Kirby Reports Sharply Higher Earnings—With A Caveat

Kirby Corporation reported on January 31 a sharp increase in earnings per share and revenues for the fourth quarter of 2017—but said the earnings were impacted by a one-time benefit related to U.S. tax reform.

For the fourth quarter, Kirby reported net earnings of $231.3 million, or $387 per share, compared with $32.4 million, or 60 cents per share, for the fourth quarter of 2016. Revenues were $708.1 million, compared with $435.7 million a year earlier.

For the full year of 2017, Kirby reported net earnings of $313.2 million, or $5.62 per share, up from $141.4 million, or $2.62 per share, for 2016. Revenues in 2017 were $2.21 billion, compared with $1.77 billion for 2016.

Those increases, however, come with a caveat: Kirby reported that “2017 fourth quarter earnings include a one-time $4.51 per share benefit from U.S. tax reform, partially offset by charges including an impairment of coastal marine vessels of $1.12 per share, and severance and workforce early retirements of $0.06 per share.”

David Grzebinski, Kirby’s president and CEO, explained, “During the fourth quarter, our earnings were impacted by a sizeable one-time benefit related to U.S. tax reform, as well as impairment, severance and workforce early retirement charges.

“The company saw high utilization and demand in the inland market, which partially offset ongoing weakness in its coastal business,” he said.

“Inland marine utilization, which spiked late in the third quarter following Hurricane Harvey, remained in the low- to mid-90 percent range throughout the fourth quarter,” Grzebinski said. “A favorable pricing environment for our customers’ products and new petrochemical capacity led to increased movement of petrochemicals and crude oil by tank barge.

“During the quarter, we took actions to improve the efficiency of our business, including workforce reductions and early retirements, and the sale of aging and inefficient towboats. While these actions adversely impacted the quarter’s financial results, we believe they improve overall efficiencies and put Kirby in a position of strength as this market begins to recover from a prolonged industry downturn.

“Looking into 2018, we will continue to pursue the right acquisition opportunities to further upgrade our fleet, consolidate the industry, and ultimately emerge larger, more efficient and better able to service our customers.”

Kirby reported that its marine transportation revenues were $330.4 million for the fourth quarter, compared with $356.2 million a year earlier. The company said that demand for inland tank barge transportation of petrochemicals and crude oil was higher compared to the 2016 fourth quarter, while demand for the transportation of refined petroleum products was slightly lower.

Outlook

Grzebinski said Kirby’s earnings guidance is 45–65 cents per share for the first quarter of 2018, and $2.50–$3 per share for the full year 2018. “These guidance ranges include the benefit of a lower effective tax rate of 8 to 12 cents per share for the first quarter and 40 to 50 cents per share for the full year.”

“…In summary, after a long couple of years, we are clearly starting to see improving market fundamentals in many of our businesses,” he said. “Throughout the downturn, Kirby has taken thoughtful and strategic steps to position itself to excel when our core markets rebound. In marine transportation, we have rationalized our cost structures, retired older equipment and acquired excess industry capacity, ultimately giving Kirby the youngest and most efficient marine fleet in its history. In distribution and services, we have expanded our manufacturing capabilities, enhanced our geographic footprint, and diversified our product and service offerings. We are excited about capitalizing on these efforts as we move into 2018, while continuing to pursue acquisition opportunities as they arise, particularly in the inland marine transportation industry.” 

Kirby expects 2018 capital spending to be in the $195 million to $215 million range. Capital spending guidance includes approximately $75 million in progress payments on new marine vessels, including six 5,000 horsepower coastal tugboats, and 15 inland towboats of varying horsepower to be delivered over a period of three years. Approximately $100 million to $115 million is associated with capital upgrades and improvements to existing inland and coastal marine equipment, including ballast water treatment systems for coastal vessels, as well as facility improvements. The balance largely relates to rental fleet growth, new machinery and equipment, and facility improvements in the distribution and services segment, the company said.