<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the quarter ended September 30, 1998
[ ] 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 200, Houston, TX 77056-3453
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(713) 435-1000
----------------------------------------------------
(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, $.10 par
value per share, on November 6, 1998 was 20,914,794.
<PAGE> 2
PART I - FINANCIAL INFORMATION
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
($ in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 712 $ 2,043
Available-for-sale securities 21,135 21,773
Receivables:
Trade, net of allowance for doubtful accounts 51,649 70,137
Insurance claims and other 50,645 14,458
Inventories 14,332 14,875
Prepaid expenses and other current assets 6,403 7,359
Deferred income taxes 1,709 1,468
Property held for sale 5,868 --
Current assets of discontinued operations -- 3,684
------- -------
Total current assets 152,453 135,797
------- -------
Property and equipment, at cost 469,268 471,019
Less accumulated depreciation 206,684 198,635
------- -------
262,584 272,384
------- -------
Investments in affiliates:
Insurance affiliate -- 45,320
Marine affiliates 15,614 16,256
------- -------
15,614 61,576
------- -------
Excess cost of consolidated subsidiaries, net of
accumulated amortization 5,497 6,652
Sundry 3,757 4,562
Long-term assets of discontinued operations -- 36,988
------- -------
$439,905 $517,959
======= =======
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 3
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
($ in thousands)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 5,333 $ 5,333
Income taxes payable 8,139 4,319
Accounts payable 14,654 26,712
Accrued liabilities 47,091 54,193
Deferred revenues 2,338 5,046
------- -------
Total current liabilities 77,555 95,603
------- -------
Long-term debt, less current portion 173,635 149,485
Deferred income taxes 43,324 48,409
Other long-term liabilities 6,423 6,193
------- -------
223,382 204,087
------- -------
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 30,907,000 shares. 3,091 3,091
Additional paid-in capital 158,369 159,016
Accumulated other comprehensive income 573 572
Retained earnings 142,089 136,945
------- -------
304,122 299,624
Less cost of 9,971,000 shares in treasury
(6,619,000 at December 31, 1997) 165,154 81,355
------- -------
138,968 218,269
------- -------
$439,905 $517,959
======= =======
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 4
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
1998 1997 1998 1997
--------- -------- --------- ---------
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Marine transportation $ 62,700 $65,007 $184,955 $192,622
Diesel repair 19,627 18,878 63,951 59,828
Investment income and other 564 322 1,373 831
Gain (loss) on disposition of assets (138) 12 106 170
------- ------ ------- -------
82,753 84,219 250,385 253,451
------- ------ ------- -------
Costs and expenses:
Costs of sales and operating expenses 53,055 54,012 161,730 166,433
Selling, general and administrative 10,039 9,904 29,345 29,990
Taxes, other than on income 1,938 1,927 5,897 5,647
Depreciation and amortization 6,800 6,940 20,459 21,208
Impairment of long-lived asset 8,333 -- 8,333 --
------- ------ ------- -------
80,165 72,783 225,764 223,278
------- ------ ------- -------
Operating income 2,588 11,436 24,621 30,173
Equity in earnings of insurance affiliate 418 422 1,325 3,734
Loss on sale of insurance affiliate (10,536) -- (10,536) --
Equity in earnings of marine affiliates 1,034 778 2,899 2,172
Interest expense (3,236) (3,293) (9,235) (10,117)
------- ------ ------- -------
Earnings (loss) from continuing operations
before taxes on income (9,732) 9,343 9,074 25,962
(Provision) benefit for taxes on income 3,161 (3,470) (3,930) (9,776)
------- ------ ------- -------
Net earnings (loss) from continuing operations (6,571) 5,873 5,144 16,186
Earnings from discontinued operations, net of
taxes on income -- 76 -- 2,607
------- ------ ------- -------
Net earnings (loss) $ (6,571) $ 5,949 $ 5,144 $ 18,793
======= ====== ======= =======
TABLE CONTINUED ON NEXT PAGE
</TABLE>
<PAGE> 5
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS, Continued
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
1998 1997 1998 1997
--------- -------- --------- ---------
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings (loss) per share of common stock:
Basic:
Continuing operations $ (.31) $ .24 $ .23 $ .66
Discontinued operations -- -- -- .11
------- ------ ------- -------
Net earnings (loss) $ (.31) $ .24 $ .23 $ .77
======= ====== ======= =======
Diluted:
Continuing operations $ (.31) $ .24 $ .23 $ .66
Discontinued operations -- -- -- .10
------- ------ ------- -------
Net earnings (loss) $ (.31) $ .24 $ .23 $ .76
======= ====== ======= =======
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 6
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine months
ended September 30,
----------------------
1998 1997
--------- ---------
($ in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,144 $ 18,793
Adjustments to reconcile net earnings to net cash provided
by continuing operations:
Earnings from discontinued operations -- (2,607)
Depreciation and amortization 20,459 21,208
Provision (credit) for deferred income taxes (3,987) 857
Gain on disposition of assets (106) (170)
Deferred scheduled maintenance costs (340) 2,247
Loss on sale of insurance affiliate 10,536 --
Equity in earnings of insurance affiliate, net of redemption (1,325) 766
Equity in earnings of marine affiliates, net of distributions
and contributions 643 (2,708)
Impairment of long-lived asset 8,333 --
Other 68 3
Increase (decrease) in cash flows resulting from changes in
operating working capital 980 (8,740)
------- -------
Net cash provided by operating activities of continuing operations 40,405 29,649
Net cash provided by (used in) operating activities of
discontinued operations (494) 11,964
------- -------
Net cash provided by operating activities 39,911 41,613
------- -------
Cash flows from investing activities:
Proceeds from sale and maturities of investments 1,200 1,935
Purchase of investments (18) (4,678)
Capital expenditures (24,043) (16,847)
Proceeds from disposition of assets 2,200 2,284
Proceeds from disposition of businesses 39,989 --
Investing activities of discontinued operations (275) (1,633)
------- -------
Net cash provided by (used in) investing activities 19,053 (18,939)
------- -------
TABLE CONTINUED ON NEXT PAGE
</TABLE>
<PAGE> 7
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
<CAPTION>
Nine months
ended September 30,
----------------------
1998 1997
--------- ---------
($ in thousands)
<S> <C> <C>
Cash flows from financing activities:
Borrowings (payments) on bank revolving credit agreements, net 29,400 (22,400)
Increase in long-term debt -- 50,000
Payments on long-term debt (5,250) (39,249)
Purchase of treasury stock (87,254) (10,887)
Proceeds from exercise of stock options 2,809 1,423
------- -------
Net cash used in financing activities (60,295) (21,113)
------- -------
Increase (decrease) in cash and cash equivalents (1,331) 1,561
Cash and cash equivalents, beginning of year 2,043 1,544
------- -------
Cash and cash equivalents, end of period $ 712 $ 3,105
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest $ 6,905 $ 7,203
Income taxes $ 5,534 $ 8,311
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 8
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
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,
1998 and December 31, 1997, and the results of operations for the three months
and nine months ended September 30, 1998 and 1997.
(1) BASIS FOR PREPARATION OF THE CONDENSED FINANCIAL STATEMENTS
The condensed 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) ADOPTION OF ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive income and its
components in a full set of financial statements. Comprehensive income includes
all changes in a company's equity (except those resulting from investments by
and distributions to owners), including, among other things, foreign currency
translation adjustments and unrealized gains (losses) on marketable securities
classified as available-for-sale. The Company's total comprehensive earnings
for the three months and nine months ended September 30, 1998 and 1997 were as
follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
-------- ------ ------ -------
<S> <C> <C> <C> <C>
Net earnings (loss) from continuing operations $(6,571) $5,873 $5,144 $16,186
Net earnings from discontinued operations -- 76 -- 2,607
------ ----- ----- ------
Net earnings (loss) (6,571) 5,949 5,144 18,793
Unrealized gain (loss) on marketable securities (255) 602 1 375
------ ----- ----- ------
Total comprehensive earnings (loss) $(6,826) $6,551 $5,145 $19,168
====== ===== ===== ======
</TABLE>
<PAGE> 9
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(2) ADOPTION OF ACCOUNTING STANDARDS, Continued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), issued in June 1997, establishes standards for
reporting information about operating segments in annual financial statements
and requires that enterprises report selected information about operating
segments in interim reports issued to shareholders. SFAS No. 131 will be
adopted by the Company in 1998. The adoption of SFAS No. 131 is not expected to
have a material impact on the Company's financial condition or results of
operations.
SFAS No. 132, "Employers' Disclosures about Pensions and other
Postretirement Benefits" ("SFAS No. 132"), issued in February 1998, revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. The statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. SFAS No. 132 will be adopted by
the Company in 1998.
(3) DISCONTINUED OPERATIONS
On March 16, 1998, the Company announced the completion of the sale of its
U.S. flag product tanker and harbor service operations for $38,600,000 in cash.
Under the terms of a purchase agreement dated January 28, 1998, Kirby sold two
offshore tankers and its harbor service operations to Hvide Marine Incorporated
and five offshore tankers were sold to August Trading Company, Inc.
The offshore tanker and harbor service operations' financial results were
accounted for as discontinued operations as of December 31, 1997, and previously
reported financial statements were restated to reflect the discontinuation of
the operations. The Company recorded an estimated net loss of $3,966,000 as of
December 31, 1997 from the sale of the tanker and harbor service operations, and
such results included a provision for operations during the phase-out period,
January 1, 1998 through the date of sale.
<PAGE> 10
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(4) TAXES ON INCOME
Earnings from continuing operations before taxes on income and details of
the provision for taxes on income from continuing operations for United States
and Puerto Rico operations for the three and nine months ended September 30,
1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
--------- ------ ------- -------
<S> <C> <C> <C> <C>
Earnings (loss) before taxes on income:
United States $(10,150) $8,921 $ 7,749 $22,228
Puerto Rico 418 422 1,325 3,734
------- ----- ------ ------
$ (9,732) $9,343 $ 9,074 $25,962
======= ===== ====== ======
Provision (benefit) for taxes on income:
United States:
Current $ 4,604 $4,013 $ 7,229 $ 7,270
Deferred (7,974) (817) (3,987) 827
State and local 209 274 688 754
------- ----- ------ ------
(3,161) 3,470 3,930 8,851
Puerto Rico - Current -- -- -- 925
------- ----- ------ ------
$ (3,161) $3,470 $ 3,930 $ 9,776
======= ===== ====== ======
</TABLE>
<PAGE> 11
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(4) TAXES ON INCOME, Continued
Earnings from discontinued operations before taxes on income and details of
the provision for taxes on income from United States discontinued operations for
the three and nine months ended September 30, 1997 were as follows (in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
Earnings before taxes on income $ 148 $4,065
==== =====
Provision (benefit) for taxes on income:
United States:
Current $(902) $ 620
Deferred 974 848
State and local -- (10)
---- -----
$ 72 $1,458
==== =====
</TABLE>
(5) IMPAIRMENT OF LONG-LIVED ASSETS
Effective September 30, 1998, the carrying value of one of the Company's
two remaining offshore liquid tank barge/tug units was reduced by $8,333,000 in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121") and was
reclassified as property held for sale on the condensed balance sheet. The pre-
tax non-recurring charge was taken in anticipation of the unit being sold in the
1998 fourth quarter for a price approximating the revised carrying value of the
unit. The unit was sold on October 30, 1998 for a price approximating the
revised carrying value of the unit. No pre-tax gain or loss will be recognized
from the sale of the unit.
On October 1, 1998, the Company sold its other unit for a pre-tax gain of
approximately $3,900,000. The gain will be recorded in the 1998 fourth quarter.
The sale of the two units completes the Company's exit from the offshore liquid
transportation business.
<PAGE> 12
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(6) SALE OF REMAINING INTEREST IN UNIVERSAL INSURANCE COMPANY
Effective September 30, 1998, the Company sold its remaining 45% voting
common stock interest and its non-voting preferred stock interest in Universal
Insurance Company ("Universal") for $36,000,000 in cash. Universal, a property
and casualty insurance company in the Commonwealth of Puerto Rico, was formed by
Kirby in 1972. In September 1992, the Company merged Universal with Eastern
America Insurance Company ("Eastern America"), a subsidiary of Eastern America
Insurance Group, Inc. ("Eastern America Group"). In accordance with a
shareholders' agreement between the Company, Universal and Eastern America
Group, through redemption rights, Universal had the obligation to purchase the
Company's entire interest in Universal gradually, over a 15 year period. The
Company closed the sale on October 7, 1998 and the cash proceeds were used to
reduce the Company's revolving line of credit.
Under an anticipated redemption schedule, the Company would have received a
stream of cash payments between now and the year 2008 totaling $62,000,000. The
$36,000,000 received represented the present value of the payment stream.
Including prior redemptions and the final sale, the Company received total
payments of $58,000,000 for its interest in Universal.
The Company recognized, during the 1998 third quarter, a pre-tax loss for
book purposes of $10,536,000 on the Universal transaction. The Company's
investment in Universal, accounted for under the equity method of accounting,
was based on the estimated receipt of $62,000,000 of redemption payments to the
Company over the next eleven years, and the recording of the remaining built-in
gain on the sale.
<PAGE> 13
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Statements contained in this Form 10-Q that are not historical facts,
including, but not limited to, any projections contained herein, are forward-
looking statements and involve a number of risks and uncertainties. Such
statements can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "anticipate," "estimate," or "continue" or the negative
thereof or other variations thereon or comparable terminology. The actual
results of the future events described in such forward-looking statements in
this Form 10-Q could differ materially from those stated in such forward-looking
statements. Among the factors that could cause actual results to differ
materially are: adverse economic conditions, industry competition and other
competitive factors, adverse weather conditions such as high water, low water,
fog and ice, marine accidents, construction of new equipment by competitors,
including construction with government assisted financing, government and
environmental laws and regulations, and the timing, magnitude and number of
acquisitions made by the Company.
In March 1998, the Company completed the sale of its offshore tanker and
harbor service operations. In accordance with a definitive purchase agreement
dated January 28, 1998, the Company sold two tankers and its harbor service
operation to Hvide Marine Incorporated and five tankers to August Trading
Company, Inc., for a combined purchase price of $38,600,000 in cash. The
offshore tanker and harbor service operations' financial results have been
accounted for as discontinued operations as of December 31, 1997, and previously
reported financial statements have been restated to reflect the discontinuation
of the operations. Such financial results as of December 31, 1997 included a
provision for operations during the phase-out period, January 1, 1998 through
the date of sale.
The Company is a provider of marine transportation services, operating a
fleet of 527 inland tank barges and 123 inland towing vessels, transporting
industrial chemicals and petrochemicals, refined petroleum products and
agricultural chemicals along the United States inland waterways. The Company's
marine transportation operation also includes one dry bulk barge and tug unit.
The Company also serves as managing partner of a 35% owned offshore marine
partnership, consisting of four dry bulk barge and tug units, and as managing
partner of a 50% owned offshore marine partnership, consisting of one dry bulk
barge and tug unit. The partnerships are accounted for under the equity method
of accounting.
The Company is engaged through its diesel repair segment in the overhaul
and servicing of large medium-speed diesel engines employed in marine, power
generation and rail applications.
<PAGE> 14
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS
The Company reported a net loss of $6,571,000, or $.31 per share, on
revenues of $82,753,000 for the 1998 third quarter, compared with net earnings
from continuing operations of $5,873,000, or $.24 per share, on revenues of
$84,219,000 for the 1997 third quarter. Net earnings for the nine months ended
September 30, 1998 were $5,144,000, or $.23 per share, on revenues of
$250,385,000, compared with net earnings from continuing operations of
$16,186,000, or $.66 per share, on revenues of $253,451,000 for the 1997 first
nine months. For comparative purposes, net earnings for the 1997 third quarter
were $5,949,000, or $.24 per share, including net earnings from discontinued
operations of $76,000, on revenues of $15,116,000. Net earnings for the 1997
first nine months were $18,793,000, or $.76 per share, including net earnings
from discontinued operations of $2,607,000, or $.10 per share, on revenues of
$49,517,000. For purposes of this Management's Discussion, all earnings per
share amounts presented are "Diluted Earnings Per Share." The weighted average
number of common shares applicable to diluted earnings (loss) for the third
quarter of 1998 and 1997 were 21,175,000 and 24,536,000, respectively, and for
the 1998 and 1997 first nine months were 22,487,000 and 24,616,000,
respectively. The reduction in common shares for the 1998 periods compared with
the applicable 1997 periods primarily reflects the acquisition of treasury stock
under the Company's Dutch Auction self-tender offer and through open market
share repurchases, more fully discussed below.
The following table sets forth the Company's revenues and percentage of
such revenues for the three months and nine months ended September 30, 1998
compared with the three months and nine months ended September 30, 1997 (dollars
in thousands):
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1998 1997 Increase (decrease)
-------------- -------------- -------------------
Amounts % Amounts % Amounts %
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Marine transportation $62,700 76% $65,007 77% $(2,307) (4)%
Diesel repair 19,627 24 18,878 23 749 4
Other income 426 -- 334 -- 92 28
------ --- ------ -- ------ --
$82,753 100% $84,219 100% $(1,466) (2)%
====== === ====== === ====== ==
</TABLE>
<PAGE> 15
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
<TABLE>
Nine months ended September 30,
-------------------------------
1998 1997 Increase (decrease)
-------------- ------------- -------------------
Amounts % Amounts % Amounts %
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Marine transportation $184,955 74% $192,622 76% $(7,667) (4)%
Diesel repair 63,951 26 59,828 24 4,123 7
Other income 1,479 -- 1,001 -- 478 48
------- --- ------- -- ------ --
$250,385 100% $253,451 100% $(3,066) (1)%
======= === ======= === ====== ==
</TABLE>
Revenue from the marine transportation segment declined 4% for the 1998
third quarter and 4% for the 1998 first nine months compared with the 1997
corresponding periods. The 1997 third quarter and first nine months included
$2,203,000 and $6,959,000, respectively, of revenue from AFRAM Carriers, Inc.
("AFRAM"), the Company's U.S. flag offshore break-bulk freighter subsidiary,
which ceased operations in September and October 1997 with the scrappage of
AFRAM's last two freighters.
During the 1998 third quarter and first nine months, chemical and
petrochemical volumes remained strong. Refined product volumes, more seasonal
in nature, were firm with the summer driving season. Fertilizer movements,
seasonal with the spring and fall fertilizer seasons, improved in September in
anticipation of a normal fall season. Spot market rates, which historically
decline during the summer months due to fleet efficiencies and planned summer
plant maintenance programs, held firm. Contracts generally continued to be
renewed with modest increases.
During the month of September 1998, the Company's marine transportation
segment was negatively impacted by three Gulf of Mexico storm events, two
hurricanes and one tropical storm, which significantly reduced fleet efficiency
during September. The Company estimated its 1998 third quarter was negatively
impacted by the loss of approximately $600,000 of revenues and incurred
approximately $400,000 of additional expenses due to the storm events. The
effects of the three storm events reduced the Company's net operating earnings
by an estimated $.02 to $.03 per share.
<PAGE> 16
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
The Company's 1997 first nine months were negatively impacted by flooding
in the Mississippi River System during the months of February through April.
The upper Mississippi River and Ohio River experienced flooding during the
majority of the first quarter, and the lower Mississippi River and Ohio River
experienced severe high water during March and April. The Company estimated a
loss of revenues of approximately $3,450,000 for the months of February through
April. The flooding reduced the Company's net earnings by an estimated $.10 per
share for the 1997 first nine months.
The diesel repair segment's revenues for the 1998 third quarter reflected
a 4% increase compared with the 1997 third quarter and increased 7% for the 1998
first nine months compared with the 1997 first nine months. The segment
continued to benefit from a strong nationwide engine overhaul and direct parts
market. The Gulf Coast market, which had in recent quarters been enhanced by
active drilling and related oil service activities in the Gulf of Mexico, did
experience a modest decline in the 1998 third quarter as drilling activities
declined. The East Coast, Midwest and West Coast markets continued favorable.
The diesel repair segment's 1997 first nine months' revenues were negatively
impacted by the flooding in the Mississippi River System, as many Midwest inland
towing customers deferred engine maintenance and overhauls.
The following table sets forth the costs and expenses and percentage of
each for the three months and nine months ended September 30, 1998 compared with
the three months and nine months ended September 30, 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
Three months ended September 30
1998 1997 Increase (decrease)
-------------- -------------- -------------------
Amounts % Amounts % Amounts %
------- ---- ------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Costs of sales and operating expenses $53,055 66% $54,012 74% $ (957) (2)%
Selling, general and administrative 10,039 13 9,904 14 135 1
Taxes, other than on income 1,938 2 1,927 2 11 --
Depreciation and amortization 6,800 9 6,940 10 (140) (2)
Impairment of long-lived assets 8,333 10 -- -- 8,333 100
------ --- ------ --- ----- ---
$80,165 100% $72,783 100% $7,382 10 %
====== === ====== === ===== ===
</TABLE>
<PAGE> 17
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------
1998 1997 Increase (decrease)
-------------- -------------- --------------------
Amounts % Amounts % Amounts %
-------- ---- -------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Costs of sales and operating expenses $161,730 71% $166,433 74% $(4,703) (3)%
Selling, general and administrative 29,345 13 29,990 14 (645) (2)
Taxes, other than on income 5,897 3 5,647 2 250 4
Depreciation and amortization 20,459 9 21,208 10 (749) (4)
Impairment of long-lived assets 8,333 4 -- -- 8,333 100
------- --- ------- --- ------ ---
$225,764 100% $223,278 100% $ 2,486 1 %
======= === ======= === ====== ===
</TABLE>
Costs of sales and operating expenses for the 1998 third quarter and the
1998 first nine months reflected 10% and 1% increases, respectively, when
compared with the corresponding periods of 1997. The 1998 third quarter and
first nine months included an impairment of a long-lived asset of $8,333,000.
The carrying value of an offshore liquid tank barge/tug unit was reduced in
accordance with SFAS No. 121. The unit was sold on October 30, 1998 for a price
approximating the revised carrying value of the unit. The 1997 third quarter and
first nine months included $2,073,000 and $6,816,000, respectively, of costs and
expenses associated with the revenues generated by AFRAM, whose vessels were
scrapped in September and October 1997. In addition, the 1997 first nine months
included higher costs and expenses associated with the flooding on the
Mississippi River System.
<PAGE> 18
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
The 1998 third quarter and first nine months marine transportation costs
and expenses reflected higher vessel labor and maintenance costs when compared
with the 1997 comparable periods. During 1998, in order to retain, as well as
attract, vessel employees into the marine lifestyle, the Company increased
vessel manpower compensation. Both 1998 periods also reflected higher
maintenance costs, as the Company competed for shipyard space with companies
participating in the oil and gas drilling activities in the Gulf of Mexico.
During the 1998 third quarter, competition for shipyard space did diminish due
to a decline in drilling activities. The 1998 third quarter and first nine
months' diesel repair costs and expenses also increased, reflecting higher
expenses associated with the 4% improvement in revenues for the 1998 third
quarter and 7% improvement for the 1998 first nine months compared with the
corresponding 1997 periods.
Selling, general and administrative expenses increased 1% in the 1998 third
quarter and decreased 2% for the 1998 first nine months compared with the
corresponding periods of 1997. The 1998 third quarter increase included non-
recurring expenses totaling $450,000 for executive severance pay, search firm
fees and consulting fees for the implementation of a value based management
system tied to a new incentive compensation plan. The decrease for the 1998
first nine months reflected savings in administrative expenses in the Company's
diesel repair segment due to reorganization efforts and the elimination of
unprofitable business lines. The results also reflect the savings from the
Company's costs reduction program implemented in late 1996 and is ongoing. The
program was designed to reduce administrative costs and improve operating
efficiencies.
<PAGE> 19
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
The following table sets forth the operating income and operating margins
by segment for the three months and nine months ended September 30, 1998
compared with the three months and nine months ended September 30, 1997 (dollars
in thousands):
<TABLE>
<CAPTION>
Three months ended September 30,
------------------------------------------
1998 1997 Increase (decrease)
-------------------- -------------------- -------------------
Operating Operating
income Operating income Operating
(loss) margin (loss) margin Amounts %
--------- --------- --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Marine transportation $10,210 16.3% $10,837 16.7% $ (627) (6)%
Diesel repair 1,999 10.2% 1,500 7.9% 499 33
Corporate (1,714) (1,236) (478) (39)
Impairment of assets (8,333) -- (8,333) (100)
------ ------ ------ ----
$ 2,162 $11,101 $(8,939) (81)%
====== ====== ====== ====
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------------
1998 1997 Increase (decrease)
-------------------- -------------------- -------------------
Operating Operating
income Operating income Operating
(loss) margin (loss) margin Amounts %
--------- --------- --------- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Marine transportation $29,029 15.7% $28,289 14.7% $ 740 3 %
Diesel repair 6,527 10.2% 4,714 7.9% 1,813 38
Corporate (4,081) (3,831) (250) (7)
Impairment of assets (8,333) -- (8,333) (100)
------ ------ ------ ----
$23,142 $29,172 $(6,030) (21)%
====== ====== ====== ====
</TABLE>
<PAGE> 20
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
The following table sets forth the equity in earnings of affiliates, loss
on the sale of the insurance affiliate and interest expense for the three months
and nine months ended September 30, 1998 compared with the three months and nine
months ended September 30, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Three months
ended September 30, Increase (decrease)
------------------- -------------------
1998 1997 Amount %
--------- ------- -------- -----
<S> <C> <C> <C> <C>
Equity in earnings of insurance affiliate $ 418 $ 422 $ (4) (1)%
Loss on sale of insurance affiliate $(10,536) -- $10,536 100 %
Equity in earnings of marine affiliates $ 1,034 $ 778 $ 256 33 %
Interest expense $ (3,236) $(3,293) $ (57) (2)%
</TABLE>
<TABLE>
<CAPTION>
Nine months
ended September 30, Increase (decrease)
------------------- -------------------
1998 1997 Amount %
--------- -------- ------- -----
<S> <C> <C> <C> <C>
Equity in earnings of insurance affiliate $ 1,325 $ 3,734 $(2,409) (65)%
Loss on sale of insurance affiliate $(10,536) -- $10,536 100 %
Equity in earnings of marine affiliates $ 2,899 $ 2,172 $ 727 33 %
Interest expense $ (9,235) $(10,117) $ (882) (9)%
</TABLE>
Effective September 30, 1998, the Company sold its remaining 45% voting
common stock interest and its non-voting preferred stock interest in Universal
for $36,000,000 in cash. Universal, a property and casualty insurance company
in the Commonwealth of Puerto Rico, was formed by Kirby in 1972. In September
1992, the Company merged Universal with Eastern America, a subsidiary of Eastern
America Group. In accordance with a shareholders' agreement between the
Company, Universal and Eastern America Group, through redemption rights,
Universal had the obligation to purchase the Company's entire interest in
Universal gradually, over a 15 year period. The Company closed the sale on
October 7, 1998 and the cash proceeds were used to reduce the Company's
revolving line of credit.
<PAGE> 21
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF CONTINUING OPERATIONS, Continued
Under an anticipated redemption schedule, the Company would have received a
stream of cash payments between now and the year 2008 totaling $62,000,000. The
$36,000,000 received represented the present value of the payment stream.
Including prior redemptions and the final sale, the Company received total
payments of $58,000,000 for its interest in Universal.
The Company recognized, during the 1998 third quarter, a pre-tax loss for
book purposes of $10,536,000 on the Universal transaction. The Company's
investment in Universal, accounted for under the equity method of accounting,
was based on the estimated receipt of $62,000,000 of redemption payments to the
Company over the next eleven years, and the recording of the remaining built-in
gain on the sale.
During the 1997 second quarter, the Company recognized as equity in
earnings of insurance affiliate, $2,500,000 of cash received from Universal as a
result of a resolution of a previously reserved Universal contingency for
outstanding litigation. The litigation was fully reserved on Universal's
records and was set aside as part of the merger in 1992 of Universal with
Eastern America Insurance.
Equity in earnings of marine affiliates reflected a 33% increase for the
1998 third quarter compared with the third quarter of 1997, and a 33% increase
for the 1998 first nine months compared with the first nine months of 1997.
During the 1998 third quarter, and for the majority of the 1998 first nine
months, the partnership's five offshore barge/tug units were fully employed.
Results for the 1997 third quarter and first nine months were negatively
impacted by additional scheduled maintenance on the partnership's vessels and by
lower coal volume requirements than the 1998 comparable periods.
Interest expense reflected a 2% decrease for the 1998 third quarter
compared with the third quarter of 1997, and a 9% decrease for the 1998 first
nine months compared with the first nine months of 1997. The decrease for both
1998 periods reflects the excess cash flow from operations and $38,600,000 in
cash proceeds from the sale of the offshore tanker and harbor service
operations, both of which were used to pay down the Company's $100,000,000
revolving credit agreement (the "Credit Agreement") with Chase Bank of Texas
N.A., as agent bank. In addition, the Company benefited from lower interest
rates on its Credit Agreement. Partially offsetting the cash payments and lower
interest rates on the Company's Credit Agreement was interest on the Company's
borrowings through the Credit Agreement to finance the Dutch Auction self-tender
offer and open market share repurchases, both of which are discussed below.
<PAGE> 22
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITIONS, CAPITAL RESOURCES AND LIQUIDITY
BALANCE SHEET
Total assets as of September 30, 1998 were $439,905,000, a decrease of 15%
compared with $517,959,000 as of December 31, 1997. The following table sets
forth the significant components of the balance sheet as of September 30, 1998
compared with December 31, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Increase (decrease)
September 30, December 31, -------------------
1998 1997 Amount %
------------- ------------ --------- ------
<S> <C> <C> <C> <C>
Assets:
Current assets $152,453 $135,797 $ 16,656 12 %
Property and equipment, net 262,584 272,384 (9,800) (4)
Investments in affiliates 15,614 61,576 (45,962) (75)
Long-term assets of discontinued operations -- 36,988 (36,988) (100)
Other assets 9,254 11,214 (1,960) (17)
------- ------- ------- ----
$439,905 $517,959 $(78,054) (15)%
======= ======= ======= ====
Liabilities and stockholders' equity:
Current liabilities $ 77,555 $ 95,603 $(18,048) (19)%
Long-term debt 173,635 149,485 24,150 16
Deferred taxes 43,324 48,409 (5,085) (11)
Other long-term liabilities 6,423 6,193 230 4
Stockholders' equity 138,968 218,269 (79,301) (36)
------- ------- ------- ----
$439,905 $517,959 $(78,054) (15)%
======= ======= ======= ====
</TABLE>
As of September 30, 1998, working capital increased to $74,898,000, an 86%
increase compared with $40,194,000 at December 31, 1997. The increase was
primarily attributable to the recording of a $36,000,000 receivable from the
sale of Universal, effective September 30, 1998, partially offset by the sale of
the discontinued offshore tanker and harbor service property and equipment in
March 1998. Trade accounts receivable decreased 26%, reflecting the sale of the
offshore operations and the Company's emphasis on collection of receivables.
Property held for sale reflects the two offshore liquid tank barge/tug units
sold in October 1998. Accounts payable decreased 45%, primarily reflecting the
sale of the offshore operations. Accrued liabilities decreased 13%, also
reflecting the sale of the offshore operations.
The available-for-sale securities of $21,135,000 at September 30, 1998 and
$21,773,000 at December 31, 1997 were investments of Oceanic Insurance Limited,
the Company's wholly owned captive insurance subsidiary.
<PAGE> 23
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY, Continued
Long-term debt, less current portion, increased 16% to $173,635,000 as of
September 30, 1998 compared with $149,485,000 at December 31, 1997. The
increase mainly reflected the borrowing to finance the Company's Dutch Auction
self-tender offer to purchase 3,066,922 shares of its common stock at a total
purchase price of $75,705,000 and open market stock repurchases totaling 537,720
shares of common stock at a total purchase price of $11,549,000, both of which
are more fully described below. Long-term debt was decreased by $38,600,000 of
cash received from the sale of the offshore tanker and harbor service operations
and repayments on long-term debt from excess cash flow.
Stockholders' equity as of September 30, 1998 decreased 36% during the 1998
first nine months, reflecting the Company's purchase of its common stock under
the Dutch Auction self-tender offer and open market repurchases, more fully
described below. As of September 30, 1998, the Company had 9,971,000 shares of
common stock in its treasury.
LONG-TERM FINANCING
The Company has a $100,000,000 Credit Agreement with Chase Bank of Texas,
N.A., as agent bank. Effective January 30, 1998, the Credit Agreement was
amended to provide a one-time allowance for the disposition of assets at the
subsidiary level. The amendment also modified the minimum net worth covenant
and fixed charge calculation. Proceeds under the Credit Agreement may be used
for general corporate purposes, the purchase of existing or new equipment, the
purchase of the Company's common stock, or for possible business acquisitions.
As of September 30, 1998, $62,000,000 was outstanding under the Credit
Agreement.
TREASURY STOCK PURCHASES
On March 23, 1998, the Company purchased 3,066,922 shares of its common
stock under a Dutch Auction self-tender offer at a price of $24.50 per share.
The Company announced the self-tender offer on February 17, 1998, expressing its
intentions to purchase up to 3,000,000 shares of its common stock at a purchase
price ranging from $21.00 to $24.50 per share. The tender offer expired on
March 16, 1998.
The Company elected to increase the size of the 3,000,000 share tender
offer and to accept all shares tendered at a price of $24.50 per share. The
3,066,922 shares purchased represented approximately 12.6% of the Company's
common stock outstanding immediately prior to the offer. Funding of the tender
offer was from the Company's Credit Agreement.
<PAGE> 24
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY, Continued
From July 31, 1998 through October 31, 1998, the Company purchased 593,700
shares of its common stock at a total purchase price of $12,670,000, for an
average price of $21.34 per share. The Company, as of October 30, 1998, has
1,220,000 shares available under its Board of Directors' 6,250,000 total open
market stock repurchase authorization. The treasury stock purchases were
financed by borrowings under the Company's Credit Agreement. The Company is
authorized to purchase its common stock on the New York Stock Exchange and in
privately negotiated transactions. When purchasing its common stock in the open
market, 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.
LIQUIDITY
The Company generated net cash provided by operating activities of
continuing operations of $40,405,000 and $29,649,000 for the nine months ended
September 30, 1998 and 1997, respectively. The 1998 first nine months were
positively impacted by a $980,000 increase in cash flow as a result of a
decrease in operating working capital, compared with a $8,740,000 decrease in
cash flow for the first nine months of 1997. The Company accounted for its
ownership in Universal and accounts for its ownership in its marine partnerships
under the equity method of accounting. It recognized cash flow from Universal
only upon receipt of an actual distribution or redemption and recognizes cash
flow from the marine partnerships upon the receipt or disbursement of cash from
the partnerships. During the 1997 first nine months, the Company received a
$2,000,000 redemption of Universal's common stock and $2,500,000 as a result of
the Universal lawsuit ruling. No redemptions of Universal's common stock were
received during 1998 prior to the Company selling its remaining 45% common stock
interest and preferred stock interest effective September 30, 1998. For the
1998 first nine months, the Company received net cash from the marine
partnerships of $3,541,000 and contributed to the partnerships $535,000 during
the 1997 first nine months.
Funds generated are available for capital construction projects, treasury
stock repurchases, asset acquisitions, repayment of borrowings associated with
treasury stock acquisitions or asset acquisitions and for other operating
requirements. In addition to its net cash flow provided by operating
activities, the Company also has available as of November 5, 1998, $75,500,000
under its Credit Agreement and $121,000,000 available under its medium term note
program. The Company's scheduled principal payments during the next 12 months
are $5,333,000.
<PAGE> 25
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY, Continued
During the last three years, 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 of inflation was reduced. The repair portion of the diesel
repair segment is based on prevailing current market rates. The Company does
not presently use financial derivatives, but uses a mix of floating and fixed
rate debt. The Company has no foreign exchange risks.
The Company has no present plan to pay dividends on its common stock.
YEAR 2000
The Company has a Year 2000 project team in place to address the potential
impact on the Company of the issue of computer software and embedded computer
chips being unable to distinguish the year 2000 from the year 1900. In 1997,
the Company began to investigate the impact of the Year 2000 issues and
associated problems on the Company's computer environment. The Year 2000
project team was formed to determine the extent of the issue and to make
recommendations for remediation of such issues. In addition, to validate the
extent of the issues and the project team remediation efforts, the Company
engaged an outside consulting firm to review the project team's findings and
make additional recommendations.
The project team, with the assistance of the consulting firm, completed a
detailed list of all of the Company's systems which may be impacted by the Year
2000 issue. The key areas were all of the Company's network components, core
corporate applications, personal computers and telephone switches. The
Company's major network components, personal computers and telephone switches
are currently Year 2000 compliant. Core corporate applications include OASIS,
the Company's internally developed vessel management system which includes a
billing, sales and traffic system, and prepackaged vendor-based products. The
principal vendor-based products are Oracle Financial, the Company's marine
transportation segment's financial accounting system, JIT, the diesel repair
segment's financial accounting system, and Ross Payroll, the system used by all
of the Company's operations to compensate their employees. A letter was sent to
each supplier of the affected system inquiring into the readiness of the
specific system, model or release.
Based on the information received from the various suppliers, the project
team (1) assigned priorities to identified systems based on a materiality factor
to the Company; (2) repaired or replaced certain material items that were
determined not to be Year 2000 compliant; (3) tested material items; (4)
continues to communicate with certain material suppliers who have not to date
brought their systems to Year 2000 compliance; (5) continues to review and
communicate with suppliers of electronic devices used by the Company that use a
timing routine to function; and (6) continues to develop a contingency and
business continuation plan with a target date for completion of March 31, 1999.
<PAGE> 26
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY, Continued
As of September 30, 1998, based on the information received to date from
the suppliers and through validation and testing, the majority of the Company's
systems, including OASIS and Oracle Financial, are in Year 2000 compliance. By
December 31, 1998, the Company anticipates that, based on ongoing communications
with the suppliers of the Ross Payroll system, modification to bring that system
to Year 2000 compliance should be complete. A major enhancement of the
Company's JIT system was initiated in March 1997. A portion of the enhancement
is to bring the whole application to Year 2000 status. The project is
anticipated to be completed by March 31, 1999.
The total costs associated with required modifications to bring the Company
into Year 2000 compliance is not expected to be material to the Company's
financial position. The total amount expended on the project through September
30, 1998 is less than $100,000.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain marine transportation and diesel
repair operating activities. Such a failure could materially and adversely
affect the Company's results of operations, liquidity and overall financial
condition. The Company is unable at the present time to determine whether a
Year 2000 non-compliance of one or more of the Company's major systems would
materially impact the Company's results of operations, liquidity or financial
condition. The Company is currently reasonably confident of its Year 2000
compliance with its systems developed in-house, as well as certain of its pre-
packaged vendor based products; however, the Company is dependent on third-party
suppliers to bring its Year 2000 compliance project to a closure.
The completion of the Year 2000 project is expected to significantly reduce
the Company's level of uncertainty related to its third-party reliance for Year
2000 compliance, and will reduce the possibility of significant interruptions of
normal business operations. The dates on which the Company believes the project
team will bring closure to the Year 2000 issues are based on the Company's best
estimates, at the present time. However, there can be no guarantee that these
estimates can be achieved, or that there will not be delays in, or increased
costs associated with, the implementation of the Year 2000 systems, primarily
due to the Company's reliance on third parties and suppliers. The Company
cannot ensure its ability to timely and cost-effectively resolve problems
associated with the Year 2000 issue that may affect its operation and business,
or expose the Company to third-party liability.
The Company cautions that forward-looking statements contained in the Year
2000 discussion should be read in conjunction with the Company's disclosure in
the opening paragraph of this Management's Discussion and Analysis.
<PAGE> 27
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY, Continued
ACCOUNTING STANDARDS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and requires
that enterprises report selected information about operating segments in interim
reports issued to shareholders. SFAS No. 131 will be adopted in 1998. The
adoption of SFAS No. 131 is not expected to have a material impact on the
Company's financial condition or results of operations.
SFAS No. 132, "Employers' Disclosures about Pensions and other
Postretirement Benefits," issued in February 1998, revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. The statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. SFAS No. 132 will be adopted by
the Company in 1998.
<PAGE> 28
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, 1997.
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 three months ended
September 30, 1998.
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: November 6, 1998
EXHIBIT 11.0
<TABLE>
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings (loss) from continuing operations $(6,571) $ 5,873 $ 5,144 $16,186
Net earnings from discontinued operations -- 76 -- 2,607
------ ------ ------ ------
Net earnings (loss) $(6,571) $ 5,949 $ 5,144 $18,793
====== ====== ====== ======
Basic earnings per share:
Weighted average number of common shares outstanding 21,175 24,313 22,181 24,405
====== ====== ====== ======
Basic earnings (loss) per share from continuing operations $ (.31) $ .24 $ .23 $ .66
Basic earnings per share from discontinued operations -- -- -- .11
------ ------ ------ ------
Basic earnings (loss) per share $ (.31) $ .24 $ .23 $ .77
====== ====== ====== ======
Diluted earnings per share:
Weighted average number of common shares outstanding 21,175 24,313 22,181 24,405
Dilutive shares applicable to stock options -- 223 306 211
------ ------ ------ ------
Shares applicable to diluted earnings 21,175 24,536 22,487 24,616
====== ====== ====== ======
Diluted earnings (loss) per share from continuing operations $ (.31) $ .24 $ .23 $ .66
Diluted earnings per share from discontinued operations -- -- -- .10
------ ------ ------ ------
Diluted earnings (loss) per share $ (.31) $ .24 $ .23 $ .76
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 712
<SECURITIES> 21,135
<RECEIVABLES> 103,136
<ALLOWANCES> 842
<INVENTORY> 14,332
<CURRENT-ASSETS> 152,453
<PP&E> 469,268
<DEPRECIATION> 206,684
<TOTAL-ASSETS> 439,905
<CURRENT-LIABILITIES> 77,555
<BONDS> 173,635
0
0
<COMMON> 3,091
<OTHER-SE> 135,877
<TOTAL-LIABILITY-AND-EQUITY> 439,905
<SALES> 49,701
<TOTAL-REVENUES> 250,385
<CGS> 35,971
<TOTAL-COSTS> 161,730
<OTHER-EXPENSES> 64,034
<LOSS-PROVISION> 68
<INTEREST-EXPENSE> 9,235
<INCOME-PRETAX> 9,074
<INCOME-TAX> 3,930
<INCOME-CONTINUING> 5,144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,144
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
