<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
[ X ] Quarterly report pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the quarter ended September 30, 1995
[ ] 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 300, Houston, TX 77056-3453
_______________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(713) 629-9370
_______________________________________________________________________________
(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, $.10 par
value per share, on November 10, 1995 was 26,384,566.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- -------------
($ in thousands)
<S> <C> <C>
Marine Transportation, Diesel Repair and Other
Current assets:
Cash and invested cash $ 887 7,355
Available-for-sale securities - short-term investments 16,763 2,875
Accounts and notes receivable, net of allowance for doubtful
accounts 65,198 63,300
Inventory - finished goods, at lower of average cost or market 8,391 8,270
Prepaid expenses 13,262 13,661
Deferred taxes 795 1,324
----------- ----------
Total current assets 105,296 96,785
----------- ----------
Property and equipment, at cost 484,857 481,612
Less allowance for depreciation 170,236 153,672
----------- ----------
314,621 327,940
----------- ----------
Investments in affiliates:
Insurance affiliate 43,063 --
Marine affiliates 8,998 181
----------- ----------
52,061 181
----------- ----------
Excess cost of consolidated subsidiaries 3,693 9,280
Noncompete agreements 1,726 3,889
Sundry 8,322 12,731
----------- ----------
Total assets - Marine Transportation, Diesel Repair and Other 485,719 450,806
----------- ----------
Insurance
Investments:
Available-for-sale securities:
Fixed maturities 149,173
Short-term investments 21,227
----------- ----------
-- 170,400
Cash and invested cash 4,485
Accrued investment income 2,638
Accounts and notes receivable, net of allowance for doubtful accounts 9,613
Reinsurance receivable on paid losses 9,871
Prepaid reinsurance premiums 5,147
Deferred policy acquisition costs 11,690
Property and equipment, at cost, net of allowance for depreciation 2,822
----------- ----------
Total assets - Insurance -- 216,666
----------- ----------
$ 485,719 667,472
=========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
-------------- ------------
($ in thousands)
<S> <C> <C>
Marine Transportation, Diesel Repair and Other
Current liabilities:
Current portion of long-term debt $ 5,676 10,962
Accounts payable 21,164 15,771
Accrued liabilities 36,738 32,559
Deferred revenues 7,093 8,294
--------- ---------
Total current liabilities 70,671 67,586
--------- ---------
Long-term debt, less current portion 158,933 148,535
Deferred taxes 40,875 42,587
Other long-term liabilities 7,076 7,998
--------- ---------
Total liabilities - Marine Transportation, Diesel Repair and
Other 277,555 266,706
--------- ---------
Insurance
Losses, claims and settlement expenses 56,433
Unearned premiums 89,801
Reinsurance premiums payable 2,657
Other liabilities 11,473
Minority interest in consolidated insurance subsidiary 17,426
--------- ---------
Total liabilities - Insurance -- 177,790
--------- ---------
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 30,804,000 shares (30,782,000 at December 31, 1994) 3,078 3,078
Additional paid-in capital 157,300 157,021
Unrealized net gains (losses) in value of investments 814 (2,686)
Retained earnings 81,938 78,651
--------- ---------
243,130 236,064
Less cost of 3,925,000 shares in treasury (2,468,000 at December 31, 1994) 34,966 13,088
--------- ---------
208,164 222,976
--------- ---------
$ 485,719 667,472
========= =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Transportation $ 91,058 77,338 253,344 224,750
Diesel repair 12,492 11,755 39,207 33,572
Net premiums earned -- 14,561 43,191 43,977
Commissions earned on reinsurance -- 1,103 2,048 3,557
Investment income 663 2,541 7,433 6,929
Gain (loss) on disposition of assets 98 316 (138) 552
Realized gain on investments -- 483 868 1,331
--------- --------- --------- ---------
104,311 108,097 345,953 314,668
--------- --------- --------- ---------
Costs and expenses:
Costs of sales and operating expenses (except as shown
below) 70,034 60,646 198,410 172,075
Losses, claims and settlement expenses -- 12,770 30,189 38,678
Policy acquisition costs -- 3,641 9,365 10,919
Selling, general and administrative 10,525 10,567 35,670 34,299
Taxes, other than on income 2,450 3,751 7,765 11,573
Depreciation and amortization 10,042 8,345 29,776 24,026
Minority interest expense -- 451 2,463 1,630
Impairment of long-lived assets 17,500 -- 17,500 --
--------- --------- --------- ---------
110,551 100,171 331,138 293,200
--------- --------- --------- ---------
Operating income (loss) (6,240) 7,926 14,815 21,468
Equity in earnings of insurance affiliate 1,210 -- 1,210 --
Equity in earnings of marine affiliates 884 -- 1,469 --
Interest expense (3,252) (2,355) (9,208) (6,121)
--------- --------- --------- ---------
Earnings (loss) before taxes on income (7,398) 5,571 8,286 15,347
Provision (benefit) for taxes on income (800) 1,965 4,999 5,651
--------- --------- --------- ---------
Net earnings (loss) $ (6,598) 3,606 3,287 9,696
========= ========= ========= =========
Earnings (loss) per share of common stock $ (.24) .13 .12 .34
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------
1995 1994
---------- --------
($ in thousands)
<S> <C> <C>
Net earnings $ 3,287 9,696
Adjustments to reconcile net earnings to net cash provided by operating activities:
Loss (gain) on disposition of assets 138 (552)
Realized gain on investments (868) (1,331)
Depreciation and amortization 29,776 24,026
Increase (decrease) in deferred taxes (696) 4,951
Deferred scheduled maintenance costs 5,409 2,076
Equity in earnings of insurance affiliate (1,210) --
Redemption from insurance affiliate 5,016 --
Equity in earnings of marine affiliates (1,469) (25)
Distributions from marine affiliates 867 --
Minority interest expense 2,463 1,630
Impairment of long-lived assets 17,500 --
Other noncash adjustments to earnings 34 161
Increase (decrease) in cash flow from other changes in operating working capital
for:
Marine transportation, diesel repair and other (7,427) (17,478)
Insurance 14,101 32,273
----------- -----------
Net cash provided by operating activities 66,921 55,427
----------- -----------
Cash flow from investing activities:
Proceeds from sale and maturities of investments 50,178 37,417
Purchase of investments (69,650) (91,149)
Net decrease (increase) in short-term investments (13,645) 5,132
Capital expenditures (33,653) (50,263)
Proceeds from disposition of assets 1,190 2,571
----------- -----------
Net cash used in investing activities (65,580) (96,292)
----------- -----------
Cash flow from financing activities:
Borrowings on bank revolving credit loan 171,100 181,000
Payments on bank revolving credit loan (217,800) (145,500)
Increase in long-term debt 82,891 --
Payments under long-term debt (26,534) (9,724)
Purchases of treasury stock (22,039) --
Sale of insurance subsidiary stock to minority stockholder -- 7,000
Proceeds from exercise of stock options 88 452
----------- -----------
Net cash provided (used) by financing activities (12,294) 33,228
----------- -----------
Decrease in cash and invested cash (10,953) (7,637)
Cash and invested cash, beginning of year 11,840 14,936
----------- -----------
Cash and invested cash, end of period $ 887 7,299
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,145 5,436
Income taxes $ 4,000 5,450
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited 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 September 30, 1995 and
December 31, 1994, and the results of operations for the three months and nine
months ended September 30, 1995 and 1994.
(1) BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS
The 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) COMPARABILITY OF FINANCIAL STATEMENTS
On July 18, 1995, Universal Insurance Company ("Universal") redeemed
$5 million of its common stock from the Company and sold $5 million of its
common stock to Eastern America Insurance Group, Inc. ("Eastern America
Group"). Such redemption and sale reduced the Company's ownership of Universal
from 58% to 47% and increased Eastern America Group's ownership of Universal
from 42% to 53%. Based on the Company's ownership of Universal declining to
47%, the Company's investment in Universal for the 1995 third quarter and
future periods will be accounted for under the equity method of accounting.
Prior period financial statements have not been restated.
The following proforma condensed financial statements are based on
historical financial statements of the Company. The proforma condensed
financial statements assume the Company was accounting for its investment in
Universal on an equity basis as of the beginning of the periods indicated.
6
<PAGE> 7
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(2) COMPARABILITY OF FINANCIAL STATEMENTS, Continued
PROFORMA CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
($ in thousands)
<S> <C> <C>
ASSETS
Current assets $105,296 101,876
Property and equipment, net 314,621 327,940
Investments in affiliates 52,061 41,825
Other assets 13,741 25,900
-------- -------
$485,719 497,541
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 70,671 73,155
Long-term debt, less current portion 158,933 148,535
Other long-term liabilities 47,951 50,450
-------- -------
277,555 272,140
Stockholders' equity 208,164 225,401
-------- -------
$485,719 497,541
======== =======
</TABLE>
PROFORMA CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Nine months ended September 30,
---------------------------------------
1995 1994
----------- ----------
($ in thousands)
<S> <C> <C>
Revenues $293,987 259,819
Costs and expenses 283,143 242,729
-------- -------
Operating income 10,844 17,090
Equity in earnings of insurance affiliate 5,181 4,378
Equity in earnings of marine affiliate 1,469 --
Interest expense (9,208) (6,121)
-------- -------
Earnings before taxes in income 8,286 15,347
Provision for taxes on income 4,999 5,651
-------- -------
Net earnings $ 3,287 9,696
======== =======
</TABLE>
7
<PAGE> 8
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(2) COMPARABILITY OF FINANCIAL STATEMENTS, Continued
Pursuant to a Shareholder Agreement entered into between Eastern
America Group, Universal and the Company in September 1992, it is anticipated
that Universal will continue redeeming its common stock from the Company over a
nine to eleven year period. To the extent that the anticipated future
redemptions by Universal of its common stock exceeds the Company's basis in
such stock, the Company will record equity in earnings accordingly. It is
anticipated that future earnings attributable to the Company's investment in
Universal for the fourth quarter of 1995 will be minimal. In addition to the
Company's common stock holding in Universal, the Company has an investment of
$11,534,000 of preferred stock, which accrues earnings based upon a pool of
U.S. Treasury Securities. Such earnings attributable to the preferred stock
will be recognized by the Company as accrued. As of September 30, 1995, the
Company believes that future redemptions by Universal of its common stock will
be sufficient to recover the Company's book basis in Universal.
(3) ADOPTION OF ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in March 1995.
SFAS 121 establishes standards for the impairment of long-lived assets, certain
identifiable intangibles related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of.
Effective September 30, 1995, the Company adopted SFAS 121. This adoption is
earlier than the required deadline of the 1996 first quarter.
As a result of the adoption of SFAS 121, the Company reduced the
carrying value of certain marine transportation equipment and related
intangibles by taking a $17,500,000 pre-tax, non-recurring charge in the 1995
third quarter. The after-tax effect of the charge was $13,000,000, or $.47 per
share. The Company reviewed long-term assets and certain identifiable
intangibles for impairment by division, and by vessel class within each
division. For purposes of determining fair value, the Company estimated future
cash flows expected to be generated, assuming the above groups, less the future
cash outflows expected to be necessary to obtain the inflows.
An analysis of the reductions of the carrying value of certain
affected assets upon adoption of SFAS 121 follows:
8
<PAGE> 9
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(3) ADOPTION OF ACCOUNTING STANDARDS, Continued
<TABLE>
<CAPTION>
Before adoption of Adoption of After adoption of
SFAS 121 SFAS 121 SFAS 121
-------- -------- --------
($ in thousands)
<S> <C> <C> <C>
Offshore Transportation Division:
Break-bulk freighters:
Freighters $10,064 (6,366) 3,698
Land and equipment 1,662 (783) 879
Intangibles 9,525 (9,525) --
------- ------- -----
21,251 (16,674) 4,577
Tanker 2,029 (693) 1,336
Inland Transportation Division:
Inland tank barges 164 (133) 31
------- -------- -----
$23,444 (17,500) 5,944
======== ======== =====
</TABLE>
(4) TAXES ON INCOME
Earnings (loss) before taxes on income and details of the provision
(benefit) for taxes on income for the three months and nine months ended
September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------- ----------------------------
1995 1994 1995 1994
-------- -------- --------- --------
($ in thousands)
<S> <C> <C> <C> <C>
Earnings (loss) before taxes on income $ (7,398) 5,571 8,286 15,347
======== ====== ====== ======
Provision (benefit) for taxes on income:
United States:
Current $ 1,863 (1,747) 5,243 (1,298)
Deferred (3,394) 3,616 (1,141) 4,951
State and municipal 229 96 395 248
-------- ------ ------ ------
(1,302) 1,965 4,497 3,901
-------- ------ ------ ------
Puerto Rico - Current 502 -- 502 1,750
-------- ------ ------ ------
$ (800) 1,965 4,999 5,651
======== ====== ====== ======
</TABLE>
The effective tax rate for the 1995 first nine months and 1995 third
quarter was significantly higher than in prior comparable periods. This
primarily resulted from the write-off of $4,600,000 in non-deductible goodwill
in connection with the Company's adoption of SFAS 121. Therefore, the
effective tax rate for both 1995 periods was above the expected 35% statutory
rate.
9
<PAGE> 10
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(5) LONG-TERM DEBT
In December 1994, the Company established a $250,000,000 medium term
note program providing for the issuance of fixed rate or floating rate notes
with maturities of nine months or longer. The shelf registration program,
registered with the Securities and Exchange Commission, was activated in March
1995 with the issuance of $34,000,000 of the authorized notes. The issued
medium term notes bear interest at an average fixed rate of 7.77% with a
maturity of March 10, 1997. Proceeds from sale of the notes were used to
retire the Company's outstanding bank term loan in the amount of $10,286,000
due June 1, 1997 and to reduce the Company's outstanding revolving credit loans
by $23,714,000. The Company's outstanding bank term loan in the amount of
$10,666,000, due March 6, 1997, was retired on March 20, 1995 with proceeds
borrowed under the Company's revolving credit agreements. In June 1995, the
Company issued $45,000,000 of authorized notes, bearing a fixed interest rate
of 7.25%, with a maturity of June 1, 2000. Proceeds from the sale of the notes
were used to reduce the Company's outstanding revolving credit loans. The
remaining $171,000,000 available under the medium term note program is
available to provide financing for future business and equipment acquisitions,
and working capital requirements.
10
<PAGE> 11
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The Company reported net earnings of $3,287,000, or $.12 per share,
for the first nine months of 1995, compared with $9,696,000, or $.34 per share,
for the first nine months of 1994. For the 1995 third quarter, the Company
reported a net loss of $6,598,000, or $.24 per share, compared with net
earnings of $3,606,000, or $.13 per share, for the 1994 third quarter.
The Company adopted SFAS 121, Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, effective September 30, 1995. As a result
of the adoption of SFAS 121, the Company reduced the carrying value of certain
marine transportation equipment and related intangibles by taking a $17,500,000
pre-tax, non-recurring charge in the 1995 third quarter. The after-tax effect
of the charge was $13,000,000, or $.47 per share. The Company reviewed
long-term assets and certain identifiable intangibles for impairment by
division, and by vessel class within each division. For purposes of
determining fair value, the Company estimated future cash flows expected to be
generated, assuming the above groupings, less the future cash outflows expected
to be necessary to obtain the inflows.
MARINE TRANSPORTATION
As a provider of service for both the inland and offshore United
States markets, the marine transportation segment is divided into three
divisions organized around the markets they serve: the Inland Chemical
Division, serving the inland industrial and agricultural chemical markets; the
Inland Refined Products Division, serving the inland refined products market;
and the Offshore Division, which serves the offshore petroleum products,
container, dry-bulk and palletized cargo markets. A division analysis of the
marine transportation segment follows:
Marine Transportation - Inland Divisions
The Inland Chemical and Refined Products Divisions' transportation
revenues for the 1995 first nine months totaled $178,453,000, reflecting a 21%
increase compared with $148,081,000 reported for the first nine months of 1994.
Third quarter 1995 transportation revenues totaled $63,402,000, an increase of
19% when compared with third quarter 1994 revenues of $53,390,000. The
acquisition from The Dow Chemical Company ("Dow") in November 1994 of 65 inland
tank barges, the assumption of the lease of 31 inland tank barges from Dow and
the accompanying ten year contract with Dow to provide inland bulk liquid
marine transportation services, contributed to the majority of the increase in
revenues for each comparable period.
Equipment utilization in the Inland Chemical and Refined Products
Divisions remained stable during the 1995 first nine months and third quarter.
The Inland Chemical Division, with over 80% of its movements under contracts,
benefited during both periods from contract renewals at higher rates and
continued operating efficiencies. The Dow fleet acquisition is being
integrated into the fleet and the fleet is operating more efficiently than
during the first half of the 1995 year.
11
<PAGE> 12
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The Inland Refined Products Divisions' third quarter movements, with
approximately 50% under contracts, benefited from the summer driving season.
Additional refinery capacity and pipeline efficiencies in the Midwest resulted
in lower rates and a slight decrease in movements when compared with the 1994
third quarter and nine months.
Movements of liquid fertilizer and anhydrous ammonia, through the
Inland Chemical Division, were as predicted during the 1995 third quarter.
Typically, fertilizer is applied in the spring with terminals resupplied in the
fall; therefore, July and August are slow periods; however, with the closure of
the Upper Mississippi River System from flooding from May 19 through June 9,
the spring fertilizer season was extended. September is the normal beginning
of the fall fertilizer season.
During the majority of the 1995 third quarter, the Illinois River was
closed for lock repairs, thereby negatively affecting the results of both the
Inland Chemical and Refined Products Divisions. In addition, several
hurricanes negatively affected both divisions' Gulf Coast operations.
Costs and expenses, excluding interest expense, for the Inland
Chemical and Refined Products Divisions for the 1995 first nine months totaled
$151,073,000, reflecting an 18% increase over the 1994 first nine months total
of $127,792,000. Third quarter 1995 costs and expenses, excluding interest
expense, totaled $51,710,000, an increase of 16% over the comparable 1994 third
quarter when costs and expenses totaled $44,583,000. The increase for both
comparable periods reflects the costs and expenses associated with the
operation of the Dow equipment acquired in November 1994, as well as
inflationary increases in costs and expenses.
The Inland Chemical and Refined Products Divisions' operating income
for the 1995 first nine months totaled $27,471,000, an increase of 30% compared
with 1994 first nine months operating income of $21,155,000. Operating income
for the 1995 third quarter increased 27% to $11,852,000 when compared with an
operating income of $9,321,000 for the 1994 third quarter. Operating margins
for the 1995 first nine months increased to 15.4% compared with 14.3% for the
first nine months of 1994. Operating margins for the 1995 third quarter also
improved to 18.7% compared with 17.5% recorded for the 1994 third quarter.
Marine Transportation - Offshore Division
Transportation revenues from the Offshore Division for the 1995 first
nine months totaled $74,891,000, reflecting a 2% decrease compared with
$76,669,000 reported for the first nine months of 1994. Third quarter 1995
Offshore Division transportation revenues totaled $27,656,000, an increase of
15% compared with $23,948,000 reported for the 1994 third quarter.
12
<PAGE> 13
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
With five of the Company's nine tankers operating under long-term
contracts at adequate rates, the four remaining tankers operated sporadically
in the spot market at inadequate rates. During the 1995 third quarter, one
spot market tanker was laid up, as current rates did not justify an anticipated
expenditure of approximately $1,000,000 to maintain the vessel's operating
certificate. The laid-up tanker has an Oil Pollution Act of 1990 expiration
date of October 1996. In anticipation of the idle tanker not returning to
service effective September 30, 1995, the tanker was written-down to scrap
steel value upon the adoption of SFAS 121. Although tanker spot market rates
are inadequate, the Offshore Division's liquid tanker segment contributed
$2,068,000 to the Company's operating income for the 1995 first nine months and
$181,000 of operating income for the 1995 third quarter.
Movements for the transportation of food aid and related products
under the United States Government's preference aid cargo programs and military
cargo movements allowed the Company's three freighters to be fully utilized
during the 1995 third quarter. However, during the first half of 1995, all
three freighters operating in this market have been laid-up at various times of
the year due to the market's excess equipment capacity. Such excess capacity
and lack of available cargo have resulted in rates that are inadequate to
achieve operating profitability. Freight rates, which have been depressed
since 1994, are not expected to recover to levels which will allow the three
freighters to make consistent contributions to the Company's earnings in the
future. With the adoption of SFAS 121, the Company wrote down the carrying
value of the three freighters and related intangibles to fair market value in
the 1995 third quarter. The Offshore Division's preference and military cargo
segment suffered operating losses of $2,989,000 for the 1995 first nine months
and $836,000 of operating losses for the 1995 third quarter, excluding the
effects of the previously mentioned write-down.
Costs and expenses, excluding interest expense, for the Offshore
Division for the 1995 first nine months totaled $74,839,000, a decrease of 4%
compared with $78,233,000 for corresponding 1994 first nine months. Third
quarter 1995 costs and expenses, excluding interest expense, totaled
$28,318,000, an increase of 6% compared with $26,774,000 reported for the 1994
third quarter. The 4% decrease in costs and expenses when comparing the 1995
first nine months with the 1994 corresponding period primarily resulted from
the lay-up of the three break-bulk freighters during the 1995 second quarter
and the continued weakness in both the offshore liquid spot market and dry
cargo markets. The 6% increase for the 1995 third quarter compared with the
1994 third quarter resulted from the full employment of the break-bulk
freighters during the 1995 third quarter and the lay-up of as many as six
liquid offshore vessels during the 1994 third quarter.
For the 1995 first nine months, the Offshore Division recorded
operating income of $160,000 compared with an operating loss of $1,700,000 for
the corresponding 1994 first nine months. For the 1995 third quarter, the
Offshore Division recorded an operating loss of $660,000, compared with an
operating loss of $2,960,000 for the 1994 third quarter. Operating margins for
the 1995 first nine months were essentially break-even compared with a negative
2.2% for the 1994 first nine months. Operating margins for the 1995 third
quarter totaled a negative 2.4% compared with a negative 12.4% for the 1994
third quarter.
13
<PAGE> 14
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The Company's investment in two marine transportation partnerships are
accounted for following the equity method of accounting for the 1995 first nine
months and third quarter. Such investment for the corresponding periods of the
1994 year was accounted for following the pro-rata method (recording the
pro-rata share of the assets, liabilities, revenues and expenses of the
partnerships). The Company recorded equity in earnings of $1,469,000 for the
1995 nine months and $884,000 for the 1995 third quarter. For the
corresponding periods of the 1994 year, the Company recorded pre-tax earnings
from the partnerships of $1,823,000 for the first nine months and $1,008,000
for the third quarter. The components of such prior year earnings were
recorded pro-rata throughout the Statements of Earnings. The decline for both
comparable periods reflect the low rates for preference aid movements, a market
in which the partnerships participate, in addition to its contract movements of
coal and limestone rock.
DIESEL REPAIR
The Company's diesel repair segment reported diesel repair and parts
sales revenues of $39,207,000 for the 1995 first nine months, reflecting a 17%
increase compared with $33,572,000 reported for the 1994 first nine months.
Third quarter 1995 revenues totaled $12,492,000, an increase of 6% compared
with 1994 third quarter revenues of $11,755,000.
The diesel repair segment is divided into two divisions organized
around the marine and rail markets. The Marine Diesel Repair Division operates
on all three coasts and in the Midwest through five facilities that repair and
overhaul marine diesel engines and reduction gears, and sell related parts and
accessories. The Rail Diesel Repair Division provides replacement parts,
service and support nationwide to shortline railroads and industrial companies
that operate locomotives.
The Marine Diesel Repair Division's revenues for the 1995 first nine
months totaled $31,720,000, an increase of 16% compared with the 1994 first
nine months' revenues of $27,288,000. Third quarter 1995 revenues increased 3%
to $9,786,000 compared with $9,516,000 reported for the 1994 third quarter.
The Gulf Coast and Midwest markets benefited from the general health of the
inland tank barge industry, the main customer base for such markets. During
the late 1995 third quarter, the repair portion of such markets declined to
some degree; however, such repair business has rebounded during the early 1995
fourth quarter. The East Coast market remained stable from military customers;
however, revenues from the West Coast market have declined as the Division has
shifted its focus from the South Pacific fishing fleet to the North Pacific
fishing fleet.
The Rail Diesel Repair Division reported revenues for the 1995 first
nine months of $7,487,000, an increase of 19% compared with the 1994 first nine
months revenues of $6,284,000. Third quarter 1995 revenues totaled $2,706,000,
an increase of 21% compared with $2,239,000 reported for the 1994 third
quarter. Operations continue to expand since the Division's commencement in
January 1994. The Rail Diesel Repair Division serves as the exclusive
distributor to shortline and industrial railroads for aftermarket parts and
service for the Electro-Motive Division of General Motors.
14
<PAGE> 15
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
Costs and expenses, excluding interest expense, for the diesel repair
segment totaled $36,494,000, an increase of 16% compared with $31,331,000
reported for the 1994 first nine months. Third quarter 1995 costs and
expenses, excluding interest expense, equaled $11,657,000, an increase of 7%
over the comparable 1994 third quarter of $10,845,000. The increases for both
comparable periods reflect the continued growth in revenues from the two diesel
repair divisions, as well as inflationary growth in costs and expenses.
The diesel repair segment's operating income for the 1995 first nine
months totaled $2,793,000, an increase of 21% compared with 1994 first nine
months operating income of $2,301,000. Third quarter 1995 operating income
decreased 9% to $853,000 compared with $935,000 reported for the 1994 third
quarter. Operating margins for the 1995 first nine months equaled 7.1%
compared with 6.9% for the corresponding 1994 period. Third quarter 1995
operating margins totaled 6.8% compared with 8.0% reported for the 1994 third
quarter.
PROPERTY AND CASUALTY INSURANCE
The Company currently has a 47% common stock ownership of Universal, a
full service property and casualty insurance company, which operates
exclusively in the Commonwealth of Puerto Rico. On July 18, 1995, Universal
redeemed $5,000,000 of its common stock from the Company and sold $5,000,000 of
its common stock to Eastern America Group, thereby reducing the Company's
voting ownership from 58%, prior to such redemption and sale, to the current
47%. Such redemption and sale increased Eastern America Group's voting
ownership from 42% to the present 53%.
Effective July 1, 1995, the Company is accounting for its investment
in Universal under the equity in earnings method of accounting. Prior period
financial statements have not been restated. For the 1995 first six months,
results for Universal are consolidated with a minority interest expense
recorded for Eastern America's interest. For the 1995 third quarter, the
Company's investment in Universal is recorded on the equity in earnings method
of accounting.
Comparability of net premiums earned, commissions earned on
reinsurance, investment income, losses, claims and settlement expenses, policy
acquisition costs, minority interest expense and, to a lesser extent, selling,
general and administrative, taxes, other than on income and depreciation and
amortization were affected by the change in the method of accounting for the
Company's investment in Universal effective July 1, 1995. Universal has
continued to expand its vehicle single-interest and double-interest lines of
business primarily the result of strong automobile sales in Puerto Rico and
from Universal's expanded market share.
15
<PAGE> 16
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
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 investment in Universal's nonvoting
preferred stock (100%). 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, are included as part of equity in earnings of insurance affiliate.
During the 1995 third quarter, the Company recognized $650,000 of realized
gains from the sale of such U.S. Treasury Securities, which are included in
equity in earnings of insurance affiliate.
The Company's portion of Universal's pretax earnings for the 1995
first nine months totaled $5,180,000, of which pretax earnings of $3,970,000
are consolidated through the 1995 first six months and $1,120,000 are recorded
as equity in earnings of insurance affiliate for the 1995 third quarter. For
comparative purposes, the Company recorded pretax earnings from Universal of
$6,378,000 for the 1994 first nine months and $1,290,000 for the 1994 third
quarter.
Results for the property and casualty insurance segment for the 1994
first nine months included an additional reserve of $2,000,000 for potential
losses associated with the Mariners Reinsurance Company Limited, the Company's
Bermuda reinsurance subsidiary which participated in the writing of property
and casualty reinsurance from 1970 through 1990. Since ceasing participation
in the reinsurance market in 1990, the Company has continued to seek a
withdrawal from the business and closure of Mariner's activities, including
commutation of Mariner's book of business. A commutation would entail the
transfer of liability from known and incurred but not reported losses to a
second party in exchange for a portion of, or all of, Mariner's assets. To
date, Mariner has been successful in commuting approximately 80% of all claims.
The remaining 20% of uncommuted claims are fully reserved and will be paid as
they are presented. Management expects to liquidate Mariner in 1996.
CORPORATE EXPENSES
Interest expense for the 1995 first nine months totaled $9,208,000, a
50% increase compared with $6,121,000 reported for the 1994 first nine months.
Third quarter 1995 interest expense totaled $3,252,000 compared with $2,355,000
for the 1994 third quarter, reflecting an increase of 38%. Such increase
represents interest on debt incurred to finance the Dow asset acquisition in
November 1994, the four tankers acquired in July 1994 and $22,039,000 of
treasury stock acquired during the 1995 first nine months, of which $10,295,000
was acquired during the 1995 third quarter.
PROVISION FOR TAXES ON INCOME
The effective tax rate for the 1995 first nine months and 1995 third
quarter was significantly higher than in prior comparable periods. This
primarily resulted from the write-off of $4,600,000 in non-deductible goodwill
in connection with the Company's adoption of SFAS 121. Therefore, the
effective tax rate for both 1995 periods was above the expected 35% statutory
rate.
16
<PAGE> 17
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Balance Sheet
Total assets as of September 30, 1995 were $485,719,000, a decrease of
27% when compared with total assets of $667,472,000 as of December 31, 1994,
primarily as a result of the change in accounting for Universal effective July
1, 1995. The insurance assets were eliminated in the change in accounting
method while Investment in insurance affiliate of $43,063,000, representing the
Company's equity in Universal, was included as an asset as of September 30,
1995.
Total liabilities as of September 30, 1995 were $277,555,000, a
decrease of 38% when compared with total liabilities of $444,496,000 as of
December 31, 1994, primarily as a result of the change in accounting for
Universal. The insurance liabilities were eliminated as the Company recorded
its investment in Universal under the equity method effective July 1, 1995.
Treasury Stock Purchases
From April 24, 1995 through October 31, 1995, the Company purchased
1,974,020 shares of common stock at a total price of $29,497,000, for an
average price of $14.94. On October 17, 1995, the Board of Directors increased
the Company's common stock repurchase authorization to 4,250,000 shares, an
increase of 2,250,000 over the 2,000,000 shares authorized in August 1994. The
Company is authorized to purchase its common stock on the American Stock
Exchange and in privately negotiated transactions. When purchasing its common
stock, the Company is subject to price, trading 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.
Long-Term Financing
In December 1994, the Company established a $250,000,000 medium term
note program providing for the issuance of fixed rate or floating rate notes
with the maturities of nine months or longer. The shelf registration program,
registered with the Securities and Exchange Commission, was activated in March
1995 with the issuance of $34,000,000 of the authorized notes. The issued
medium term notes bear interest at an average fixed rate of 7.77% with a
maturity of March 10, 1997. Proceeds from sale of the notes were used to
retire the Company's outstanding bank term loan in the amount of $10,286,000
due June 1, 1997 and to reduce the Company's outstanding revolving credit loans
by $23,714,000. The Company's outstanding bank term loan in the amount of
$10,666,000, due March 6, 1997, was retired on March 20, 1995 with proceeds
borrowed under the Company's revolving credit agreements. In June 1995, the
Company issued $45,000,000 of authorized notes, bearing a fixed interest rate
of 7.25%, with a maturity of June 1, 2000. Proceeds from the sale of the notes
were used to reduce the Company's outstanding revolving credit loans. The
remaining $171,000,000 available under the medium term note program will
provide financing for future business and equipment acquisitions and working
capital requirements.
As of September 30, 1995, 29% of the Company's long-term debt was
priced at floating interest rates and 71% was on fixed rate debt.
17
<PAGE> 18
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY, Continued
Capital Expenditures
In May 1994, the Company entered into a contract for the construction
of 12 double skin 29,000 barrel capacity inland tank barges for use in the
movement of industrial chemicals and refined products. In February 1995, the
Company exercised the option under the contract to construct 12 additional
barges. Since January 1995, the Company has received nine barges,
approximately one each month, and the remaining 15 barges are scheduled to be
delivered one each month thereafter. A third option for the construction of 12
additional barges was canceled. The new construction program is consistent
with the Company's long-term strategy of upgrading its equipment to service the
needs of its customers and to enhance its market position.
Liquidity
The Company has generated net cash provided by operating activities of
$46,694,000 for the first nine months of 1995 compared with $33,868,000 for the
comparable 1994 period. Such funds are available for capital construction
projects, treasury stock purchases, asset acquisitions, repayment of borrowings
associated with asset acquisitions and for other operating requirements. In
addition to its cash flow provided by operating activities, the Company also
has available as of November 8, 1995 $45,700,000 under its revolving credit
agreement and $171,000,000 available under its medium term note program.
During each year, 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.
The Company has no present plan to pay dividends on its common stock.
18
<PAGE> 19
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, 1994.
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 nine months ended
September 30, 1995.
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
Dated: December 27, 1995
19
<PAGE> 20
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
11.0 Computation of Earnings per Common Share
27.0 Financial Data Schedule
<PAGE> 1
EXHIBIT 11.0
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ---------------------
1995 1994 1995 1994
------- ------- ------ ------
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings (loss) $(6,598) 3,606 3,287 9,696
======= ====== ====== ======
Shares:
Weighted average number of common
shares outstanding 27,472 28,439 27,995 28,419
Common equivalent shares for dilutive effect
of assumed exercise of stock options -- 290 314 322
------- ------ ------ ------
27,472 28,729 28,309 28,741
======= ====== ====== ======
Earnings (loss) per share of common stock $ (.24) .13 .12 .34
======= ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 887
<SECURITIES> 16,763
<RECEIVABLES> 65,851
<ALLOWANCES> 653
<INVENTORY> 8,391
<CURRENT-ASSETS> 105,296
<PP&E> 484,857
<DEPRECIATION> 170,236
<TOTAL-ASSETS> 485,719
<CURRENT-LIABILITIES> 70,671
<BONDS> 158,933
<COMMON> 3,078
0
0
<OTHER-SE> 205,086
<TOTAL-LIABILITY-AND-EQUITY> 485,719
<SALES> 29,823
<TOTAL-REVENUES> 345,953
<CGS> 23,805
<TOTAL-COSTS> 237,964
<OTHER-EXPENSES> 57,504
<LOSS-PROVISION> 34
<INTEREST-EXPENSE> 9,208
<INCOME-PRETAX> 8,286
<INCOME-TAX> 4,999
<INCOME-CONTINUING> 3,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,287
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
