Kirby Corporation 2021 Form 10-K Summary
Business context and reporting period
Kirby Corporation filed its annual report for the fiscal year ended December 31, 2021. The company operates two reportable segments: marine transportation, primarily domestic tank-barge transportation of bulk liquid products, and distribution and services, which provides engine and equipment parts, repair, rentals, manufacturing and oilfield services.
Kirby operated approximately 1,025 inland tank barges, 31 coastal tank barges and related towboats and tugboats at year-end. It employed approximately 5,125 people. The filing reports full-year results; separate fourth-quarter revenue and profit figures are not clearly provided in the filing text.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $2.247 billion | $2.171 billion | +3% |
| Marine transportation revenue | $1.323 billion | $1.404 billion | -6% |
| Distribution and services revenue | $923.7 million | $767.1 million | +20% |
| Operating income (loss) | $(258.1) million | $(420.8) million | Improved |
| Net loss attributable to Kirby | $(247.0) million | $(272.5) million | Improved |
| Diluted loss per share | $(4.11) | $(4.55) | Improved |
| Cash provided by operating activities | $321.6 million | $444.9 million | -28% |
| Capital expenditures | $98.0 million | $148.2 million | -34% |
Marine transportation operating income declined 61% to $63.0 million, and the operating margin fell to 4.8% from 11.7%. Lower inland term and spot pricing, COVID-19-related demand effects, Winter Storm Uri, Hurricane Ida and higher diesel costs offset the contribution from the Savage fleet acquired in 2020.
Distribution and services returned to profitability. Operating income increased to $27.6 million from a $12.2 million loss, and the operating margin improved to 3.0% from negative 1.6%. Improvements reflected stronger commercial and industrial activity, higher oilfield activity, increased equipment demand and improved Thermo King sales.
Year-end cash and cash equivalents were $34.8 million, compared with $80.3 million in 2020. Total debt, net of discounts and issuance costs, was $1.163 billion, compared with $1.469 billion. The debt-to-capitalization ratio declined to 28.7% from 32.2%. Available borrowing capacity at December 31, 2021 was $844.9 million under the revolving credit facility and $8.7 million under a separate credit line. The company was in compliance with its debt covenants.
Current assets were $1.004 billion and current liabilities were $543.8 million. Total equity was $2.889 billion. The company has not paid common-stock dividends since 1989 and made no share repurchases in 2021.
Material changes versus the prior comparable period
- Total revenue increased modestly because strong growth in distribution and services more than offset the decline in marine transportation.
- Marine transportation utilization recovered through the year, with inland utilization reaching the mid-to-high 80% range in the fourth quarter and coastal utilization reaching approximately 90%.
- Inland pricing was weak during the first three quarters but improved in the fourth quarter; renewed inland term contracts increased approximately 10% in the fourth quarter compared with corresponding 2020 renewals.
- The company retired 36 inland tank barges, returned five leased barges and reduced its inland fleet by 41 barges during 2021. It also exited the Hawaii coastal market and retired or classified additional underutilized coastal equipment as held for sale.
- The company recorded $340.7 million of pre-tax noncash impairment charges in 2021, including $219.1 million of marine transportation goodwill impairment and $121.7 million related to coastal marine equipment and other long-lived assets. The 2020 period included $561.3 million of noncash impairment, inventory and other charges.
- Operating cash flow decreased despite a $119.5 million federal tax refund received in 2021, primarily because of lower marine transportation revenue and operating income.
- Interest expense declined to $42.5 million from $48.7 million, primarily due to lower average debt.
Guidance, outlook, risks and unusual items
Management expects improved financial results in both segments in 2022. Inland marine utilization is expected to range from the high 80% range to the low 90% range, with improving spot pricing and higher term-contract renewals. Inland revenue and operating margins are expected to improve, although first-quarter results may be constrained by winter weather and COVID-19-related crewing challenges.
Coastal demand is expected to improve modestly, but pricing is expected to remain pressured by industry overcapacity. Coastal revenue is expected to decline modestly because of the Hawaii exit and anticipated lower coal shipments. Planned maintenance and ballast-water-treatment installations are expected to affect later 2022 quarters.
Distribution and services revenue is expected to grow substantially in 2022 as economic activity, oilfield activity, power generation, marine repair and on-highway demand improve. Supply-chain constraints and project timing are expected to make the first quarter the weakest period, with margins improving as the year progresses.
Management projects 2022 capital expenditures of $170 million to $190 million, including approximately $145 million to $155 million for marine maintenance and improvements. The program includes approximately $11 million for a diesel-electric towboat and towboat repowering projects intended to reduce emissions. Government grants totaling approximately $3.8 million are expected to reimburse certain emissions-related projects in 2023.
On February 3, 2022, the company entered into an agreement to issue $300 million of unsecured senior notes due in 2033. Proceeds are intended to repay the $350 million of 3.29% senior notes due February 2023, together with cash from operations.
Principal risks include COVID-19 and supply-chain disruption, adverse weather and water conditions, aging inland-waterway infrastructure, marine accidents and environmental liabilities, fuel-price volatility, crewing and labor availability, Jones Act or other regulatory changes, coastal overcapacity, oil and gas cyclicality, climate-related regulation, cybersecurity, customer concentration and refinancing or interest-rate risk.
The company recorded a one-time $5.7 million deferred tax provision in the fourth quarter related to a change in Louisiana tax law. It also disclosed environmental and litigation contingencies, including a $15.3 million payment related to a 2014 Houston Ship Channel spill and unresolved potential exposure from a 2016 Canadian grounding. Management believes its accruals and insurance coverage are adequate and that other proceedings are not expected to materially affect financial condition, results or cash flows.
Important facts for investors to verify
- Whether the anticipated 2022 improvement in inland pricing, utilization and margins is sustained after the fourth-quarter 2021 recovery.
- The timing and terms of the planned 2033 senior-note issuances and repayment of the 2023 notes.
- The effect of coastal fleet retirements, the Hawaii exit, ballast-water compliance and continued industry overcapacity.
- Whether distribution and services growth converts into durable margin expansion despite supply-chain constraints.
- The carrying value and future impairment risk of marine equipment and the remaining $438.7 million of goodwill.
- Potential cash requirements from environmental proceedings, insurance claims, pension underfunding and other contingencies.
- Exposure to fuel costs, floating-rate debt, customer contract renewals, weather disruptions and COVID-19-related labor constraints.
- The company’s reported effective internal control over financial reporting and KPMG’s unqualified audit opinions.