Kirby Corporation 2013 Form 10-K Summary
Business context and reporting period
Kirby Corporation reported for the fiscal year ended December 31, 2013; the filing also presents fourth-quarter and full-year comparative information. Kirby operates two segments: marine transportation and diesel engine services. It is the largest domestic U.S. tank-barge operator and transports petrochemicals, black oil, refined petroleum products and agricultural chemicals. Its diesel engine services segment provides engine repair, parts, power-generation services and oilfield equipment manufacturing.
Key financial metrics
| ($ in thousands, except per-share data) | 2013 | 2012 | Change |
|---|---|---|---|
| Revenue | $2,242,195 | $2,112,658 | 6% |
| Operating income | $436,182 | $364,833 | 20% |
| Operating margin | 19.4% approximately | 17.3% approximately | Expanded |
| Net earnings attributable to Kirby | $253,061 | $209,438 | 21% |
| Diluted EPS | $4.44 | $3.73 | 19% |
| Net cash from operating activities | $601,032 | $325,730 | 85% |
| Capital expenditures | $253,227 | $312,167 | (19%) |
| Long-term debt, including current portion | $749,150 | $1,135,110 | (34%) |
| Total equity | $2,022,153 | $1,707,054 | 18% |
Consolidated net margin was approximately 11.3% in 2013 versus approximately 9.9% in 2012. Cash and cash equivalents were $4.0 million at year-end. The company reported a 27.0% debt-to-capitalization ratio, down from 39.9% in 2012.
- Marine transportation revenue was $1.713 billion, up 22%, with operating income of $408.3 million, up 31%, and an operating margin of 23.8% versus 22.1%.
- Diesel engine services revenue was $529.0 million, down 25%, with operating income of $42.8 million, down 36%, and an operating margin of 8.1% versus 9.4%.
- Marine transportation represented 76% of consolidated revenue; diesel engine services represented 24%.
- At December 31, 2013, debt consisted primarily of $500.0 million of senior notes, $208.0 million of term-loan borrowings and $41.2 million drawn on the revolving credit facility.
- The company had $283.9 million available under its revolving credit facility at year-end and reported compliance with all debt covenants.
Material changes versus the prior comparable period
- Marine transportation benefited from a full year of operations from the Allied and Penn acquisitions completed in late 2012, strong petrochemical and black-oil demand, higher utilization and favorable pricing.
- Inland tank-barge utilization remained approximately 90% to 95%; coastal utilization improved to approximately 90% from approximately 80% in 2012.
- Term-contract mix increased in coastal marine transportation to approximately 75% of revenue from approximately 60% in 2012, improving revenue visibility.
- Diesel engine services declined because of lower demand for oilfield equipment manufacturing, pressure-pumping units and land-based engine, transmission and parts services. The pressure-pumping market experienced oversupply following prior overbuilding and lower natural-gas drilling activity.
- Net debt declined materially after the company issued $225.0 million of new senior notes, retired $200.0 million of floating-rate notes and made substantial term-loan and revolving-facility repayments.
- A $18.3 million pretax credit related to elimination of the United acquisition earnout liability benefited 2013 earnings; 2012 included a $4.3 million credit.
- High water, lock closures and congestion reduced 2013 second-quarter results by an estimated $0.03 per share. The company added a net 20 inland tank barges and approximately 600,000 barrels of capacity during 2013.
Guidance, outlook, risks and unusual items
- Management projected 2014 capital expenditures of approximately $200 million to $210 million, including 37 inland tank barges and progress payments on a 185,000-barrel coastal articulated tank barge and tugboat unit expected in mid-to-late 2015.
- Management expected continued strength in inland petrochemical and black-oil markets, modest improvement in marine diesel services and stability in power generation. It expected the land-based diesel engine business to improve sometime in 2014, with greater emphasis on remanufacturing and servicing existing pressure-pumping equipment.
- Key risks include aging inland waterways, lock outages, adverse weather, marine accidents and spills, environmental and occupational regulations, Jones Act changes or waivers, fuel-price volatility, labor availability, competition and possible inland or coastal tank-barge oversupply.
- Two marine customers, Dow and SeaRiver Maritime, together accounted for approximately 13% of 2013 revenue. Their contracts were scheduled to run through 2016 and 2017, respectively.
- The company remained involved in CERCLA-related Superfund matters and a collective-action overtime lawsuit involving vessel tankermen. Management stated that reserves, insurance or defenses were adequate, but the tankerman litigation liability could not yet be assessed.
- Outstanding contractual obligations totaled approximately $1.141 billion, including $749.2 million of debt, operating leases and $126.7 million of barge and towing-vessel construction commitments.
- The company maintained effective disclosure controls and internal control over financial reporting, and KPMG issued unqualified audit opinions.
Most important facts for investors to verify
- Whether strong marine utilization and contract-rate increases continued after 2013 without excessive new barge capacity.
- Progress in the recovery of the diesel engine services segment, particularly pressure-pumping equipment manufacturing and land-based service activity.
- Actual 2014 capital spending, vessel deliveries, construction costs and compliance with debt covenants.
- Exposure to customer concentration, fuel-cost recovery delays, waterway disruptions and environmental or spill-related liabilities.
- Resolution and potential financial impact of the CERCLA matters, the tankerman overtime litigation and the remaining Allied contingent liability.