1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarter ended June 30, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
Commission File Number 1-7615
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 200, Houston, TX 77056-3453
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 435-1000
- --------------------------------------------------------------------------------
(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, $.10 par
value per share, on August 1, 1997 was 24,304,836.
2
PART 1 - FINANCIAL INFORMATION
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1997 1996
-------- --------
($ in thousands)
Current assets:
Cash and invested cash $ 4,213 1,544
Available-for-sale securities - short-term investments 20,163 18,199
Accounts and notes receivable, net of allowance for doubtful
accounts 84,401 79,866
Inventory - finished goods, at lower of average cost or market 18,517 16,361
Prepaid expenses and other 14,841 13,315
Deferred taxes 1,018 600
-------- --------
Total current assets 143,153 129,885
-------- --------
Property and equipment, at cost 525,770 518,773
Less allowance for depreciation 213,740 200,049
-------- --------
312,030 318,724
-------- --------
Investments in affiliates:
Insurance affiliate 43,105 44,554
Marine affiliates 13,616 12,697
-------- --------
56,721 57,251
-------- --------
Excess cost of consolidated subsidiaries, net of accumulated
amortization 7,966 8,316
Sundry 7,426 10,354
-------- --------
$527,296 524,530
======== ========
See accompanying notes to condensed financial statements.
2
3
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
--------- ---------
($ in thousands)
Current liabilities:
Current portion of long-term debt $ 5,333 5,333
Income taxes payable 2,343 4,027
Accounts payable 24,325 30,518
Accrued liabilities 50,918 44,511
Deferred revenues 3,714 5,302
--------- ---------
Total current liabilities 86,633 89,691
--------- ---------
Long-term debt, less current portion 177,251 176,617
Deferred taxes 47,744 45,901
Other long-term liabilities 7,065 6,567
--------- ---------
232,060 229,085
--------- ---------
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 30,907,000 shares 3,091 3,091
Additional paid-in capital 158,575 158,712
Unrealized net losses in value of available-for-sale securities (259) (32)
Retained earnings 128,107 115,263
--------- ---------
289,514 277,034
Less cost of 6,604,000 shares in treasury (6,129,000 at
December 31, 1996) (80,911) (71,280)
--------- ---------
208,603 205,754
--------- ---------
$ 527,296 524,530
========= =========
See accompanying notes to condensed financial statements.
3
4
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
($ in thousands, except per share amounts)
Revenues:
Transportation $ 83,996 81,312 161,908 158,784
Diesel repair 20,406 14,630 40,950 29,565
Investment income and other 142 195 618 707
Gain on disposition of assets 174 1,764 157 1,748
--------- --------- --------- ---------
104,718 97,901 203,633 190,804
--------- --------- --------- ---------
Costs and expenses:
Costs of sales and operating expenses (except as
shown below) 69,658 62,565 136,857 124,027
Selling, general and administrative 11,388 10,632 22,710 20,783
Taxes, other than on income 2,053 1,904 3,878 3,829
Depreciation and amortization 8,738 8,267 17,534 17,655
--------- --------- --------- ---------
91,837 83,368 180,979 166,294
--------- --------- --------- ---------
Operating income 12,881 14,533 22,654 24,510
Equity in earnings of insurance affiliate 2,911 382 3,312 1,351
Equity in earnings of marine affiliates 531 1,166 1,394 1,914
Interest expense (3,450) (3,161) (6,824) (6,476)
--------- --------- --------- ---------
Earnings before taxes on income 12,873 12,920 20,536 21,299
Provision for taxes on income (4,768) (4,694) (7,692) (7,833)
--------- --------- --------- ---------
Net earnings $ 8,105 8,226 12,844 13,466
========= ========= ========= =========
Net earnings per share of common stock $ .33 .31 .52 .51
========= ========= ========= =========
See accompanying notes to condensed financial statements.
4
5
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
-------------------------
1997 1996
-------- --------
Cash flows from operating activities:
Net earnings $ 12,844 13,466
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 17,534 17,655
Provision for deferred income taxes 1,548 2,775
Gain on disposition of assets (157) (1,748)
Deferred scheduled maintenance costs 4,672 2,475
Equity in earnings of insurance affiliate, net of redemption 1,188 (1,351)
Equity in earnings of marine affiliates, net of distributions (919) (426)
Other 2 92
Increase (decrease) in cash flows resulting from changes in operating
working capital (13,446) 861
-------- --------
Net cash provided by operating activities 23,266 33,799
-------- --------
Cash flows from investing activities:
Proceeds from sale and maturities of investments 1,935 --
Purchase of investments (3,987) (1,283)
Capital expenditures (11,351) (23,679)
Proceeds from disposition of assets 1,940 5,100
-------- --------
Net cash used in investing activities (11,463) (19,862)
-------- --------
Cash flows from financing activities:
Payments on bank revolving credit agreements, net (10,200) (8,400)
Increase in long-term debt 50,000 --
Payments on long-term debt (39,166) (5,513)
Purchase of treasury stock (10,887) --
Proceeds from exercise of stock options 1,119 417
-------- --------
Net cash used in financing activities (9,134) (13,496)
-------- --------
Increase in cash and invested cash 2,669 441
Cash and invested cash, beginning of year 1,544 1,457
-------- --------
Cash and invested cash, end of period $ 4,213 1,898
======== ========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 6,155 6,510
Income taxes $ 6,314 4,487
See accompanying notes to condensed financial statements.
5
6
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
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,
1997 and December 31, 1996, and the results of operations for the three months
and six months ended June 30, 1997 and 1996.
(1) BASIS FOR PREPARATION OF THE CONDENSED FINANCIAL STATEMENTS
The condensed 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) ADOPTION OF ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per
Share. This statement establishes standards for computing and presenting
earnings per share and requires, among other things, dual presentation of basic
and diluted earnings per share on the face of the statements of earnings. The
statement is effective for financial statements for periods ending after
December 15, 1997. The Company will adopt SFAS No. 128 by December 31, 1997 and
does not expect the adoption to have a material impact on its calculation of
earnings per share.
(3) TAXES ON INCOME
Earnings before taxes on income and details of the provision for taxes
on income for the three months and six months ended June 30, 1997 and 1996 were
as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Earnings before taxes on income:
United States $ 9,962 12,538 17,224 19,948
Foreign 2,911 382 3,312 1,351
--------- --------- --------- ---------
$ 12,873 12,920 20,536 21,299
========= ========= ========= =========
Provision for taxes on income:
United States
Current $ 3,052 2,755 4,779 4,771
Deferred 691 1,792 1,518 2,775
State and municipal 300 147 470 287
--------- --------- --------- ---------
4,043 4,694 6,767 7,833
Puerto Rico - Current 725 -- 925 --
--------- --------- --------- ---------
$ 4,768 4,694 7,692 7,833
========= ========= ========= =========
6
7
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(4) LONG-TERM DEBT
The Company has on file a shelf registration on Form S-3 with the
Securities and Exchange Commission providing for the issue of up to
$250,000,000 of medium term notes ("Medium Term Notes") at fixed or floating
interest rates with maturities of nine months or longer. In January 1997, the
Company issued $50,000,000 of the authorized Medium Term Notes at a fixed
interest rate of 7.05%, due January 29, 2002. Proceeds from the issuance were
used to retire $34,000,000 of Medium Term Notes due March 10, 1997, with the
balance used to reduce the Company's revolving credit agreement (the "Credit
Agreement") with Texas Commerce Bank National Association, as agent bank. As of
June 30, 1997, $121,000,000 was available under the Medium Term Notes program
and $39,800,000 was available for takedown under the Credit Agreement. Both
issues are available to provide financing for future business and equipment
acquisitions and working capital requirements.
(5) INSURANCE DISCLOSURE
The Company's investment in Universal Insurance Company ("Universal"),
a property and casualty insurance company operating exclusively in the
Commonwealth of Puerto Rico, is accounted for under the equity method of
accounting. Currently, the Company owns 45% of Universal's voting common stock
and 55% is owned by Eastern America Financial Group, Inc. ("Eastern America").
In March 1997, Universal redeemed $2,000,000 of Universal's voting common stock
from the Company, reducing the Company's voting common stock investment in
Universal from 47% to 45%.
7
8
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Statements contained in this Form 10-Q that are not historical facts,
including, but not limited to, any projections contained herein, are
forward-looking statements and involve a number of risks and uncertainties.
Such statements can be identified by the use of forward-looking terminology
such as "may," "will," "expect," "anticipate," "estimate," or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
actual results of the future events described in such forward-looking
statements in this Form 10-Q could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results
to differ materially are: adverse economic conditions, industry competition and
other competitive factors, adverse weather conditions such as high water, low
water, fog and ice, marine accidents, construction of new equipment by
competitors, including construction with government assisted financing,
government and environmental laws and regulations, and the timing, magnitude
and number of acquisitions made by the Company.
The Company is a provider of marine transportation services for both
the inland and offshore marine markets. The marine transportation segment is
divided into two divisions, organized around the markets they serve. The Inland
Division serves the inland industrial chemical, petrochemical, agricultural
chemical and refined products markets. The Offshore Division serves the
offshore refined products, dry-bulk, container and palletized cargo markets.
The Offshore Division also serves as managing partner of two offshore marine
partnerships, of which the Company has a 35% and 50% ownership, respectively.
The partnerships are accounted for under the equity method of accounting.
The Company is engaged through its Diesel Repair Division in the sale,
overhaul and repair of large medium-speed diesel engines in marine, power
generation and rail applications. The Company's 45% voting common stock
investment in Universal is accounted for under the equity method of accounting.
RESULTS OF OPERATIONS
The Company reported net earnings for the 1997 second quarter of
$8,105,000, or $.33 per share, on revenues of $104,718,000, compared with net
earnings of $8,226,000, or $.31 per share, on revenues of $97,901,000 for the
second quarter of 1996. The 1997 second quarter net earnings included the
receipt from Universal of $2,500,000, or $.06 per share after taxes, the result
of a resolution of a previously reserved Universal contingency for outstanding
litigation. Net earnings for the 1997 first six months totaled $12,844,000, or
$.52 per share, on revenues of $203,633,000. Net earnings for the 1996 first
six months totaled $13,466,000, or $.51 per share, on revenues of $190,804,000.
The following tables set forth the Company's revenues from its
principal operating divisions and percentage of such revenues for the three
months and six months ended June 30, 1997 compared with the three months and
six months ended June 30, 1996 (dollars in thousands):
8
9
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
THREE MONTHS ENDED JUNE 30,
------------------------------------------
1997 1996 INCREASE (DECREASE)
---------------- -------------------- ---------------------
Amounts % Amounts % Amounts %
------- --- ------- --- ------- ---
Revenues:
Inland Division $62,948 60% $62,123 63% $825 1%
Offshore Division 21,048 20 19,189 20 1,859 10
Diesel Repair Division 20,406 19 14,630 15 5,776 39
Other income 316 1 1,959 2 (1,643) (84)
-------- ---- ------- ---- ------- ----
$104,718 100% $97,901 100% $6,817 7%
======== ==== ======= ==== ======= ====
SIX MONTHS ENDED JUNE 30,
------------------------------------------
1997 1996 INCREASE (DECREASE)
---------------- -------------------- -------------------
Amounts % Amounts % Amounts %
------- --- ------- --- -------- ---
Revenues:
Inland Division $117,759 58% $118,977 62% $ (1,218) (1)%
Offshore Division 44,149 22 39,807 21 4,342 11
Diesel Repair Division 40,950 20 29,565 16 11,385 39
Other income 775 -- 2,455 1 (1,680) (68)
-------- ---- -------- ---- --------- ----
$203,633 100% $190,804 100% $ 12,829 7 %
========= ==== ======== ==== ========= ====
Revenues for the Inland Division for both comparable periods remained
relatively constant. During the 1997 second quarter and first six months
utilization was enhanced and spot market rates increased; however, such
improvements were offset by the impact of the flooding on the Mississippi River
System during the months of February through April. During the majority of the
1997 first quarter, the upper Mississippi River and Ohio River experienced high
water and flooding conditions, with river closures in selected areas and
mandated regulatory operating restrictions. During the month of March, and
extending into April, the lower Mississippi River, the Company's principal area
of operations, experienced high water not seen in such severity since 1983. The
loss of revenue, estimated at approximately $750,000 for the 1997 second
quarter and approximately $3,450,000 for the 1997 first six months, was the
result of delays, diversions and limitations on night passages, horsepower
requirements and size of tows. The effects of the flooding throughout the
Mississippi River System, which reduced the Company's revenues and increased
its expenses, resulted in a reduction in net earnings by an estimated $.03 per
share for the 1997 second quarter and $.10 per share for the 1997 first six
months.
During the latter part of the 1997 first quarter and during the second
quarter, fleet utilization and spot market pricing remained strong due to
inefficiencies in the river system. Volumes also improved in the inland
chemical, petrochemical and refined products markets. In addition, revenue for
the Inland Division for the 1996 second quarter and 1996 first six months
included approximately $2,100,000 and $3,900,000, respectively, of revenue from
the Company's harbor services operation. Revenue from the harbor services
operation for the 1997 second quarter and 1997 first six months of
approximately $2,400,000 and $4,700,000, respectively, was included in the
Offshore Division.
9
10
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Offshore Division's 10% increase for the 1997 second quarter and
11% increase for the 1997 first six months was primarily attributable to the
addition of the harbor services operation's revenue of approximately $2,400,000
for the 1997 second quarter and $4,700,000 for the 1997 first six months, as
previously noted. During the 1997 second quarter, the Division's liquid tanker
fleet experienced a significant decline in spot market rates and utilization
when compared with the 1997 first quarter, when the fleet experienced full
utilization at adequate rates. During the 1997 first quarter, the tankers moved
heating oil to the Northeast and refined products to the West Coast. During the
1997 second quarter, higher MTBE imports, record clean petroleum production by
middle Atlantic and California refineries and additional capacity competing for
spot market movements resulted in the lay-up of certain spot market tankers for
a portion of the quarter and lower spot market rates.
The Offshore Division's two preference food aid freighters were only
partially employed during the 1997 second quarter and first six months. During
the corresponding periods of the prior year, the Division averaged only one of
their vessels being employed. In May 1997, one of the Division's freighters was
scrapped following a preference food aid trip to North Korea. The Division had
previously scrapped one freighter in September 1996. Lack of available
movements and corresponding low rates continue to effect this segment of the
Offshore Division.
The Diesel Repair Division's revenue for the 1997 second quarter and
first six months reflected a 39% increase for both periods when compared with
the corresponding periods of the 1996 year. The increases were primarily due to
the inclusion of MKW Power Systems, Inc. ("MKW"), whose operating assets were
acquired in July 1996. Such acquisition generated approximately $7,800,000 and
$15,200,000, respectively, of revenue during the 1997 second quarter and 1997
first six months. During the months of February through April 1997, the Diesel
Repair Division's Midwest facility was negatively impacted by the lingering
effect of the Mississippi River flooding and a disappointing inland dry cargo
barge market.
The decrease in other income for both the 1997 second quarter and
first six months compared with the 1996 corresponding periods primarily
reflected the realized gain for the sale of two inland towboats of $1,769,000
during the 1996 second quarter.
The following tables set forth the costs and expenses and percentage
of each for the three months and six months ended June 30, 1997 compared with
the three months and six months ended June 30, 1996 (dollars in thousands):
10
11
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
THREE MONTHS ENDED JUNE 30,
--------------------------------------------
1997 1996 INCREASE (DECREASE)
-------------------- -------------------- ---------------------
AMOUNTS % AMOUNTS % AMOUNTS %
-------- -------- -------- -------- -------- --------
Costs and expenses:
Costs of sales and operating expenses $ 69,658 76% $ 62,565 75% $ 7,093 11%
Selling, general and administrative 11,388 12 10,632 13 756 7
Taxes, other than on income 2,053 2 1,904 2 149 8
Depreciation and amortization 8,738 10 8,267 10 471 6
-------- -------- -------- -------- -------- --------
$ 91,837 100% $ 83,368 100% $ 8,469 10%
======== ======== ======== ======== ======== ========
SIX MONTHS ENDED JUNE 30,
--------------------------------------------
1997 1996 INCREASE (DECREASE)
-------------------- -------------------- ---------------------
AMOUNTS % AMOUNTS % AMOUNTS %
-------- -------- -------- -------- -------- --------
Costs and expenses:
Costs of sales and operating expenses $136,857 76% $124,027 75% $ 12,830 10%
Selling, general and administrative 22,710 12 20,783 12 1,927 9
Taxes, other than on income 3,878 2 3,829 2 49 1
Depreciation and amortization 17,534 10 17,655 11 (121) (1)
-------- -------- -------- -------- -------- --------
$180,979 100% $166,294 100% $ 14,685 9%
======== ======== ======== ======== ======== ========
The 11% increase for the 1997 second quarter and 10% increase for the
1997 first half in costs of sales and operating expenses primarily reflected
the increased Diesel Repair Division's costs and expenses of approximately
$6,100,000 and $11,000,000, respectively, generated from acquiring the
operating assets of MKW. In addition, the Inland Division's operating expenses
increased for the 1997 second quarter and first half by an estimated $250,000,
reflecting the high costs and equipment utilization associated with the
flooding.
Selling, general and administrative expenses increased 7% for the 1997
second quarter and 9% for the first six months when compared with the
corresponding periods of 1996. The increases were largely due to approximately
$1,500,000 of additional expenses for the 1997 second quarter and approximately
$3,400,000 for the 1997 first half of additional expenses associated with the
Diesel Repair Division's acquisition of MKW. Selling, general and
administrative expenses for the Inland Division and corporate activities
declined approximately $850,000 for the 1997 second quarter and $1,950,000 for
the 1997 first half, when compared with the corresponding periods of 1996,
primarily reflecting the savings from the 1996 reorganization, which reduced
administrative costs.
Depreciation and amortization for the 1997 second quarter increased 6%
and for the 1997 first half decreased 1% when compared with the corresponding
1996 periods. The 6% increase for the 1997 second quarter was primarily
attributable to the Company's change in the estimated depreciable lives of its
inland tank barges and towboats. The change, recorded in the 1996 second
quarter, was effective as of January 1, 1996 and decreased depreciation expense
for the 1996 second quarter and first six months by $1,261,000. The change in
the estimated lives provided a more consistent matching of revenues and
depreciation expense over the economic useful lives of
11
12
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
the inland tank barges and towboats. Partially offsetting the decrease
associated with the change in the estimated depreciable lives was the
depreciation of new inland tank barges, 14 of which were added in 1996 and two
were added in 1997.
The following tables set forth the operating income and operating
margin by division for the three months and six months ended June 30, 1997
compared with the three months and six months ended June 30, 1996 (dollars in
thousands):
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997 1996 INCREASE DECREASE)
------------------------ -------------------------- -----------------------
OPERATING OPERATING
INCOME OPERATING INCOME OPERATING
(LOSS) MARGIN (LOSS) MARGIN AMOUNTS %
--------- ---- --------- ---- --------- --------
Inland Division $ 11,004 17.5% $ 11,524 18.6% $ (520) (5)%
Offshore Division 1,361 6.5% 1,477 7.7% (116) (8)
Diesel Repair Division 1,667 8.2% 1,313 9.0% 354 27
Corporate expenses (1,467) (1,740) 273 16
--------- --------- --------- ---------
$ 12,565 $ 12,574 $ (9) -- %
========= ========= ========= =========
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997 1996 INCREASE DECREASE)
------------------------ -------------------------- -----------------------
OPERATING OPERATING
INCOME OPERATING INCOME OPERATING
(LOSS) MARGIN (LOSS) MARGIN AMOUNTS %
--------- ---- --------- ---- --------- --------
Inland Division $ 16,795 14.3% $ 18,732 15.7% $ (1,937) (10)%
Offshore Division 4,465 10.1% 4,041 10.1% 424 10
Diesel Repair Division 3,214 7.8% 2,496 8.4% 718 29
Corporate expenses (2,595) (3,214) 619 19
--------- --------- --------- ---------
$ 21,879 $ 22,055 $ (176) (1)%
========= ========= ========= =========
As previously discussed, flooding on the entire Mississippi River
System during the 1997 first quarter, and continued flooding on the lower
Mississippi River during the month of April, resulted in estimated reductions
in the Inland Division's operating profit for the 1997 second quarter and first
six months of approximately $1,000,000 and $3,700,000, respectively. Adding
back the flooding impact, the Inland Division's 1997 second quarter and first
six months operating margin would have been approximately 19% and 17%,
respectively, an improvement over the 17.5% operating margin reported for the
1997 second quarter and 14.3% reported for the 1997 first six months.
12
13
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following tables set forth the equity in earnings of affiliates
and interest expense for the three months and six months ended June 30, 1997
compared with the three months and six months ended June 30, 1996 (dollars in
thousands):
THREE MONTHS ENDED JUNE 30, INCREASE (DECREASE)
--------------------------- --------------------
1997 1996 AMOUNT %
--------- --------- --------- ---------
Equity in earnings of insurance affiliate $ 2,911 $ 382 $ 2,529 662%
Equity in earnings of marine affiliates 531 1,166 (635) (54)
Interest expense (3,450) (3,161) 289 9
SIX MONTHS ENDED JUNE 30, INCREASE (DECREASE)
--------------------------- --------------------
1997 1996 AMOUNT %
--------- --------- --------- ---------
Equity in earnings of insurance affiliate $ 3,312 $ 1,351 $ 1,961 145%
Equity in earnings of marine affiliates 1,394 1,914 (520) (27)
Interest expense (6,824) (6,476) 348 5
The Company currently has a 45% voting common stock investment in
Universal. 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 a 100% investment in
Universal's nonvoting preferred stock. Because the preferred stock controls 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, were included as part of equity in earnings of the insurance
affiliate. For the 1997 and 1996 second quarters and first six months, the
Company recorded $261,000 and $232,000, and $512,000 and $469,000,
respectively, of interest earned from its investment in U.S. Treasury
Securities, and recognized during the 1996 first quarter $582,000 of realized
gains from the sale of such U.S. Treasury Securities, which were included in
equity in earnings of insurance affiliate.
The Company recognized in the 1997 second quarter $2,911,000 of equity
in earnings of insurance affiliate, including the $2,500,000 of cash received
from Universal as the result of a resolution of a previously reserved Universal
contingency for outstanding litigation. The litigation was fully reserved on
Universal's financial records and was set aside as part of the merger in 1992
of Universal with Eastern America.
Equity in earnings of marine affiliates reflected a 54% decrease for
the 1997 second quarter compared with the 1996 second quarter, and a 27%
decrease for the 1997 first six months compared with the first six months of
13
14
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996. During the 1997 second quarter, two of the partnership's barge and tug
units were in the shipyard for maintenance for the majority of the quarter.
Interest expense reflected a 9% increase for the 1997 second quarter
compared with the second quarter of 1996, and a 5% increase for the 1997 first
six months compared with the first six months of 1996. Long-term debt was
increased to finance the purchase of treasury stock discussed below, and the
recently completed barge construction project also discussed below. Excess cash
flows from operating activities were used to pay down the long-term debt.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
BALANCE SHEET
Total assets as of June 30, 1997 were $527,296,000, an increase of 1%
compared with $524,530,000 as of December 31, 1996. The following table sets
forth the significant components of the balance sheet as of June 30, 1997
compared with December 31, 1996 (dollars in thousands):
INCREASE (DECREASE)
JUNE 30, DECEMBER 31, -------------------------
1997 1996 AMOUNT %
---------- ---------- ---------- ----------
Assets:
Current assets $ 143,153 $ 129,885 $ 13,268 10%
Property and equipment, net 312,030 318,724 (6,694) (2)
Investments in affiliates 56,721 57,251 (530) (1)
Other assets 15,392 18,670 (3,278) (18)
---------- ---------- ---------- ----------
$ 527,296 $ 524,530 $ 2,766 1%
========== ========== ========== ==========
Liabilities and Stockholders' equity:
Current liabilities $ 86,633 $ 89,691 $ (3,058) (3)%
Long-term debt 177,251 176,617 634 --
Deferred taxes 47,744 45,901 1,843 4
Other long-term liabilities 7,065 6,567 498 8
Stockholders' equity 208,603 205,754 2,849 1
---------- ---------- ---------- ----------
$ 527,296 $ 524,530 $ 2,766 1%
========== ========== ========== ==========
The 10% increase in current assets primarily reflected an increase in
cash and available-for-sale securities of $4,633,000, accounts receivable of
$4,535,000 and finished goods inventory for the Diesel Repair Division of
$2,156,000. The increase in accounts receivable was due primarily to higher
trade accounts receivable recorded in May and June, reflecting the strong
inland equipment utilization. The increase in inventory reflected higher
inventory levels in the Gulf Coast due to a strong offshore oilfield services
market. The 2% decrease in property and equipment primarily reflected the
depreciation for the 1997 first six months of approximately $16,300,000,
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KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
offset by approximately $11,400,000 of capital additions. Other assets
decreased 18% primarily from the amortization of excess costs of consolidated
subsidiaries and other intangibles of approximately $1,300,000 and
approximately $2,300,000 of amortization of prepaid maintenance costs of
ocean-going vessels.
Current liabilities reflected a 3% decrease primarily due to a 20%
decrease in accounts payable. Partially offsetting the decrease in accounts
payable was a 14% increase in accrued liabilities, the majority of which was an
increase in accruals for scheduled repair and maintenance, which are charged to
operating expense based on estimated annual expenditures.
Long-term debt, more fully described below, remained relatively flat
during the 1997 first half, reflecting the additional long-term borrowings
associated with the treasury stock acquisitions and barge construction project,
more fully described below, less paydown on debt from the operating cash flow
generated during the 1997 first half. Stockholders' equity increased 1% during
the 1997 first half, reflecting the net earnings of $12,844,000, offset by the
purchase of treasury stock during the year of $10,900,000 and a small decrease
in the unrealized value of investments associated with the Universal preferred
stock.
LONG-TERM DEBT
In January 1997, the Company issued $50,000,000 of Medium Term Notes
at a fixed interest rate of 7.05% due January 29, 2002. Proceeds from the
issuance were used to retire the $34,000,000 of Medium Term Notes due March 10,
1997, with the balance used to reduce the Company's $100,000,000 revolving
Credit Agreement. As of June 30, 1997, $95,000,000 was outstanding under the
Medium Term Notes program and $60,200,000 was outstanding under the Credit
Agreement.
CAPITAL EXPENDITURES
The Company continued to enhance its existing operations through the
construction of new equipment. During the 1997 first quarter, the final two new
inland tank barges were placed in service, completing the order of 24
double-skin 29,000 barrel capacity barges. The construction project cost
approximately $1,500,000 per barge. Funds for the construction project were
available through the Company's Credit Agreement and cash provided by operating
activities.
TREASURY STOCK PURCHASES
During the 1997 first quarter, the Company purchased 564,450 shares of
its own common stock at a total purchase price of $10,608,000, for an average
price of $18.80 per share. In the 1997 second quarter, the Company purchased
16,200 shares of its common stock at a total purchase price of $279,000, for an
average price of $17.20 per share. As of August 1, 1997, the Company had
1,859,000 shares available under the 6,250,000 total repurchase authorization.
The treasury stock purchases were financed by borrowing under the Company's
Credit Agreement. The Company is authorized to purchase its common stock on the
New York Stock Exchange and in privately negotiated transactions. When
purchasing its common stock, the Company is subject to price, trading
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KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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.
LIQUIDITY
The Company generated net cash provided by operating activities of
$23,266,000 for the first six months of 1997 compared with $33,799,000 for the
1996 first six months. The 1997 first half was negatively impacted by a
$13,446,000 decrease in cash flow resulting from changes in operating working
capital, compared with an $861,000 increase for the first six months of 1996.
The 1997 first six months net cash provided by operating activities included a
$2,000,000 redemption of Universal's common stock and the $2,500,000 of cash
received from Universal for the lawsuit ruling.
Funds generated are available for capital projects, treasury stock
repurchases, asset acquisitions, repayment of borrowings and for other
operating requirements. In addition to its net cash provided by operating
activities, the Company also has available as of July 31, 1997, $45,200,000
under its revolving credit agreement and $121,000,000 available under its
Medium Term Notes program. The Company's fixed principal payments during the
next 12 months are $5,333,000.
During the last three years, 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 or on
negotiated service contracts with its customers. The Company does not presently
use financial derivatives, but uses a mix of floating and fixed rate debt. The
Company has no foreign exchange risks.
The Company has no present plan to pay dividends on its common stock.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings per Share. This statement establishes standards for computing
and presenting earnings per share and requires, among other things, dual
presentation of basic and diluted earnings per share on the face of the
statements of earnings. The statement is effective for financial statements for
periods ending after December 15, 1997. The Company will adopt SFAS No. 128 by
December 31, 1997 and does not expect the adoption to have a material impact on
its calculation of earnings per share.
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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, 1996.
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, 1997.
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
Date: August 4, 1997
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
11.0 Computation of Earnings per Common Share.
27.0 Financial Data Schedule