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 June 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, $.10 par
value per share, on August 4, 1995 was 27,503,786.
PART 1 - FINANCIAL INFORMATION
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
ASSETS
June December
30, 31,
1995 1994
-------- --------
($ in thousands)
Marine Transportation, Diesel Repair and
Other
Current assets:
Cash and invested cash $ -- 7,355
Available-for-sale securities - short-term
investments 13,118 2,875
Accounts and notes receivable, net of
allowance for doubtful accounts 66,968 63,300
Inventory - finished goods, at lower of
average cost or market 8,761 8,270
Prepaid expenses 14,980 13,661
Deferred taxes 792 1,324
-------- -------
Total current assets 104,619 96,785
-------- -------
Property and equipment, at cost 474,488 481,612
Less allowance for depreciation 153,780 153,672
-------- -------
320,708 327,940
-------- -------
Excess cost of consolidated subsidiaries 8,614 9,280
Noncompete agreements 3,114 3,889
Investment in unconsolidated marine
partnerships 8,980 181
Sundry 11,115 12,731
-------- -------
Total assets - Marine Transportation,
Diesel Repair and Other 457,150 450,806
-------- -------
Table continues on following page
PART 1 - FINANCIAL INFORMATION
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
ASSETS
June December
30, 31,
1995 1994
--------- --------
Insurance
Investments:
Available-for-sale securities:
Fixed maturities 182,206 149,173
Short-term investments 20,837 21,227
-------- --------
203,043 170,400
Cash and invested cash 2,162 4,485
Accrued investment income 3,047 2,638
Accounts and notes receivable, net of
allowance for doubtful accounts 18,408 9,613
Reinsurance receivable on paid losses 15,306 9,871
Prepaid reinsurance premiums 5,152 5,147
Deferred policy acquisition costs 16,597 11,690
Property and equipment, at cost, net of
allowance for depreciation 3,156 2,822
-------- --------
Total assets - Insurance 266,871 216,666
-------- --------
$724,021 667,472
======== ========
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June December
30, 31,
1995 1994
-------- --------
($ in thousands)
Marine Transportation, Diesel Repair and
Other
Current liabilities:
Current portion of long-term debt $ 5,333 10,962
Accounts payable 21,228 15,771
Accrued liabilities 33,369 32,559
Deferred revenues 5,560 8,294
-------- ------
Total current liabilities 65,490 67,586
-------- ------
Long-term debt, less current portion 161,659 148,535
Deferred taxes 44,645 42,587
Other long-term liabilities 6,688 7,998
-------- ------
Total liabilities - Marine Transportation,
Diesel Repair and Other 278,482 266,706
-------- --------
Insurance
Losses, claims and settlement expenses 60,516 56,433
Unearned premiums 115,363 89,801
Reinsurance premiums payable 1,140 2,657
Other liabilities 20,258 11,473
Minority interest in consolidated insurance
subsidiary 22,513 17,426
-------- --------
Total liabilities - Insurance 219,790 177,790
-------- --------
Table continues on following page
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June December
30, 31,
1995 1994
-------- --------
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) 3,080 3,078
Additional paid-in capital 157,025 157,021
Unrealized net gains (losses) in value of
investments 1,916 (2,686)
Retained earnings 88,536 78,651
-------- --------
250,557 236,064
Less cost of 3,284,000 shares in treasury
(2,468,000 at December 31, 1994) 24,808 13,088
-------- --------
225,749 222,976
-------- --------
$724,021 667,472
======== ========
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF EARNINGS
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
------------------ ----------------
1995 1994 1995 1994
-------- -------- ------- --------
($ in thousands, except per share
amounts)
Revenues:
Transportation $83,078 74,025 162,287 147,412
Diesel repair 12,690 11,646 26,715 21,817
Net premiums earned 22,124 15,305 43,191 29,415
Commissions earned on
reinsurance 1,136 1,148 2,048 2,455
Investment income 3,612 2,452 6,771 4,388
Gain (loss) on disposition of
assets (249) 75 (236) 236
Realized gain on investments 635 90 868 848
-------- ------- ------- -------
123,026 104,741 241,644 206,571
-------- ------- ------- -------
Costs and expenses:
Costs of sales and operating
expenses (except as shown
below) 64,701 55,004 128,296 111,429
Losses, claims and settlement
expenses 15,620 14,784 30,189 25,908
Policy acquisition costs 4,613 3,644 9,365 7,278
Selling, general and
administrative 13,366 11,807 25,195 23,732
Taxes, other than on income 2,724 4,232 5,314 7,822
Depreciation and amortization 10,036 7,887 19,766 15,681
Minority interest expense 1,290 532 2,463 1,179
-------- ------- ------- -------
112,350 97,890 220,588 193,029
-------- ------- ------- -------
Operating income 10,676 6,851 21,056 13,542
Table continues on following page
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF EARNINGS
(Unaudited)
Three months Six months
ended ended
June 30, June 30,
--------------- ---------------
1995 1994 1995 1994
------- ------- ------ -------
Equity in earnings of marine
partnerships 425 -- 584 --
Interest expense (3,046) (1,957) (5,956) (3,766)
------- ------- ------ -------
Earnings before taxes on income 8,055 4,894 15,684 9,776
Provision for taxes on income 2,979 1,701 5,799 3,686
------- ------ ------ ------
Net earnings $ 5,076 3,193 9,885 6,090
====== ====== ====== ======
Earnings per share of common
stock $ .18 .11 .35 .21
====== ====== ====== ======
See accompanying notes to financial statements.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW
(Unaudited)
Six months ended
June 30,
--------------------
1995 1994
--------- ---------
($ in thousands)
Net earnings $ 9,885 6,090
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gain on disposition of assets 236 (236)
Realized gain on investments (868) (849)
Depreciation and amortization 19,766 15,681
Increase in deferred tax items 2,589 1,336
Deferred scheduled maintenance costs 4,125 (1,865)
Minority interest and earnings of unconsolidated
subsidiaries 1,878 1,135
Other noncash adjustments to earnings 11 43
Increase (decrease) in cash flow from other changes
in operating working capital for:
Marine transportation, diesel repair and other (8,288) (5,314)
Insurance 14,101 10,639
-------- -------
Net cash provided by operating activities 43,435 26,660
-------- -------
Cash flow from investing activities:
Proceeds from sale and maturities of investments 50,178 22,364
Purchase of investments (69,650) (57,668)
Net decrease (increase) in short-term investments (12,060) 5,705
Capital expenditures (22,921) (12,528)
Proceeds from disposition of assets 1,015 564
-------- -------
Net cash used in investing activities (53,438) (41,563)
-------- -------
Cash flow from financing activities:
Borrowings on bank revolving credit loan 134,600 87,900
Payments on bank revolving credit loan (179,000) (80,300)
Increase in long-term debt 82,891 --
Payments under long-term debt (26,451) (7,981)
Purchase of treasury stock (11,744) --
Proceeds from exercise of stock options 29 453
-------- -------
Net cash provided by financing activities 325 72
-------- -------
Table continued on following page
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW
(Unaudited)
Six months ended
June 30,
--------------------
1995 1994
--------- ---------
Decrease in cash and invested cash (9,678) (14,831)
Cash and invested cash, beginning of year 11,840 14,936
-------- --------
Cash and invested cash, end of period $ 2,162 105
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 5,258 3,813
Income taxes $ 800 3,400
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 June 30, 1995 and
December 31, 1994, and the results of operations for the three months and six
months ended June 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) SUBSEQUENT EVENT
On July 18, 1995, Universal Insurance Company ("Universal") redeemed $5
million of its common stock from the Company and sold $5 million of its common
stock to Eastern America Insurance Group, Inc. ("Eastern America Group").
Such redemption and sale reduced Kirby's ownership from 58% to 47% and
increased Eastern America Group's ownership of Universal from 42% to 53%.
Effective July, 1995, the financial statements of Universal will no longer be
consolidated with the Company, and the Company will account for its investment
in Universal on an equity basis. Prior year financial statements will be
restated.
The following proforma condensed financial statements are based on
historical financial statements of the Company. The proforma condensed
financial statements assume the Company was accounting for its investment in
Universal on an equity basis as of the beginning of the periods indicated.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(2) SUBSEQUENT EVENT, Continued
PROFORMA CONDENSED BALANCE SHEETS
June December
30, 31,
1995 1994
---------- ----------
ASSETS ($ in thousands)
Current assets $ 106,452 102,711
Property and equipment, net 320,708 316,979
Investment in Universal 46,742 39,354
Other assets 31,822 34,047
--------- ----------
$ 505,724 493,091
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 68,159 74,604
Long-term debt, less current portion 161,659 145,000
Other long-term liabilities 50,157 50,511
--------- ----------
279,975 270,115
Stockholders' equity 225,749 222,976
--------- ----------
$ 505,724 493,091
========= ==========
PROFORMA CONDENSED STATEMENTS OF EARNINGS
Six months ended
June 30,
----------------------
1995 1994
--------- ----------
Revenues $ 189,672 169,957
Costs and expenses 172,590 159,502
--------- ----------
Operating income 17,082 10,455
Equity in earnings of Universal 2,798 2,007
Equity in earnings of marine
partnerships 584 --
Interest expense (5,956) (3,767)
--------- ----------
Earnings before taxes in income 14,508 8,695
Provision for taxes on income 4,623 2,605
--------- ----------
Net earnings $ 9,885 6,090
========= ==========
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(2) SUBSEQUENT EVENT, Continued
Pursuant to a Shareholder Agreement entered into between Eastern America
Group, Universal and the Company in September, 1992, it is anticipated that
Universal will continue redeeming its common stock from the Company over a
nine to eleven year period. To the extent that the anticipated future
redemptions by Universal of its common stock exceeds the Company's basis in
such stock, the Company will record equity in earnings accordingly. It is
anticipated that future earnings attributable to the Company's investment in
Universal for the second half of 1995 will be minimal. In addition to the
Company's common stock holding in Universal, the Company has an investment of
$11,534,000 of preferred stock which accrues earnings based upon a pool of
U.S. Treasury Securities. The U.S. Treasury Securities are collateral for the
preferred stock. The fair market value of such securities at June 30, 1995
was $13,500,000. Such earnings attributable to the preferred stock will be
recognized by the Company as accrued. As of June 30, 1995, the Company
believes that future redemptions by Universal of its common stock will be
sufficient to recover the Company's book basis in Universal.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(3) ACCOUNTING CHANGE
In March, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 is effective for fiscal years beginning after December 15, 1995. The
Company has not completed the analysis required by SFAS 121 and, as a result,
the impact that the adoption of SFAS 121 is expected to have on the Company's
financial statements is not known. SFAS 121 must be adopted prior to the
first quarter of 1996.
(4) TAXES ON INCOME
Earnings before taxes on income and details of the provision for taxes on
income for United States and Puerto Rico operations for the three months and
six months ended June 30, 1995 and 1994 are as follows:
Three months Six months ended
ended June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Earnings before taxes
on income:
United States $ 5,844 3,856 11,713 6,688
Foreign 2,211 1,038 3,971 3,088
------- ------- ------- -------
$ 8,055 4,894 15,684 9,776
======= ======= ======= =======
Provision for taxes on
income:
United States:
Current $ 1,681 1,131 3,380 2,199
Deferred 1,186 799 2,253 1,335
State and municipal 112 73 166 152
------- ------- ------ -------
$ 2,979 2,003 5,799 3,686
======= ======= ====== =======
Puerto Rico:
Deferred $ -- (302) -- --
======= ======= ====== =======
KIRBY CORPORATION AND CONSOLIDATED SUBSIDARIES
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 $9,885,000, or $.35 per share, for
the first six months of 1995, compared with net earnings of $6,090,000, or
$.21 per share, for the first six months of 1994. Net earnings for the 1995
second quarter totaled $5,076,000, or $.18 per share, compared with net
earnings of $3,193,000, or $.11 per share.
The Company conducts operations in three business segments: marine
transportation, diesel repair and property and casualty insurance. The sum of
the three business segments' operating income exceeds the Company's
consolidated operating income due primarily to general corporate expenses and
interest expense. A discussion of each segment follows:
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:
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
Marine Transportation - Inland Divisions
The Inland Chemical and Refined Products Divisions' transportation
revenues for the 1995 first six months totaled $115,052,000, reflecting a 22%
increase compared with $94,691,000 reported for the first six months of 1994.
Second quarter 1995 transportation revenues totaled $59,077,000, an increase
of 21% when compared with second quarter 1994 transportation revenues of
$48,673,000. 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 increase in revenues for each comparable period.
Operating results for the 1995 first half, and second quarter were
negatively affected by the Upper Mississippi River System closure for all
marine transportation movements from May 19 through June 9, 1995, and to a
lesser extent, flooding on the Arkansas River. The closure of the Upper
River, the result of severe flooding, resulted in idle, delayed or diverted
equipment equal to approximately 10% of the Company's inland tank barge fleet.
When the Upper River opened, operations were impeded by channel silting which
restricted drafts, and in some cases, briefly closed the Upper River in
selected areas. The closure marked the second time in three years the Upper
River has closed due to flooding. In the previous 25 years, the Upper River
has closed four times as a result of flooding. The Company estimated that net
earnings were reduced by approximately $800,000, or $.03 per share, from the
effects of the Upper River and Arkansas River flooding. For comparative
purposes, the 1993 flood, which closed the Upper River for most of the summer,
reduced net earnings by an estimated $1,500,000, or $.05 per share.
Equipment utilization in the Inland Chemical Division and Refined
Products Division remained relatively strong during the 1995 first half and
second quarter in the Lower Mississippi River, Ohio River and Gulf
Intracoastal Waterway, as well as the Upper River, before, and after, the
flood event. The Inland Chemical Division, with over 80% of its movements
under long-term contracts, has not benefited to any large extent from the
modest rate increases experienced in spot market movements. Second quarter
1995 spot market rates for the Refined Products Division experienced a
decline, as additional refinery capacity in the Midwest and additional
pipeline efficiencies drove rates down slightly. Offsetting the improved
efficiencies was a growing demand for gasoline in the Midwest markets.
Movements of liquid fertilizer and anhydrous ammonia, through the Inland
Chemical Division, was strong during the early part of the spring fertilizer
season, however, the Upper River System closure caused early termination of
the spring fertilizer season.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
Costs and expenses, excluding interest expense, for the Inland Chemical
and Refined Products Divisions' for the 1995 first six months totaled
$99,346,000, reflecting a 19% increase over the 1994 first half total of
$83,210,000. Second quarter 1995 costs and expenses, excluding interest
expense, totaled $50,931,000, an increase of 18% over the comparable 1994
second quarter when costs and expenses totaled $43,262,000. 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.
The Inland Chemical and Refined Products Divisions' operating income for
the 1995 first six months totaled $15,638,000, an increase of 32% compared
with 1994 first six months operating income of $11,833,000. Operating income
for the 1995 second quarter increased 45% to $8,102,000 when compared with an
operating income of $5,575,000 for the second quarter of 1994. Operating
margin for the 1995 first half increased to 13.6% compared with 12.5% for the
first half of 1994. Operating margin for the 1995 second quarter also
improved to 13.7% compared with 11.4% recorded for the 1994 second quarter.
Marine Transportation - Offshore Division
Transportation revenues from the Offshore Division for the 1995 first six
months totaled $47,235,000, reflecting a 10% decrease compared with
$52,721,000 reported for the first six months of 1994. Second quarter 1995
Offshore Division transportation revenues equaled $24,001,000, a decrease of
5% compared with $25,352,000 reported for the 1994 second quarter.
The Company's Offshore Division, which participates in movements of both
refined products and dry cargo products, experienced weaknesses in spot market
rates within its liquid market and reduced demand and excess equipment
capacity within its dry cargo markets.
The Offshore Division's liquid segment, which benefited from the charters
of eight of its tank vessels during the 1994 fourth quarter, experienced
continued weakness in spot market rates during the first half of 1995. Such
reduction in rates occurred as movements of heating oil, normally strong
during the first quarter of the year, did not materialize due to the unusually
mild winter in the Northeast.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
During the 1995 second quarter, six of the Division's tank vessels
operated under long-term contract and five tank vessels operated in the spot
market. One tanker was scrapped in January, 1995 in accordance with the
designated vessel retirements under the Oil Pollution Act of 1990 ("OPA 90").
Full recovery of the offshore tank vessels' market is anticipated to be
gradual, over the next few years, as offshore tank vessels are removed from
service under OPA 90.
Movements for the transportation of food aid and related products under
the United States Government's preference aid cargo programs and military
cargo movements continued to remain weak for the first half of 1995. Excess
equipment capacity and a reduction in available movements have led to reduced
rates. All three of the Company's break-bulk freighters have been laid up for
various periods of the 1995 first half. One freighter was laid up for
substantially all of the 1995 first quarter and during the 1995 second
quarter, two of the freighters were laid up for the first half of the quarter
and the third freighter was laid up for substantially all of the quarter, only
returning to working status the last 15 days of the quarter. The depressed
market also negatively affected the Company's other offshore dry cargo barge
and tug units that primarily work under a long-term contract with an electric
utility company, but periodically operate in the preference aid market as a
supplement to their long-term contract movements.
Prospects for the second half of 1995 offers some encouragement as
available dry cargo movements have increased and all of the Company's dry
cargo vessels are currently working. In addition, a competitor has scrapped
eight vessels during 1995 and three additional vessels are scheduled to be
scrapped by the end of the 1995 year. Such vessels have participated in
preference aid and military cargo movements in the past.
Costs and expenses, excluding interest expense, for the Offshore Division
for the 1995 first six months totaled $46,239,000, a decrease of 10% compared
with the corresponding 1994 first six months of $51,458,000. Second quarter
1995 costs and expenses, excluding interest expense, totaled $23,777,000, a
decrease of 3% over the comparable 1994 second quarter of $24,494,000. The
costs and expenses of the four offshore tankers acquired in July, 1994 and
reflected in the 1995 first half and second quarter also accounted for a
portion of the variance from period to period. Costs and expenses for the 1994
first quarter included $1,750,000 of costs associated with the collection of
containers from several voyages carrying preference aid cargo to Haiti, which
during that period of time, was politically unstable.
For the 1995 first six months, the Offshore Division recorded operating
income of $1,102,000 compared with $1,261,000 for the 1994 first six months.
for the 1994 second quarter. Operating margin for the 1995 first half equaled
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
Second quarter 1995 operating income totaled $320,000 compared with $830,000
2.3% compared with 2.4% for the 1994 first half. Operating margin for the
1995 second quarter totaled 1.3% compared with 3.3% reported for the 1994
second quarter. The Offshore Division's operating income noted above includes
an operating loss from the Company's three break-bulk freighters for the 1995
first six months of $1,865,000 and for the 1995 second quarter of $1,179,000
Diesel Repair
The Company's diesel repair segment reported diesel repair and parts
sales revenues of $26,715,000 for the first six months of 1995, reflecting a
22% increase compared with $21,816,000 reported for the 1994 first six months.
Second quarter 1995 revenues totaled $12,690,000, an increase of 9% when
compared with 1994 second quarter revenues of $11,646,000.
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 six
months totaled $21,935,000, an increase of 23% compared with $17,771,000
reported for the 1994 first half. Second quarter 1995 revenues increased 12%
to $10,318,000 compared with $9,251,000 reported for the 1994 second quarter.
The Gulf Coast and Midwest markets benefited from the general health of the
inland barge industry, that serves as the main customer base for such markets.
The East Coast market continued to reflect improvements from military
customers while the West Coast market benefited from an improved tuna fishing
industry.
The Rail Diesel Repair Division reported revenues for the 1995 first six
months of $4,780,000, an increase of 18% compared with the 1994 first six
months' revenues of $4,045,000. Second quarter 1995 revenues totaled
$2,372,000 compared with $2,395,000 reported for the 1994 second quarter.
Operations continue to expand since the division's commencement in January,
1994. The division serves as the exclusive distributor to shortline and
industrial railroads of aftermarket parts and service for the Electro-Motive
Division of General Motors.
Costs and expenses, excluding interest expense, for the diesel repair
segment totaled $24,837,000, an increase of 21% compared with $20,486,000
reported for the 1994 first half. Second quarter 1995 costs and expenses,
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
excluding interest expense, equaled $11,850,000, an increase of 9% over the
comparable 1994 second quarter total of $10,849,000. 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 six
months totaled $1,940,000, an increase of 42% compared with 1994 first half
operating income of $1,366,000. Second quarter 1995 operating income
increased 5% to $864,000 compared with $822,000 reported for the 1994 second
quarter. Operating margin for the 1995 first half equaled 7.3% compared with
6.3% for the 1994 first half. Second quarter 1995 operating margin totaled
6.8% compared with 7.0% reported for the 1994 second quarter.
Property and Casualty Insurance
The Company's property and casualty insurance segment is primarily
centered around Universal, Kirby's full service property and casualty
insurance company operating exclusively in the Commonwealth of Puerto Rico.
The Mariner Reinsurance Company Limited ("Mariner"), Kirby's Bermuda
reinsurance subsidiary, participated in the writing of property and casualty
reinsurance from 1970 through 1990.
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%.
The property and casualty insurance segment reported premiums written of
$78,979,000 for the 1995 first six months, an increase of 40% compared with
premiums written of $56,587,000 for the 1994 first half. Second quarter 1995
premiums written totaled $43,078,000 compared with $30,470,000 reporting for
the corresponding 1994 second quarter, an increase of 41%. Continued
expansion of the vehicle single-interest and double-interest lines of business
contributed to the significant increases for each comparable period, primarily
the result of strong automobile sales in Puerto Rico and from Universal's
expanded market share.
Net premiums earned for the 1995 first six months increased 47% to
$43,192,000 compared with $29,415,000 for the 1994 first six months. Net
premiums earned for the 1995 second quarter totaled $22,125,000, reflecting a
45% increase compared with net premiums earned of $15,305,000 reported for the
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations, Continued
1994 second quarter. Net premiums earned represents the amortization of net
premiums written over the life of the policy. Net premiums written have
increased annually since 1992, thereby increasing the amount amortized to net
premiums earned.
Losses, claims and settlement expenses for the first six months of 1995
totaled $30,189,000, an increase of 33% compared with $22,702,000 for the 1994
first half. For the 1995 second quarter, losses, claims and settlement
expenses totaled $15,620,000, up 41% from the $11,077,000 reported for the
1994 second quarter. The 1994 first half losses, claims and settlement
expenses included a $2,000,000 additional reserve for potential losses
associated with Mariner. Since ceasing participation in the reinsurance
market in 1990, the Company has continued to seek a withdrawal from the
business and closure of Mariner's activities, including commutation of
Mariner's book of business. A commutation would entail the transfer of
liability from known and incurred but not reported losses to a second party in
exchange for a portion of, or all of, Mariner's assets. To date, Mariner has
been successful in commuting approximately 80% of its claims. The remaining
20% of uncommuted claims are fully reserved and will be paid as they are
presented. Management expects to liquidate Mariner in 1996.
The Company's portion of the property and casualty insurance segment's
pretax earnings for the first six months of 1995 totaled $3,971,000, up 265%
compared with $1,088,000 for the like 1994 period. Second quarter 1995 pretax
earnings totaled $2,212,000, up 113% compared with $1,038,000 for the 1994
second quarter. Minority interest expense for the 1995 first half and second
quarter totaled $2,463,000 and $1,290,000, respectively, based on the
Company's 58% voting ownership of Universal. Minority interest expense for
the 1994 first half and second quarter totaled $1,179,000 and $532,000,
respectively. Such expense was based on a 67% voting ownership of Universal
for the 1994 first quarter and 58% for the 1994 second quarter.
Corporate Expenses
Interest expense for the 1995 first six months totaled $5,956,000,
reflecting a 58% increase over $3,766,000 reported for the 1994 first six
months. Second quarter 1995 interest expense equaled $3,046,000, up 56% from
$1,957,000 reported for the 1994 second quarter. Such increase represents
interest on the debt incurred to finance the Dow asset acquisition in
November, 1994, the four tankers acquired in July, 1994, the $11,700,000 of
treasury stock purchased during the 1995 second quarter and the increase in
short-term interest rates from the first half of 1994 through the first half
of 1995.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition, Capital Resources and Liquidity
Stock Repurchase
From April 24, 1995 through July 31, 1995, the Company repurchased
836,800 shares of common stock at a total price of $11,986,000, for an average
price of $14.32. The Company has 1,163,200 shares remaining under the
2,000,000 common share repurchase authorization approved by the Board of
Directors in August, 1994. The Company is authorized to purchase the common
stock on the American Stock Exchange and in privately negotiated transactions.
When purchasing common stock, the Company is subject to price, trading volume
and other market considerations. Shares repurchased 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.
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 five barges and the
remaining 19 barges are scheduled to be delivered one each month thereafter.
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.
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition, Capital Resources and Liquidity, Continued
Accounting Change
In March, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 is effective for fiscal years beginning after December 15, 1995. The
Company has not completed the analysis required by SFAS 121 and, as a result,
the impact that the adoption of SFAS 121 is expected to have on the Company's
financial statements is not known. SFAS 121 must be adopted prior to the
first quarter of 1996.
Liquidity
The Company has generated substantial cash flow from its operating
segments to fund its capital construction project, asset acquisitions,
repayment of borrowings associated with acquisitions and other operation
requirements. The Company generated net cash provided by operating activities
of $43,435,000 for the 1995 first six months compared with $26,660,000 for the
1994 first six months.
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
segment's short-term, or spot business, is based principally on current
prices. In addition, the marine 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. For the property and casualty insurance
segment, 100% of its investments were classified as available-for-sale
securities, which consist primarily of United States Governmental instruments.
Universal is subject to dividend restrictions under the stockholders
agreement between the Company, Universal and Eastern America Group. In
addition, Universal is subject to industry guidelines and regulations with
respect to the payment of dividends.
The Company has no present plan to pay dividends on 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 six months ended June 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: August 7, 1995
EXHIBIT 11.0
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
------- ------- ------- -------
($ in thousands, except per share
amounts)
Net earnings $ 5,076 3,193 9,885 6,090
======= ======= ======= =======
Shares:
Weighted average number of
common shares outstanding 28,073 28,433 28,256 28,408
Common equivalent shares for
dilutive effect of assumed
exercise of stock options 304 327 332 336
------- ------- ------- -------
28,377 28,760 28,588 28,744
======= ======= ======= =======
Earnings per share of common $ .18 .11 .35 .21
stock ====== ======= ====== ======
5
6-MOS
DEC-31-1995
JUN-30-1995
0
13,118
66,870
672
8,761
104,619
474,488
153,780
724,021
65,490
161,659
3,080
0
0
222,669
724,021
20,870
241,644
16,256
167,850
25,080
11
5,956
15,684
5,799
9,885
0
0
0
9,885
.35
.35
ALL INSURANCE ASSETS AND LIABILITIES ARE ASSUMED TO BE NON-CURRENT.
