US fuel oil transportation firm
Kirby Corporation has announced a 24 percent drop in net earnings for the fourth quarter ended December 31, 2009 of $29.2 million, or $.54 per share, compared with $38.4 million, or $.72 per share, for the 2008 fourth quarter.
Consolidated revenues for the 2009 fourth quarter were $259.6 million compared with $326.7 million reported for the 2008 fourth quarter, representing a 20.5 percent drop in net income.
Net earnings attributable to Kirby for 2009 were $125.9 million, or $2.34 per share, compared with $157.2 million, or $2.91 per share for 2008. Consolidated revenues for 2009 were $1.08 billion compared with $1.36 billion for 2008.
Commenting on the results,
Joe Pyne, Kirby's President and Chief Executive Officer, said, "2009 has been a challenging year for Kirby with the current economic environment. A decline in volumes in all four marine transportation markets resulted in lower tank barge utilization levels industry wide that led to increased downward pressure on term contract and spot market pricing throughout 2009. Our diesel engine services segment's marine and railroad service levels and direct parts sales have also remained well below 2008 levels due to weak marine transportation, offshore oil services and railroad markets, which resulted in deferrals of maintenance on customers' idled equipment."
Mr. Pyne added, "In the 2009 fourth quarter, as a result of continued low demand for both our marine transportation and diesel engine services, we further reduced our shore staff to ensure that Kirby is operating as prudently and efficiently as possible during this continued period of economic uncertainty. A charge of $4.8 million before taxes, or $.05 per share, comprised of $3.5 million for marine transportation, $0.9 million for diesel engine services and $0.4 million for corporate, was taken in the 2009 fourth quarter.
"Our 2010 first quarter results will also include an estimated shore staff reduction charge of $3.9 million before taxes, or $.04 per share. Since our peak headcount in October 2008, we have reduced our shore staff positions by 21% through early retirements, staff reductions and through attrition. We have also addressed a number of other costs including a reduction in the number of chartered towboats we operate, reduced maintenance on laid-up equipment and on-going cost reduction initiatives."
Segment Results – Marine Transportation
The marine transportation operating income for the 2009 fourth quarter was $51.1 million, including a $3.5 million shore staff reduction charge and the positive impact of a $2.5 million reduction in the allowance for doubtful accounts, on revenues of $216.9 million. This compares with $62.2 million of operating income on revenues of $265.5 million for the 2008 fourth quarter.
Fourth quarter demand levels in the petrochemical, black oil and refined products markets were weaker when compared with the 2009 third quarter. Term contract renewals remained under pressure, but were relatively consistent with 2009 third quarter term contract renewals; however, spot market pricing continued to deteriorate. Lower diesel fuel costs associated with the pass through of diesel fuel to customers through fuel escalation and de-escalation clauses in term contracts also contributed to the lower revenues.
The marine transportation operating margin was 23.6% for the 2009 fourth quarter compared with 23.4% for the 2008 fourth quarter. The higher operating margin reflected lower fuel costs, the positive impact of the reduction in the allowance for doubtful accounts, ongoing cost reduction initiatives, lower shoreside headcount, frozen officer and management salaries, reduction of towboats operated, reduced maintenance on laid-up equipment, more efficient operations and lower insurance claim losses, partially offset by the marine transportation's portion of the shore staff reduction charge.
Outlook
Commenting on the 2010 first quarter and full year market conditions and guidance, Mr. Pyne said, "For the 2010 first quarter, our earnings guidance is $.42 to $.47 per share compared with $.52 per share for the 2009 first quarter. Our first quarter guidance includes an estimated $.04 per share charge for shore staff reductions as we continue to respond to a lower utilization and service environment, and anticipated unfavorable winter weather conditions. The first quarter guidance also reflects our expectation of continued excess industry-wide tank barge capacity, utilization rates in the low 80% level and continued downward pressure on term contract renewals and spot market pricing.
For the 2010 year, our guidance range is $1.85 to $2.20 per share compared with $2.34 per share for 2009. Our low end guidance assumes volumes will be consistent with current volumes throughout 2010, with continued downward pressure on term contract renewals and spot market pricing in the first half of 2010. Our high end guidance assumes an improvement in volumes as the year progresses, some reduction in excess tank barge capacity and some improvement in term contract and spot market pricing. We anticipate our diesel engine services segment will continue to face challenges but we do believe we have reached the bottom of the diesel engine services business cycle. Our guidance represents our current judgment with respect to our 2010 performance as the economy remains weak and somewhat unpredictable. Our 2010 capital spending guidance range is $125 to $135 million, including approximately $60 million for the construction of 61 new tank barges and finishing the construction of three towboats."
Commenting on the financial condition of Kirby, Mr. Pyne said, "Despite the pain of this recession, Kirby is in excellent financial condition with an investment grade rated balance sheet, sustainable cash flows and low debt levels. During this time of economic uncertainly, Kirby will continue to focus on the areas we can control: customer service, safety, cost, upgrading our fleet and looking for opportunities to continue to grow our marine transportation and diesel engine services businesses."
