term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. The Company has also elected to combine lease and non-lease components on all classes of leased assets, except for leased towing vessels for which the Company estimates approximately 75 % of the costs relate to service costs and other non-lease components. Variable lease costs relate primarily to real estate executory costs (i.e. taxes, insurance and maintenance).
7
Total |
||||
2019 |
$ |
|||
2020 |
||||
2021 |
||||
2022 |
||||
2023 |
||||
Thereafter |
||||
Total lease payments |
||||
Less: imputed interest |
( |
) |
||
Operating lease liabilities |
$ |
|||
As of December 31, 2018, future total rentals on the Company’s noncancellable operating leases were $278,602,000 in the aggregate, which consisted of the following: $97,091,000 in 2019; $30,062,000 in 2020; $21,818,000 in 2021; $20,263,000 in 2022; $17,429,000 in 2023; and $91,939,000 thereafter.
Three months ended June 30, 2019 |
Six months ended June 30, 2019 |
|||||||
Operating lease cost |
$ |
$ |
||||||
Variable lease cost |
||||||||
Short-term lease cost |
||||||||
Sublease income |
( |
) |
( |
) |
||||
Total lease cost |
$ |
$ |
||||||
Weighted average discount rate |
% |
|||
Weighted average remaining lease term |
||||
(4) REVENUES
The following table sets forth the Company’s revenues by major source for the three months and six months ended June 30, 2019 and 2018 (in thousands):
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
Marine transportation segment: |
||||||||||||||||
Inland transportation |
$ |
$ |
$ |
$ |
||||||||||||
Coastal transportation |
||||||||||||||||
$ |
$ |
$ |
$ |
|||||||||||||
Distribution and services segment: |
||||||||||||||||
Oil and gas |
$ |
$ |
$ |
$ |
||||||||||||
Commercial and industrial |
||||||||||||||||
$ |
$ |
$ |
$ |
|||||||||||||
8
Contract Assets and Liabilities. Contract liabilities represent advance consideration received from customers, and are recognized as revenue over time as the related performance obligation is satisfied. The amount of revenue recognized in the first six months of 2019 that was included in the opening contract liability balance was $73,370,000 . The Company has recognized all contract liabilities within the deferred revenues financial statement caption on the balance sheet. The Company did no
The Company applies the practical expedient that allows non-disclosure of information about remaining performance obligations that have original expected durations of one year or less.
(5) ACQUISITIONS
During the six months ended June 30, 2019, the Company purchased seven inland tank barges from a leasing company for $8,340,000 in cash. The Company had been leasing the barges prior to the purchases.
On March 14, 2019, the Company completed the acquisition of the marine transportation fleet of Cenac Marine Services, LLC (“Cenac”) for $244,500,000 in cash. Cenac’s fleet consisted of 63 inland 30,000 barrel tank barges with approximately 1,833,000 barrels of capacity, 34 inland towboats and two offshore tugboats. Cenac transported petrochemicals, refined products and black oil, including crude oil, residual fuels, feedstocks and lubricants on the lower Mississippi River, its tributaries, and the Gulf Intracoastal Waterway for major oil companies and refiners. The average age of the inland tank barges was approximately five years and the inland towboats had an average age of approximately seven years .
The Company considers Cenac to be a natural extension of the current marine transportation segment, expanding the capabilities of the Company’s inland based marine transportation business and lowering the average age of its inland tank barge and towboat fleet.
The fair values of the assets acquired and liabilities assumed recorded at the acquisition date were as follows (in thousands):
Assets: |
||||
Prepaid expenses |
$ |
|||
Property and equipment |
||||
Other intangibles |
||||
Total assets |
$ |
|||
Other long-term liabilities |
||||
Net assets acquired |
$ |
|||
The Company acquired intangible assets with an amortization period of two years and incurred long-term intangible liabilities related to unfavorable contracts with a weighted average amortization period of approximately 1.3 years. The fair values have not been finalized and are provisional, pending completion of the tangible and intangible valuation studies. As additional information becomes known concerning the assets acquired, the Company may make adjustments to the fair value of assets acquired and liabilities assumed for up to one year following the acquisition date. Acquisition related costs of $392,000 , consisting primarily of legal and other professional fees, were expensed as incurred to selling, general and administrative expense in the 2019 first six months.
Pro forma results of the acquisitions made in the 2019 first six months have not been presented as the pro forma revenues and net earnings attributable to Kirby would not be materially different from the Company’s actual results.
9
(6) INVENTORIES
The following table presents the details of inventories as of June 30, 2019 and December 31, 2018 (in thousands):
June 30, 2019 |
December 31, 2018 |
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Finished goods |
$ |
$ |
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Work in process |
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$ |
$ |
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(7) LONG-TERM DEBT
On March 27, 2019, the Company entered into an amended and restated credit agreement (the “Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, that extends the term of the Company’s existing $850,000,000 revolving credit facility (“Revolving Credit Facility”) to March 27, 2024 and adds a five-year term loan (“Term Loan”) facility in an amount of $500,000,000 . The Credit Agreement provides for a variable interest rate based on the London interbank offered rate (“LIBOR”) or a base rate calculated with reference to the agent bank’s prime rate, among other factors (the “Alternate Base Rate”). The interest rate varies with the Company’s credit rating and is currently 112.5 basis points over LIBOR or 12.5 basis points over the Alternate Base Rate. The Term Loan is repayable in quarterly installments commencing June 30, 2020, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance payable of 65 % of the initial amount due on March 27, 2024. The Credit Agreement contains certain financial covenants including an interest coverage ratio and a debt-to-capitalization ratio. In addition to financial covenants, the Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates and changes in lines of business. The Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness, among other events. Borrowings under the Credit Agreement may be used for general corporate purposes including acquisitions. As of June 30, 2019, the Company was in compliance with all Credit Agreement covenants and had outstanding borrowings of $103,577,000 under the Revolving Credit Facility and $500,000,000 under the Term Loan. The Revolving Credit Facility includes a $25,000,000 commitment which may be used for standby letters of credit. Outstanding letters of credit under the Revolving Credit Facility were $5,670,000 as of June 30, 2019.
The estimated fair value of total debt outstanding at June 30, 2019 and December 31, 2018 was $1,637,493,000 and $1,411,628,000 , respectively, which differs from the carrying amounts of $1,594,706,000 and $1,410,188,000 , respectively, included in the consolidated financial statements. The fair value of debt outstanding was determined using a Level 2 fair value measurement.
(8) STOCK AWARD PLANS
Three months ended June 30, |
Six months ended June 30, |
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2019 |
2018 |
2019 |
2018 |
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Compensation cost |
$ |
$ |
$ |
$ |
||||||||||||
Income tax benefit |
$ |
$ |
$ |
$ |
||||||||||||
The Company has an employee stock award plan for selected officers and other key employees which provides for the issuance of stock options, restricted stock awards and performance awards. On February 19, 2018, the employee stock award plan was amended to also allow for the granting of restricted stock units (“RSUs”) to selected officers and other key employees. The amendment included a provision for the continued vesting of unvested stock options and RSUs for employees who meet certain years of service and age requirements at the time of their retirement. The vesting change resulted in shorter expense accrual periods on stock options and RSUs granted after February 19, 2018 to employees who are nearing retirement and meet the service and age requirements.
10
The exercise price for each option equals the fair market value per share of the Company’s common stock on the date of grant. Substantially all stock options outstanding under the plan have terms of seven years and vest ratably over three years . No performance awards payable in stock have been awarded under the plan. At June 30, 2019, 1,348,971 shares were available for future grants under the employee plan and no outstanding stock options under the employee plan were issued with stock appreciation rights.
Outstanding Non- Qualified or Nonincentive Stock Awards |
Weighted Average Exercise Price |
|||||||
Outstanding at December 31, 2018 |
$ |
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Granted |
$ |
|||||||
Exercised |
( |
) |
$ |
|||||
Canceled or expired |
( |
) |
$ |
|||||
Outstanding at June 30, 2019 |
$ |
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The following table summarizes information about the Company’s outstanding and exercisable stock options under the employee plan at June 30, 2019:
Options Outstanding |
Options Exercisable |
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Range of Exercise Prices |
Number Outstanding |
Weighted Average Remaining Contractual Life in Years |
Weighted Average Exercise Price |
Aggregate Intrinsic Value |
Number Exercisable |
Weighted Average Exercise Price |
Aggregate Intrinsic Value |
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$ |
$ |
$ |
||||||||||||||||||||
$ |
$ |
$ |
||||||||||||||||||||
$ |
$ |
$ |
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$ |
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