Kirby Corporation Announces 2010 Fourth Quarter and Year Results

HOUSTON, Jan. 26, 2011 /PRNewswire/ -- Kirby Corporation ("Kirby") (NYSE: KEX) today announced net earnings attributable to Kirby for the fourth quarter ended December 31, 2010 of $31.6 million, or $.59 per share, compared with $29.2 million, or $.54 per share, for the 2009 fourth quarter.  The 2009 fourth quarter results included a $4.8 million before taxes, or $.05 per share, charge for shore staff reductions, a $1.9 million before taxes, or $.02 per share, charge for impairment of goodwill and a $2.0 million before taxes, or $.02 per share, net positive impact from the reduction in Kirby's allowance for doubtful accounts.  Consolidated revenues for the 2010 fourth quarter were $286.3 million compared with $259.6 million reported for the 2009 fourth quarter.  

Joe Pyne, Kirby's Chief Executive Officer, commented, "The United States petrochemical industry is currently very competitive on a global basis.  With approximately 70% of our marine transportation revenues tied to the United States petrochemical industry, a globally competitive petrochemical business is important to Kirby.  The petrochemical industry's global competitive position is attributed to a number of factors including its size, industry integration and an efficient transportation system, an important segment of which is inland tank barging.  During 2010, low priced natural gas, a basic feedstock used by many of our customers, significantly improved the competitiveness of the United States petrochemical industry.  As a result, production volumes from United States petrochemical plants for both domestic and foreign destinations remained strong and led to an overall tank barge utilization level in the mid to high 80% range during 2010.  Our diesel engine services power generation sector reported a strong quarter with engine-generator set upgrade projects, higher parts sales and new engine sales, partially offset by the continued deferral of major maintenance projects by our Gulf Coast oil services customers."  

Kirby reported net earnings attributable to Kirby for the 2010 year of $116.2 million, or $2.15 per share, compared with $125.9 million, or $2.34 per share for 2009.  Consolidated revenues for 2010 were $1.11 billion compared with $1.08 billion for 2009.

Segment Results – Marine Transportation

The marine transportation revenues for the 2010 fourth quarter was $232.4 million, a 7% increase compared with the 2009 fourth quarter, while operating income was $49.4 million, a 3% decrease compared with the 2009 fourth quarter.  The 2009 fourth quarter operating income included a $3.5 million shore staff reduction charge and the positive impact of a $2.5 million reduction in the allowance for doubtful accounts.  The improved marine transportation revenues reflected continued modest improvement in tank barge demand and equipment utilization levels in the petrochemical market during the 2010 fourth quarter as low natural gas prices continued to enhance the global competitiveness of the United States petrochemical industry, thereby producing increased marine transportation volumes for basic petrochemicals to both domestic consumers and terminals for export destinations.  In addition, the black oil products market reflected high equipment utilization levels during the fourth quarter due to continued high refinery utilization and strong export demand for certain black oil products.  The higher revenues were also impacted by a 16% increase in fuel prices during the 2010 fourth quarter versus the 2009 fourth quarter.  Offsetting the improved demand and equipment utilization levels was the negative impact of lower term contract rates renegotiated during 2009 and the 2010 first half.

The marine transportation operating margin was 21.2% for the 2010 fourth quarter compared with 23.6% for the 2009 fourth quarter, a reflection of lower contract rates renegotiated throughout 2009 and the 2010 first half, and higher fuel costs, partially offset by modestly higher equipment utilization and by the cost reduction initiatives implemented throughout 2009 and 2010.  

Segment Results – Diesel Engine Services

The diesel engine services revenues for the 2010 fourth quarter were $53.9 million, a 26% increase compared with the 2009 fourth quarter, and operating income was $6.9 million, a 81% increase compared with the 2009 fourth quarter, as that quarter included a $.9 million staff reduction charge and a $.5 million increase in allowance for doubtful accounts.  The 2010 fourth quarter benefited from increased engine-generator set upgrade projects and higher parts and engine sales in its medium-speed power generation market and strong maintenance cycles for inland marine customers.  Both the medium-speed and high-speed Gulf Coast oil services markets continued to experience weak service levels and direct parts sales as customers continue to defer major maintenance projects, exacerbated by the new safety regulations on Gulf Coast drilling operators and the delays in issuing offshore drilling permits.  

The diesel engine services operating margin was 12.8% for the 2010 fourth quarter, a reflection of the cost reduction initiative implemented during 2009 and increased power generation projects, partially offset by the continued weak medium-speed and high-speed Gulf Coast oil services markets and resulting lower labor utilization.  The 8.9% operating margin for the 2009 fourth quarter reflected the diesel engine services' portion of the staff reduction charge and the increase in the allowance for doubtful accounts.

Cash Flow

Kirby continued to generate strong cash flow during 2010 with EBITDA of $294.8 million.  The cash flow was used to fund capital expenditures of $136.8 million, including $74.3 million for new tank barge and towboat construction and $62.5 million primarily for upgrades to the existing fleet.  The cash flow was also used to purchase $23.8 million of Kirby common stock, or 618,000 shares, during 2010.  Total debt as of December 31, 2010 was $200.1 million, consisting predominately of a $200 million private placement loan that matures in 2013.  Kirby's debt-to-capitalization ratio was 14.7% at December 31, 2010.  Cash and cash equivalents at December 31, 2010 were $195.6 million compared with $97.8 million at December 31, 2009.  

Outlook

Commenting on the 2011 first quarter and full year market conditions and guidance, Mr. Pyne said, "Our guidance for the 2011 first quarter is $.56 to $.61 per share.  This compares with $.46 per share for the 2010 first quarter that included a $.05 per share charge for retirements and shore staff reductions.  Our 2011 first quarter guidance includes unfavorable winter weather conditions at various severity levels and equipment utilization from the mid to high 80% range. For the 2011 year, our guidance range is $2.35 to $2.55 per share compared with $2.15 per share for 2010.  Our low end guidance assumes equipment utilization will be consistent with current utilization throughout 2011, and term contract renewal and spot contract pricing will improve modestly later in the year.  Our high end guidance assumes a continued modest improvement in equipment utilization, some reduction in excess industry-wide tank barge capacity and modest improvement in term contract renewal and spot contract pricing throughout 2011.  Both our 2011 year low end and high end guidance assumes our diesel engine services segment will continue to face challenges in its Gulf Coast oil services market, with some gradual improvement as 2011 progresses, and assumes stable Midwest and East Coast marine markets, and a stable power generation market.  Our guidance represents our current judgment with respect to our 2011 performance as the United States economy continues its slow recovery process.  Our 2011 capital spending guidance range is $170 to $180 million, including approximately $100 million for the construction of 40 new tank barges and three new towboats."  

Commenting on the financial condition of Kirby, Mr. Pyne said, "Kirby remains in excellent financial condition with an investment grade rated balance sheet, sustainable cash flows and low debt levels.  We currently have $209 million of cash on our balance sheet.  During the recessionary years of 2009 and 2010 we removed a significant amount of cost from our businesses, thereby allowing us to maintain marine transportation and diesel engine services operating margins above 20% and 10%, respectively.  For 2011, we will continue to focus on the areas we can control:  safety, customer service, cost, upgrading our fleet and looking for opportunities to grow our marine transportation and diesel engine services businesses."  

Conference Call

A conference call is scheduled at 10:00 a.m. central time tomorrow, Thursday, January 27, 2011, to discuss the 2010 fourth quarter and year performance as well as the outlook for the 2011 first quarter and year.  The conference call number is 800-446-1671 for domestic callers and 847-413-3362 for international callers.  The leader's name is Steve Holcomb.  The confirmation number is 28764805.  An audio playback will be available at 1:00 p.m. central time on Thursday, January 27, through 5:00 p.m. central time on Friday, February 25, 2011 by dialing 888-843-7419 for domestic and 630-652-3042 for international callers.  The passcode is 28764805#.  A live audio webcast of the conference call will be available to the public and a replay available after the call by visiting Kirby's website at http://www.kirbycorp.com/.

GAAP to Non-GAAP Financial Measures

The financial and other information to be discussed in the conference call is available in this press release and in a Form 8-K filed with the Securities and Exchange Commission.  This press release and the Form 8-K include a non-GAAP financial measure, EBITDA, which Kirby defines as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization.  A reconciliation of EBITDA with GAAP net earnings attributable to Kirby is included in this press release.  This earnings press release includes marine transportation performance measures, consisting of ton miles, revenue per ton mile, towboats operated and delay days.  Comparable performance measures for the 2010 and 2009 years and quarters are available at Kirby's web site, http://www.kirbycorp.com/, under the caption Performance Measurements in the Investor Relations section.  

About Kirby Corporation

Kirby Corporation, based in Houston, Texas, operates inland tank barges and towing vessels, transporting petrochemicals, black oil products, refined petroleum products and agricultural chemicals throughout the United States inland waterway system.  Kirby also owns and operates four ocean-going barge and tug units transporting dry-bulk commodities in United States coastwise trade.  Through the diesel engine services segment, Kirby provides after-market service for medium-speed and high-speed diesel engines and reduction gears used in marine, power generation and railroad applications.

Statements contained in this press release with respect to the future are forward-looking statements.  These statements reflect management's reasonable judgment with respect to future events.  Forward-looking statements involve risks and uncertainties.  Actual results could differ materially from those anticipated as a result of various factors, including cyclical or other downturns in demand, significant pricing competition, unanticipated additions to industry capacity, changes in the Jones Act or in U.S. maritime policy and practice, fuel costs, interest rates, weather conditions, and timing, magnitude and number of acquisitions made by Kirby.  Forward-looking statements are based on currently available information and Kirby assumes no obligation to update any such statements.  A list of additional risk factors can be found in Kirby's annual report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission.

SOURCE Kirby Corporation