UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly report pursuant to Section 13 or
[ X ] 15(d) of the Securities and Exchange Act of
1934
For the quarter ended September 30, 1995
Transition report pursuant to Section 13 or
[ ] 15(d) of the Securities and Exchange Act of
1934
Commission File 1-7615
Number
Kirby Corporation
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 74-1884980
_____________________________________ __________________________________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1775 St. James Place, Suite 300, Houston, TX 77056-3453
______________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(713) 629-9370
______________________________________________________________________________
(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 [ X ] No [ ]
The number of shares outstanding of the registrant's Common Stock, $.10 par
value per share, on November 10, 1995 was 26,384,566.
PART 1 - FINANCIAL INFORMATION
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
ASSETS
September December
30, 31,
1995 1994
-------- ---------
($ in thousands)
Current assets:
Cash and invested cash $ 887 6,980
Available-for-sale securities --
short-term investments 16,763 8,244
Accounts and notes receivable, net of
allowance for doubtful accounts 65,198 63,397
Inventory - finished goods, at lower
of average cost or market 8,391 8,270
Prepaid expenses 13,262 13,661
Deferred taxes 795 1,324
------- -------
Total current assets 105,296 101,876
------- -------
Property and equipment, at cost 484,857 481,612
Less allowance for depreciation 170,236 153,672
------- -------
314,621 327,940
Investments in affiliates: ------- -------
Insurance affiliate 43,063 41,644
Marine affiliates 8,998 181
------- -------
52,061 41,825
------- -------
Excess cost of consolidated subsidiaries 3,693 9,280
Noncompete agreements 1,726 3,889
Sundry 8,322 12,731
------- -------
$485,719 497,541
======= =======
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September December
30, 31,
1995 1994
--------- --------
($ in thousands)
Current liabilities:
Current portion of long-term debt $ 5,676 10,962
Accounts payable 21,164 16,368
Accrued liabilities 36,738 37,531
Deferred revenues 7,093 8,294
------- -------
Total current liabilities 70,671 73,155
------- -------
Long-term debt, less current portion 158,933 148,535
Deferred taxes 40,875 42,452
Other long-term liabilities 7,076 7,998
------- -------
Total liabilities 277,555 272,140
------- -------
Contingencies and commitments -- --
Stockholders' equity:
Preferred stock, $1.00 par value per
share. Authorized 20,000,000 shares -- --
Common stock, $.10 par value per share.
Authorized 60,000,000 shares, issued
30,804,000 shares (30,782,000 at
December 31, 1994) 3,078 3,078
Additional paid-in capital 157,300 157,021
Unrealized net gains (losses) in
value of investments 814 (261)
Retained earnings 81,938 78,651
------- -------
243,130 238,489
Less cost of 3,925,000 shares in
treasury (2,468,000 at
December 31, 1994) 34,966 13,088
------- -------
208,164 225,401
------- -------
$485,719 497,541
======= =======
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF EARNINGS
(Unaudited)
Three months Nine months
ended ended
September 30, September 30,
--------------- ---------------
1995 1994 1995 1994
------- ------ ------ ------
($ in thousands, except per
share amounts)
Revenues:
Transportation $ 91,058 77,338 253,344 224,750
Diesel repair 12,492 11,755 39,207 33,572
Investment income 663 444 1,574 945
Gain (loss) on disposition
of assets 98 316 (138) 552
------- ------ ------- -------
104,311 89,853 293,987 259,819
------- ------ ------- -------
Costs and expenses:
Costs of sales and
operating expenses
(except as shown below) 70,034 62,783 198,414 178,971
Selling, general and
administrative 10,525 8,545 30,397 28,784
Taxes, other than on income 2,450 3,657 7,391 11,260
Depreciation and amortization 10,042 8,232 29,441 23,714
Impairment of long-lived
assets 17,500 -- 17,500 --
------- ------ ------- -------
110,551 83,217 283,143 242,729
------- ------ ------- -------
Operating income (loss) (6,240) 6,636 10,844 17,090
Equity in earnings of
insurance affiliate 1,210 1,290 5,181 4,378
Equity in earnings of
marine affiliates 884 -- 1,469 --
Interest expense (3,252) (2,355) (9,208) (6,121)
------- ------ ------- -------
Earnings (loss) before
taxes on income (7,398) 5,571 8,286 15,347
Provision (benefit) for
taxes on income (800) 1,965 4,999 5,651
------- ------ ------- -------
Net earnings (loss) $ (6,598) 3,606 3,287 9,696
======= ====== ======= =======
Earnings (loss) per share $ (.24) .13 .12 .34
of common stock ======= ====== ======= =======
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW
(Unaudited)
Nine months ended
September 30,
-----------------
1995 1994
-------- -------
($ in thousands)
Net earnings $ 3,287 9,696
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Loss (gain) on disposition of assets 138 (552)
Depreciation and amortization 29,441 23,714
Increase (decrease) in deferred taxes (696) 4,951
Deferred scheduled maintenance costs 5,409 2,076
Equity in earnings of insurance affiliate (5,181) (4,378)
Redemption from insurance affiliate 5,016 7,000
Equity in earnings of marine affiliates (1,469) --
Distributions from marine affiliates 867 --
Impairment of long-lived assets 17,500 --
Other noncash adjustments to earnings 33 125
Decrease in cash flow from other changes
in operating working capital (7,651) (8,764)
------- -------
Net cash provided by operating
activities 46,694 33,868
------- -------
Cash flow from investing activities:
Net decrease in investments (8,699) (8,759)
Capital expenditures (32,984) (49,610)
Proceeds from disposition of assets 1,190 2,572
------- -------
Net cash used in investing activities (40,493) (55,797)
------- -------
Cash flow from financing activities:
Borrowings on bank revolving credit loan 171,100 181,000
Payments on bank revolving credit loan (217,800) (145,500)
Increase in long-term debt 82,891 --
Payments under long-term debt (26,534) (9,724)
Purchases of treasury stock (22,039) (141)
Proceeds from exercise of stock options 88 594
------- -------
Net cash provided (used)
by financing activities (12,294) 26,229
------- -------
Table continues on following page
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW
(Unaudited)
Nine months ended
September 30,
------------------
1995 1994
-------- --------
Increase (decrease) in cash
and invested cash (6,093) 4,300
Cash and invested cash, beginning of year 6,980 1,998
------ ------
Cash and invested cash, end of period $ 887 6,298
====== ======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 6,145 5,436
Income taxes $ 4,000 5,450
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements of Kirby Corporation and consolidated subsidiaries (the "Company")
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of September 30, 1995
and December 31, 1994, and the results of operations for the three months and
nine months ended September 30, 1995 and 1994.
(1) BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS
The financial statements included herein have been prepared by 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
latest Annual Report on Form 10-K.
(2) COMPARABILITY OF FINANCIAL STATEMENTS
On July 18, 1995, Universal Insurance Company ("Universal") redeemed $5
million of its common stock from the Company and sold $5 million of its common
stock to Eastern America Insurance Group, Inc. ("Eastern America Group").
Such redemption and sale reduced the Company's ownership of Universal from 58%
to 47% and increased Eastern America Group's ownership of Universal from 42%
to 53%. Based on the Company's ownership of Universal declining to 47%, the
Company's investment in Universal for the current period and future periods
will be accounted for under the equity method of accounting. Prior period
financial statements have been restated to reflect this change in accounting.
(3) ADOPTION OF ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in March 1995.
SFAS 121 establishes standards for the impairment of long-lived assets,
certain identifiable intangibles related to those assets to be held and used,
and for long-lived assets and certain identifiable intangibles to be disposed
of. Effective September 30, 1995, the Company adopted SFAS 121. This
adoption is earlier than the required deadline of the 1996 first quarter.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(3) ADOPTION OF ACCOUNTING STANDARDS, Continued
As a result of the adoption of SFAS 121, the Company reduced the carrying
value of certain marine transportation equipment and related intangibles by
taking a $17,500,000 pre-tax, non-recurring charge in the 1995 third quarter.
The after-tax effect of the charge was $13,000,000, or $.47 per share. The
Company reviewed long-term assets and certain identifiable intangibles for
impairment by division, and by vessel class within each division. For
purposes of determining fair value, the Company estimated future cash flows
expected to be generated, assuming the above groups, less the future cash
outflows expected to be necessary to obtain the inflows.
An analysis of the reductions of the carrying value of the assets upon
adoption of SFAS 121 follows:
After
Before Adoption adoption
adoption of of SFAS of SFAS
SFAS 121 121 121
---------- -------- --------
($ in thousands)
Offshore Transportation
Division:
Break-bulk freighters:
Freighters $10,064 (6,366) 3,698
Land and equipment 1,662 (783) 879
Intangibles 9,525 (9,525) --
------ ------- ------
21,251 (16,674) 4,577
Tanker 2,029 (693) 1,336
Inland Transportation
Division:
Inland tank barges 164 (133) 31
------ ------- ------
$23,444 (17,500) 5,944
====== ======= ======
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(4) TAXES ON INCOME
Earnings (loss) before taxes on income and details of the provision
(benefit) for taxes on income for the three months and nine months ended
September 30, 1995 and 1994 were as follows:
Three months Nine months
ended ended
September 30, September 30,
---------------- ----------------
1995 1994 1995 1994
------- ------- ------- ------
($ in thousands)
Earnings (loss) before
taxes on income $(7,398) 5,571 8,286 15,347
====== ====== ====== ======
Provision (benefit) for
taxes on income:
United States:
Current $ 1,863 (1,747) 5,243 (1,298)
Deferred (3,394) 3,616 (1,141) 4,951
State and
municipal 229 96 395 248
------ ------ ------ ------
(1,302) 1,965 4,497 3,901
------ ------ ------ ------
Puerto Rico -
Current 502 -- 502 1,750
------ ------ ------ ------
$ (800) 1,965 4,999 5,651
====== ====== ====== ======
The effective tax rate for the 1995 first nine months and 1995 third
quarter was significantly higher than in prior comparable periods. This
primarily resulted from the write-off of $4,600,000 in non-deductible goodwill
in connection with the Company's adoption of SFAS 121. Therefore, the
effective tax rate for both 1995 periods was above the expected 35% statutory
rate.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(5) LONG-TERM DEBT
In December 1994, the Company established a $250,000,000 medium term note
program providing for the issuance of fixed rate or floating rate notes with
maturities of nine months or longer. The shelf registration program,
registered with the Securities and Exchange Commission, was activated in March
1995 with the issuance of $34,000,000 of the authorized notes. The issued
medium term notes bear interest at an average fixed rate of 7.77% with a
maturity of March 10, 1997. Proceeds from sale of the notes were used to
retire the Company's outstanding bank term loan in the amount of $10,286,000
due June 1, 1997 and to reduce the Company's outstanding revolving credit
loans by $23,714,000. The Company's outstanding bank term loan in the amount
of $10,666,000, due March 6, 1997, was retired on March 20, 1995 with proceeds
borrowed under the Company's revolving credit agreements. In June 1995, the
Company issued $45,000,000 of authorized notes, bearing a fixed interest rate
of 7.25%, with a maturity of June 1, 2000. Proceeds from the sale of the
notes were used to reduce the Company's outstanding revolving credit loans.
The remaining $171,000,000 available under the medium term note program is
available to provide financing for future business and equipment acquisitions,
and working capital requirements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The Company reported net earnings of $3,287,000, or $.12 per share, for
the first nine months of 1995, compared with $9,696,000, or $.34 per share,
for the first nine months of 1994. For the 1995 third quarter, the Company
reported a net loss of $6,598,000, or $.24 per share, compared with net
earnings of $3,606,000, or $.13 per share, for the 1994 third quarter.
The Company adopted SFAS 121, Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, effective September 30, 1995. As a
result of the adoption of SFAS 121, the Company reduced the carrying value of
certain marine transportation equipment and related intangibles by taking a
$17,500,000 pre-tax, non-recurring charge in the 1995 third quarter. The
after-tax effect of the charge was $13,000,000, or $.47 per share. The
Company reviewed long-term assets and certain identifiable intangibles for
impairment by division, and by vessel class within each division. For
purposes of determining fair value, the Company estimated future cash flows
expected to be generated, assuming the above groupings, less the future cash
outflows expected to be necessary to obtain the inflows.
Marine Transportation
As a provider of service for both the inland and offshore United States
markets, the marine transportation segment is divided into three divisions
organized around the markets they serve: the Inland Chemical Division,
serving the inland industrial and agricultural chemical markets; the Inland
Refined Products Division, serving the inland refined products market; and the
Offshore Division, which serves the offshore petroleum products, container,
dry-bulk and palletized cargo markets. A division analysis of the marine
transportation segment follows:
Marine Transportation - Inland Divisions
The Inland Chemical and Refined Products Divisions' transportation
revenues for the 1995 first nine months totaled $178,453,000, reflecting a 21%
increase compared with $148,081,000 reported for the first nine months of
1994. Third quarter 1995 transportation revenues totaled $63,402,000, an
increase of 19% when compared with third quarter 1994 revenues of $53,390,000.
The acquisition from The Dow Chemical Company ("Dow") in November 1994 of 65
inland tank barges, the assumption of the lease of 31 inland tank barges from
Dow and the accompanying ten year contract with Dow to provide inland bulk
liquid marine transportation services, contributed to the majority of the
increase in revenues for each comparable period.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
Equipment utilization in the Inland Chemical and Refined Products
Divisions remained stable during the 1995 first nine months and third quarter.
The Inland Chemical Division, with over 80% of its movements under long-term
contracts, benefited during both periods from contract renewals at higher
rates and continued operating efficiencies. The Dow fleet acquisition is
being integrated into the fleet and the fleet is operating more efficiently
than during the first half of the 1995 year.
The Inland Refined Products Divisions' third quarter movements, with
approximately 50% under long-term contract, benefited from the summer driving
season. Additional refinery capacity and pipeline efficiencies in the Midwest
resulted in lower rates and a slight decrease in movements when compared with
the 1994 third quarter and nine months.
Movements of liquid fertilizer and anhydrous ammonia, through the Inland
Chemical Division, were as predicted during the 1995 third quarter.
Typically, fertilizer is applied in the spring with terminals resupplied in
the fall; therefore, July and August are slow periods; however, with the
closure of the Upper Mississippi River System from flooding from May 19
through June 9, the spring fertilizer season was extended. September is the
normal beginning of the fall fertilizer season.
During the majority of the 1995 third quarter, the Illinois River was
closed for lock repairs, thereby negatively affecting the results of both the
Inland Chemical and Refined Products Divisions. In addition, several
hurricanes negatively affected both divisions' Gulf Coast operations.
Costs and expenses, excluding interest expense, for the Inland Chemical
and Refined Products Divisions for the 1995 first nine months totaled
$151,073,000, reflecting an 18% increase over the 1994 first nine months total
of $127,792,000. Third quarter 1995 costs and expenses, excluding interest
expense, totaled $51,710,000, an increase of 16% over the comparable 1994
third quarter when costs and expenses totaled $44,583,000. The increase for
both comparable periods reflects the costs and expenses associated with the
operation of the Dow equipment acquired in November 1994, as well as
inflationary increases in costs and expenses.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
The Inland Chemical and Refined Products Divisions' operating income for
the 1995 first nine months totaled $27,471,000, an increase of 30% compared
with 1994 first nine months operating income of $21,155,000. Operating income
for the 1995 third quarter increased 27% to $11,852,000 when compared with an
operating income of $9,321,000 for the 1994 third quarter. Operating margins
for the 1995 first nine months increased to 15.4% compared with 14.3% for the
first nine months of 1994. Operating margins for the 1995 third quarter also
improved to 18.7% compared with 17.5% recorded for the 1994 third quarter.
Marine Transportation - Offshore Division
Transportation revenues from the Offshore Division for the 1995 first
nine months totaled $74,891,000, reflecting a 2% decrease compared with
$76,669,000 reported for the first nine months of 1994. Third quarter 1995
Offshore Division transportation revenues totaled $27,656,000, an increase of
15% compared with $23,948,000 reported for the 1994 third quarter.
With five of the Company's nine tankers operating under long-term
contracts at adequate rates, the four remaining tankers operated sporadically
in the spot market at inadequate rates. During the 1995 third quarter, one
spot market tanker was laid up, as current rates did not justify an
anticipated expenditure of approximately $1,000,000 to maintain the vessel's
operating certificate. The laid-up tanker has an Oil Pollution Act of 1990
expiration date of October 1996. In anticipation of the idle tanker not
returning to service effective September 30, 1995, the tanker was written-down
to scrap steel value upon the adoption of SFAS 121. Although tanker spot
market rates are inadequate, the Offshore Division's liquid tanker segment
contributed $2,068,000 to the Company's operating income for the 1995 first
nine months and $181,000 of operating income for the 1995 third quarter.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
Movements for the transportation of food aid and related products under
the United States Government's preference aid cargo programs and military
cargo movements allowed the Company's three freighters to be fully utilized
during the 1995 third quarter. However, during the first half of 1995, all
three freighters operating in this market have been laid-up at various times
of the year due to the market's excess equipment capacity. Such excess
capacity and lack of available cargo have resulted in rates that are
inadequate to achieve operating profitability. Freight rates, which have been
depressed since 1994, are not expected to recover to levels which will allow
the three freighters to make consistent contributions to the Company's
earnings in the future. With the adoption of SFAS 121, the Company wrote down
the carrying value of the three freighters and related intangibles to fair
market value in the 1995 third quarter. The Offshore Division's preference
and military cargo segment suffered operating losses of $2,989,000 for the
1995 first nine months and $836,000 of operating losses for the 1995 third
quarter, excluding the effects of the previously mentioned write-down.
Costs and expenses, excluding interest expense, for the Offshore Division
for the 1995 first nine months totaled $74,839,000, a decrease of 4% compared
with $78,233,000 for corresponding 1994 first nine months. Third quarter 1995
costs and expenses, excluding interest expense, totaled $28,318,000, an
increase of 6% compared with $26,774,000 reported for the 1994 third quarter.
The 4% decrease in costs and expenses when comparing the 1995 first nine
months with the 1994 corresponding period primarily resulted from the lay-up
of the three break-bulk freighters during the 1995 second quarter and the
continued weakness in both the offshore liquid spot market and dry cargo
markets. The 6% increase for the 1995 third quarter compared with the 1994
third quarter resulted from the full employment of the break-bulk freighters
during the 1995 third quarter and the lay-up of as many as six liquid offshore
vessels during the 1994 third quarter.
For the 1995 first nine months, the Offshore Division recorded operating
income of $160,000 compared with an operating loss of $1,700,000 for the
corresponding 1994 first nine months. For the 1995 third quarter, the
Offshore Division recorded an operating loss of $660,000, compared with an
operating loss of $2,960,000 for the 1994 third quarter. Operating margins
for the 1995 first nine months were essentially break-even compared with a
negative 2.2% for the 1994 first nine months. Operating margins for the 1995
third quarter totaled a negative 2.4% compared with a negative 12.4% for the
1994 third quarter.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
The Company's investment in two marine transportation partnerships are
accounted for following the equity method of accounting for the 1995 first
nine months and third quarter. Such investment for the corresponding periods
of the 1994 year was accounted for following the pro-rata method (recording
the pro-rata share of the assets, liabilities, revenues and expenses of the
partnerships). The Company recorded equity in earnings of $1,469,000 for the
1995 nine months and $884,000 for the 1995 third quarter. For the
corresponding periods of the 1994 year, the Company recorded pre-tax earnings
from the partnerships of $1,823,000 for the first nine months and $1,008,000
for the third quarter. The components of such prior year earnings were
recorded pro-rata throughout the Statements of Earnings. The decline for both
comparable periods reflect the low rates for preference aid movements, a
market in which the partnerships participate, in addition to its contract
movements of coal and limestone rock.
Diesel Repair
The Company's diesel repair segment reported diesel repair and parts
sales revenues of $39,207,000 for the 1995 first nine months, reflecting a 17%
increase compared with $33,572,000 reported for the 1994 first nine months.
Third quarter 1995 revenues totaled $12,492,000, an increase of 6% compared
with 1994 third quarter revenues of $11,755,000.
The diesel repair segment is divided into two divisions organized around
the marine and rail markets. The Marine Diesel Repair Division operates on
all three coasts and in the Midwest through five facilities that repair and
overhaul marine diesel engines and reduction gears, and sell related parts and
accessories. The Rail Diesel Repair Division provides replacement parts,
service and support nationwide to shortline railroads and industrial companies
that operate locomotives.
The Marine Diesel Repair Division's revenues for the 1995 first nine
months totaled $31,720,000, an increase of 16% compared with the 1994 first
nine months' revenues of $27,288,000. Third quarter 1995 revenues increased
3% to $9,786,000 compared with $9,516,000 reported for the 1994 third quarter.
The Gulf Coast and Midwest markets benefited from the general health of the
inland tank barge industry, the main customer base for such markets. During
the late 1995 third quarter, the repair portion of such markets declined to
some degree; however, such repair business has rebounded during the early 1995
fourth quarter. The East Coast market remained stable from military
customers; however, the West Coast market has experienced peaks and valleys
from the slowly rebounding tuna fishing industry.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
The Rail Diesel Repair Division reported revenues for the 1995 first nine
months of $7,487,000, an increase of 19% compared with the 1994 first nine
months revenues of $6,284,000. Third quarter 1995 revenues totaled
$2,706,000, an increase of 21% compared with $2,239,000 reported for the 1994
third quarter. Operations continue to expand since the Division's
commencement in January 1994. The Rail Diesel Repair Division serves as the
exclusive distributor to shortline and industrial railroads for aftermarket
parts and service for the Electro-Motive Division of General Motors.
Costs and expenses, excluding interest expense, for the diesel repair
segment totaled $36,494,000, an increase of 16% compared with $31,331,000
reported for the 1994 first nine months. Third quarter 1995 costs and
expenses, excluding interest expense, equaled $11,657,000, an increase of 7%
over the comparable 1994 third quarter of $10,845,000. The increases for both
comparable periods reflect the continued growth in revenues from the two
diesel repair divisions, as well as inflationary growth in costs and expenses.
The diesel repair segment's operating income for the 1995 first nine
months totaled $2,793,000, an increase of 21% compared with 1994 first nine
months operating income of $2,301,000. Third quarter 1995 operating income
decreased 9% to $853,000 compared with $935,000 reported for the 1994 third
quarter. Operating margins for the 1995 first nine months equaled 7.1%
compared with 6.9% for the corresponding 1994 period. Third quarter 1995
operating margins totaled 6.8% compared with 8.0% reported for the 1994 third
quarter.
Property and Casualty Insurance
The Company's investment in Universal, a full service property and
casualty insurance company operating exclusively in the Commonwealth of Puerto
Rico, is accounted for under the equity in earnings method of accounting.
On July 18, 1995, Universal redeemed $5,000,000 of its common stock from
the Company and sold $5,000,000 of its common stock to Eastern America Group.
Such redemption and sale lowered the Company's voting ownership in Universal
from 58% to 47% and increased Eastern America Group's voting ownership in
Universal from 42% to 53%. See "Note 2" to the notes to the financial
statements included elsewhere herein for further disclosures on the Universal
redemption and sale of its common stock, and the effects of the Company's
voting ownership in Universal being decreased to 47%.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
The Company recorded equity in earnings of insurance affiliate for the
1995 first nine months of $5,181,000 compared with $4,378,000 of restated
equity in earnings for the corresponding 1994 period. Third quarter equity in
earnings of insurance affiliate totaled $1,210,000 compared with $1,290,000
for the 1994 third quarter. The amount recorded by the Company as equity in
earnings for the Company's investment in Universal is influenced to the extent
that anticipated future redemptions by Universal of its common stock exceeds
the Company's investment in Universal's stock. The Company also has an
investment in Universal's nonvoting preferred stock (100%). Because the
preferred stock is collateralized by a separate portfolio of U.S. Treasury
Securities, the Company accounts for this preferred stock under SFAS 115.
Therefore, the interest earned, as well as the realized gains from the sale of
U.S. Treasury Securities collateralizing the preferred stock, are included as
part of equity in earnings of insurance affiliate. During the 1995 third
quarter, the Company recognized $650,000 of realized gains from the sale of
such U.S. Treasury Securities, which are included in equity in earnings of
insurance affiliate.
Corporate Expenses
Interest expense for the 1995 first nine months totaled $9,208,000, a 50%
increase compared with $6,121,000 reported for the 1994 first nine months.
Third quarter 1995 interest expense totaled $3,252,000 compared with
$2,355,000 for the 1994 third quarter, reflecting an increase of 38%. Such
increase represents interest on debt incurred to finance the Dow asset
acquisition in November 1994, the four tankers acquired in July 1994 and
$22,039,000 of treasury stock acquired during the 1995 first nine months, of
which $10,295,000 was acquired during the 1995 third quarter.
Provision for Taxes on Income
The effective tax rate for the 1995 first nine months and 1995 third
quarter was significantly higher than in prior comparable periods. This
primarily resulted from the write-off of $4,600,000 in non-deductible goodwill
in connection with the Company's adoption of SFAS 121. Therefore, the
effective tax rate for both 1995 periods was above the expected 35% statutory
rate.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition, Capital Resources and Liquidity
Treasury Stock Purchases
From April 24, 1995 through October 31, 1995, the Company purchased
1,974,020 shares of common stock at a total price of $29,497,000, for an
average price of $14.94. On October 17, 1995, the Board of Directors
increased the Company's common stock repurchase authorization to 4,250,000
shares, an increase of 2,250,000 over the 2,000,000 shares authorized in
August 1994. The Company is authorized to purchase its common stock on the
American Stock Exchange and in privately negotiated transactions. When
purchasing its common stock, the Company is subject to price, trading volume
and other market considerations. Shares purchased may be used for reissuance
upon the exercise of stock options, in future acquisitions for stock or for
other appropriate corporate purposes.
Long-Term Financing
In December 1994, the Company established a $250,000,000 medium term note
program providing for the issuance of fixed rate or floating rate notes with
the maturities of nine months or longer. The shelf registration program,
registered with the Securities and Exchange Commission, was activated in March
1995 with the issuance of $34,000,000 of the authorized notes. The issued
medium term notes bear interest at an average fixed rate of 7.77% with a
maturity of March 10, 1997. Proceeds from sale of the notes were used to
retire the Company's outstanding bank term loan in the amount of $10,286,000
due June 1, 1997 and to reduce the Company's outstanding revolving credit
loans by $23,714,000. The Company's outstanding bank term loan in the amount
of $10,666,000, due March 6, 1997, was retired on March 20, 1995 with proceeds
borrowed under the Company's revolving credit agreements. In June 1995, the
Company issued $45,000,000 of authorized notes, bearing a fixed interest rate
of 7.25%, with a maturity of June 1, 2000. Proceeds from the sale of the
notes were used to reduce the Company's outstanding revolving credit loans.
The remaining $171,000,000 available under the medium term note program will
provide financing for future business and equipment acquisitions and working
capital requirements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition, Capital Resources and Liquidity, Continued
Capital Expenditures
In May 1994, the Company entered into a contract for the construction of
12 double skin 29,000 barrel capacity inland tank barges for use in the
movement of industrial chemicals and refined products. In February 1995, the
Company exercised the option under the contract to construct 12 additional
barges. Since January 1995, the Company has received nine barges,
approximately one each month, and the remaining 15 barges are scheduled to be
delivered one each month thereafter. A third option for the construction of
12 additional barges was canceled. The new construction program is consistent
with the Company's long-term strategy of upgrading its equipment to service
the needs of its customers and to enhance its market position.
Liquidity
The Company has generated net cash provided by operating activities of
$46,694,000 for the first nine months of 1995 compared with $33,868,000 for
the comparable 1994 period. Such funds are available for capital construction
projects, treasury stock purchases, asset acquisitions, repayment of
borrowings associated with asset acquisitions and for other operating
requirements. In addition to its cash flow provided by operating activities,
the Company also has available as of November 8, 1995 $45,700,000 under its
revolving credit agreement and $171,000,000 available under its medium term
note program.
During each year, inflation has had a relatively minor effect on the
financial results of the Company. The marine transportation segment has long-
term contracts which generally contain cost escalation clauses whereby certain
costs, including fuel, can be passed through to its customers, while the
transportation assets acquired and accounted for using the purchase method of
accounting were adjusted to a fair market value and, therefore, the cumulative
long-term effect on inflation was reduced. The repair portion of the diesel
repair segment is based on prevailing current market rates.
The Company has no present plan to pay dividends on its common stock.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a detailed explanation of the material pending legal proceedings
against the Company, please refer to the Form 10-K for the year ended December
31, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11.0 Computation of Earnings per Common Share.
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the nine months ended
September 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Kirby Corporation
(Registrant)
By: /s/ G. Stephen Holcomb
----------------------------
G. Stephen Holcomb
Vice President and Controller
Dated: November 13, 1995
EXHIBIT 11.0
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
Three months ended Nine months
September 30, ended September 30,
------------------- -------------------
1995 1994 1995 1994
------------------- -------------------
($ in thousands, except per share
amounts)
Net earnings (loss) $ (6,598) 3,606 3,287 9,696
======= ====== ====== ======
Shares:
Weighted average number
of common shares
outstanding 27,472 28,439 27,995 28,419
Common equivalent shares
for dilutive effect
of assumed exercise
of stock options -- 290 314 322
------ ------ ------ ------
27,472 28,729 28,309 28,741
====== ====== ====== ======
Earnings (loss) per share
of common stock $ (.24) .13 .12 .34
====== ====== ====== ======
5
9-MOS
DEC-31-1995
SEP-30-1995
887
16,763
65,851
653
8,391
105,296
484,857
170,236
485,719
70,671
158,933
3,078
0
0
205,086
485,719
29,823
293,987
23,805
198,414
54,332
34
9,208
8,286
4,999
3,287
0
0
0
3,287
.12
.12
