October 30, 2008
Kirby reports another record quarter
Kirby Corporation (NYSE: KEX) today announced record net earnings for the third quarter ended September 30, 2008 of $41.8 million, or $.77 per share, compared with net earnings of $34.4 million, or $.64 per share, for the 2007 third quarter. The 2008 third quarter results included an estimated $.09 per share negative impact from Hurricanes Gustav and Ike, partially offset by a $.04 per share positive timing impact from lower diesel fuel prices. Consolidated revenues for the 2008 third quarter were a record $354.6 million, an increase of 17% over the $302.6 million reported for the 2007 third quarter.
"Our record third quarter results mark the 19th consecutive quarter that our net earnings exceeded the same quarter of the previous year, despite the negative impact from Hurricanes Gustav and Ike," said Joe Pyne, Kirby's President and Chief Executive Officer. "Our marine transportation segment's results reflected continued strong demand in the majority of our markets and pricing for our services continued to trend upward. Our diesel engine services segment's results reflected continued strong demand in our medium-speed markets."
Impact of Hurricanes Gustav and Ike
Hurricane Gustav, which made landfall between Houma and Morgan City, Louisiana on September 1, resulted in the closure for several days of the Gulf Intracoastal Waterway in Louisiana, the closure of Kirby's Gulf Coast diesel engine services operations for several days, as well as disruptions to the operations of Kirby's four offshore barge and tug units. Hurricane Ike made landfall on September 13 in the Houston/Galveston area, closing much of the Gulf Coast petrochemical and refining capacity prior to landfall. Strong winds and a 15 to 20 foot storm surge significantly affected petrochemical and refining plants in the Houston and Port Arthur/Beaumont areas, some of which are still not back in operation or are operating at reduced levels. Additionally, eight miles of the Gulf Intracoastal Waterway between the Houston Ship Channel and Port Arthur, Texas were closed for 11 days, completely stopping all movements to and from the Houston area. Hurricanes Gustav and Ike caused no material damage to Kirby's active tank barge and towboat fleet. The estimated impact of the hurricanes on the 2008 third quarter was a negative $.09 per share.
Marine Transportation Operating Results
Marine transportation revenues and operating income for the 2008 third quarter increased 19% and 18%, respectively, compared with the third quarter of 2007. The higher third quarter results reflected favorable demand in Kirby's petrochemical and black oil markets, partially offset by continued weakness in the upriver refined products market. While demand during the third quarter softened for certain products, overall barge utilization remained high. Operating conditions were favorable in July and August, but deteriorated in September due to Hurricanes Gustav and Ike. Ton miles for the 2008 third quarter decreased 21% compared with the 2007 third quarter due primarily to disruptions caused by the two Gulf Coast hurricanes and a continued soft Midwest refined products market. On a positive note, the third quarter results reflected a $.04 per share benefit from the timing impact of falling diesel fuel prices, which declined from an average high of $4.33 per gallon on July 14 to an average low of $3.11 per gallon on September 30. The 2008 third quarter operating margin was 22.7% compared with 22.9% for the 2007 third quarter.
Diesel Engine Services Operating Results
Diesel engine services revenues and operating income for the 2008 third quarter increased 11% and 12%, respectively, compared with the 2007 third quarter, despite the negative impact of Hurricane Gustav. The higher results reflected continued strong service activity and direct parts sales in the medium-speed markets, led by favorable Midwest marine and power generation markets. The high-speed market continued to experience a slowdown in the Gulf Coast oil services sector, but was stronger than the 2008 first half. The diesel engine services operating margin was 15.7% for the 2008 third quarter compared with 15.5% for the 2007 third quarter.
Treasury Stock Purchases
During August, September and October 2008, Kirby purchased 756,900 shares of its common stock for $30,202,000, for an average purchase price of $39.90 per share. Since the beginning of 2008, Kirby has purchased 837,400 shares of its common stock for $33,377,000, for an average purchase price of $39.86 per share. Kirby has 1,420,000 shares remaining under its current Board of Directors repurchase authorization.
Fourth Quarter and Year Outlook
Commenting on the 2008 fourth quarter market conditions and guidance, Mr. Pyne said, "Certainly the current global financial situation has significantly reduced our visibility. Hurricanes Gustav and Ike materially affected the Gulf Coast petrochemical and refining industries. Many of these facilities are just now returning to full operational status. Until inventories get back to desired levels, we anticipate our fleet utilization will maintain its high utilization rates. Business levels in our diesel engine services markets are anticipated to remain favorable, with some improvement in the Gulf Coast oil services market. For the 2008 fourth quarter, our earnings guidance is $.77 to $.82 per share, reflecting a 20% to 28% increase compared with $.64 per share for the 2007 fourth quarter. For the 2008 year, our earnings guidance is $2.96 to $3.01 per share, reflecting a 29% to 31% increase over 2007 net earnings of $2.29 per share. Our 2008 capital spending guidance range remains at $165 to $175 million, including approximately $90 million for the construction of new tank barges and towboats."