Kirby Corp 1Q 2009 Results
• 2009 first quarter earnings per share were $.52 compared with $.68 earned in the 2008 first quarter
• Results included a $.05 per share charge for early retirements and staff reductions
• 2009 second quarter earnings per share guidance is $.52 to $.62 versus $.74 earned in the 2008 second quarter
• 2009 year earnings per share guidance revised to $2.40 to $2.55 versus $2.91 earned in the 2008 year
Kirby Corporation (NYSE:KEX) announced net earnings for the first quarter ended March 31, 2009 of $28 million, or $.52 per share, compared with net earnings of $36.6 million, or $.68 per share, for the 2008 first quarter. The 2009 first quarter net earnings included a $4 million before taxes, or $.05 per share, charge for early retirements and staff reductions. Kirby's published 2009 first quarter earnings guidance range was $.45 to $.55 per share. Consolidated revenues for the 2009 first quarter were $277.7 million compared with revenues of $330.6 million reported for the 2008 first quarter.
Joe Pyne, Kirby's President and Chief Executive Officer commented, "The current economic recession and its impact on both our marine transportation and diesel engine services businesses ended our current string of 20 consecutive quarters with year over year net earnings increases. Our transportation volumes across all segments softened, driven by the deteriorating economic conditions, resulting in lower revenue and operating income, partially offset by favorable first quarter winter weather conditions. Our diesel engine services segment saw service levels and direct parts sales further weaken in the first quarter in the Gulf Coast oil service, inland marine and railroad markets, as customers deferred maintenance."
Pyne further commented, "As a result of the lower demand during the 2009 first quarter for both our marine transportation and diesel engine services segments, we have taken specific steps to reduce overhead and lower expenditures. The shore staffs of the marine transportation and diesel engine services segments were reduced by approximately 6% through early retirement incentives and staff reductions. A charge of $4 million before taxes, $2.6 million for marine transportation and $1.4 million for diesel engine services, or $.05 per share, was taken in the 2009 first quarter. We estimate that the early retirements and staff reductions will result in savings of $.02 per share for the 2009 year and $.08 per share for 2010. In addition, we froze all officer and management salaries at 2008 levels, significantly reduced the number of chartered towboats we operate, moved several owned towboats and tank barges to inactive status and reduced maintenance on that equipment. We will continue to monitor our staffing, horsepower and maintenance requirements and will take the necessary steps to ensure that Kirby is operating as prudently and efficiently as possible during this period of economic uncertainty."
Marine transportation revenues and operating income for the 2009 first quarter decreased 16% and 17%, respectively, compared with the first quarter of 2008. All four transportation markets, petrochemicals, black oil products, refined petroleum products and agricultural chemicals, saw demand for the movement of products soften. In addition, lower diesel fuel prices resulted in a reduction in revenues when compared with the 2008 first quarter. With the continued high volatility of diesel fuel prices, the timing impact was a negative $.03 per share for the 2009 first quarter. Some small improvement in upriver demand of more finished petrochemical products was realized in the 2009 first quarter as Midwest industries restarted their plants. However, Gulf Intracoastal Waterway petrochemical products demand declined as anticipated, resulting in excess tank barge capacity and lower spot market pricing. Also, as anticipated, demand for the movement of black oil products, refined products and agricultural chemicals was below prior year levels. Partially offsetting the impact of the lower demand was a 48% improvement in delay days when compared with the 2008 first quarter, the result of favorable 2009 first quarter winter weather operating conditions. Despite lower demand, the segment's operating margin was 21.1% compared with 21.3% for the first quarter of 2008, reflecting the reduction of chartered towboats, frozen officer and management salaries, reduced maintenance on inactive equipment, ongoing cost reduction initiatives and favorable winter weather operating conditions, partially offset by the charge for early retirements and staff reductions.
The marine transportation segment operated an average of 232 towboats during the 2009 first quarter compared with an average of 260 towboats during the 2008 first quarter and 250 during the 2008 fourth quarter. As demand softened during the 2008 fourth quarter and 2009 first quarter, Kirby released chartered towboats and laid-up certain owned towboats in an effort to balance horsepower needs with current requirements. As of April 29, 2009, Kirby was operating 221 towboats and will continue to downsize the towboat fleet if warranted by market changes.
Diesel engine services revenues and operating income for the 2009 first quarter decreased 15% and 54%, respectively, compared with the 2008 first quarter. Demand for service and direct parts sales in the Gulf Coast marine medium-speed and high-speed markets weakened considerably as Gulf Coast oil service and inland marine customers deferred maintenance as their activities slowed. The medium-speed railroad market was also weak as industrial and shortline railroad customers deferred maintenance in response to the economic slowdown. The diesel engine services operating margin was 8.7% for the 2009 first quarter compared with 16.0% for the 2008 first quarter, reflecting lower service and parts sales and resulting lower utilization, and the early retirements and staff reductions noted above. Excluding the early retirements and staff reductions charge, the diesel engine services operating margin would have been 11.1%.
Strong cash flow for the 2009 first quarter, aided by a reduction in accounts receivable, was used to fund capital expenditures of $64.8 million, including $48.5 million for new tank barge and towboat construction and $16.3 million for upgrades to the existing fleet, and to reduce its revolving line of credit by $21 million. Total debt as of March 31, 2009 was $226.3 million and Kirby's debt-to-capitalization ratio was 19.7%, down from 21.7% at December 31, 2008 and 25.9% at March 31, 2008.
Commenting on the 2009 second quarter, Pyne said, "For the 2009 second quarter, our earnings guidance is $.52 to $.62 per share, reflecting a 16% to 30% decrease compared with $.74 per share for the 2008 second quarter. For the 2009 year, we are maintaining our lower earnings per share guidance of $2.40 but reducing our higher guidance to $2.55 from $2.65. We have seen some short-term improvement in upriver movements in our marine transportation segment, but we enter the 2009 second quarter with lower utilization rates than the first quarter and with spot market rates which continue to decline. We have seen some short-term improvement in our diesel engine services Gulf Coast oil service and inland marine markets. Our 2009 capital spending guidance range was lowered slightly to $180 to $190 million, which includes approximately $135 million for the construction of 46 new tank barges and five towboats."