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, 1999
[ ] 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, $.10 par
value per share, on November 12, 1999 was 24,543,345.
<PAGE> 2
PART I - FINANCIAL INFORMATION
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
($ in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,238 $ 861
Available-for-sale securities 13,753 20,795
Accounts receivable:
Trade - less allowance for doubtful accounts 45,837 53,586
Insurance claims and other 5,328 16,919
Inventory - finished goods 13,098 14,181
Prepaid expenses 5,657 4,829
Deferred income taxes 1,473 1,187
------- -------
Total current assets 93,384 112,358
------- -------
Property and equipment, at cost 476,041 466,443
Less accumulated depreciation 228,118 209,544
------- -------
247,923 256,899
------- -------
Investments in marine affiliates 13,046 12,795
Goodwill - less accumulated amortization 4,985 5,368
Sundry 2,059 2,879
------- -------
$361,397 $390,299
======= =======
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 3
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
($ in thousands)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 5,333 $ 5,333
Income taxes payable 1,853 504
Accounts payable 14,007 12,918
Accrued liabilities 36,501 43,305
Deferred revenues 3,777 3,880
------- -------
Total current liabilities 61,471 65,940
------- -------
Long-term debt - less current portion 106,302 137,552
Deferred income taxes 40,990 40,045
Other long-term liabilities 6,344 5,722
------- -------
153,636 183,319
------- -------
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 158,802 159,122
Accumulated other comprehensive income (264) 338
Retained earnings 164,521 147,054
------- -------
326,150 309,605
Less cost of 10,786,000 shares in treasury
(10,137,000 at December 31, 1998) 179,860 168,565
------- -------
146,290 141,040
------- -------
$361,397 $390,299
======= =======
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 4
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- --------- --------- ---------
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Marine transportation $63,571 $ 62,700 $184,972 $184,955
Diesel engine services 16,933 19,627 58,068 63,951
Investment income and other 494 564 840 1,373
Gain (loss) on disposition of assets (27) (138) 8 106
------ ------- ------- -------
80,971 82,753 243,888 250,385
------ ------- ------- -------
Costs and expenses:
Costs of sales and operating expenses 51,275 53,055 158,370 161,730
Selling, general and administrative 8,724 10,039 26,624 29,345
Taxes, other than on income 1,818 1,938 5,507 5,897
Depreciation and amortization 6,778 6,800 20,287 20,459
Impairment of long-lived assets -- 8,333 -- 8,333
------ ------- ------- -------
68,595 80,165 210,788 225,764
------ ------- ------- -------
Operating income 12,376 2,588 33,100 24,621
Equity in earnings of marine affiliates 917 1,034 2,407 2,899
Equity in earnings of insurance affiliate -- 418 -- 1,325
Loss on sale of insurance affiliate -- (10,536) -- (10,536)
Interest expense (2,289) (3,236) (7,403) (9,235)
------ ------- ------- -------
Earnings (loss) before taxes on income 11,004 (9,732) 28,104 9,074
(Provision) benefit for taxes on income (4,140) 3,161 (10,637) (3,930)
------ ------- ------- -------
Net earnings (loss) $ 6,864 $ (6,571) $ 17,467 $ 5,144
====== ======= ======= =======
Net earnings (loss) per share of common stock:
Basic $ .34 $ (.31) $ .87 $ .23
====== ======= ======= =======
Diluted $ .34 $ (.31) $ .86 $ .23
====== ======= ======= =======
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 5
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months
ended September 30,
-------------------
1999 1998
--------- ---------
($ in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 17,467 $ 5,144
Adjustments to reconcile net earnings to net cash
provided by operations:
Depreciation and amortization 20,287 20,459
Provision (credit) for deferred income taxes 983 (3,987)
Gain on disposition of assets (8) (106)
Deferred scheduled maintenance costs (496) (340)
Equity in earnings of marine affiliates, net of
distributions and contributions (250) 643
Equity in earnings of insurance affiliate -- (1,325)
Loss on sale of insurance affiliate -- 10,536
Impairment of long-lived assets -- 8,333
Other (70) 68
Increase in cash flows resulting from changes in
operating working capital 16,636 980
------- -------
Net cash provided by operating activities of
continuing operations 54,549 40,405
Net cash used in operating activities of
discontinued operations -- (494)
------- -------
Net cash provided by operating activities 54,549 39,911
------- -------
TABLE CONTINUED ON NEXT PAGE
</TABLE>
<PAGE> 6
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
<TABLE>
<CAPTION>
Nine months
ended September 30,
-------------------
1999 1998
--------- ---------
($ in thousands)
<S> <C> <C>
Cash flows from investing activities:
Proceeds from sale and maturities of investments $ 6,116 $ 1,200
Purchase of investments -- (18)
Capital expenditures (11,062) (24,043)
Proceeds from disposition of assets 639 2,200
Proceeds from disposition of business -- 39,989
Investing activities of discontinued operations -- (275)
------- -------
Net cash provided by (used in) investing
activities (4,307) 19,053
------- -------
Cash flows from financing activities:
Borrowings (payments) on bank revolving credit
agreements, net (26,000) 29,400
Payments on long-term debt (5,250) (5,250)
Purchase of treasury stock (11,838) (87,254)
Proceeds from exercise of stock options 223 2,809
------- -------
Net cash used in financing activities (42,865) (60,295)
------- -------
Increase (decrease) in cash and cash equivalents 7,377 (1,331)
Cash and cash equivalents, beginning of year 861 2,043
------- -------
Cash and cash equivalents, end of period $ 8,238 $ 712
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest $ 5,114 $ 6,905
Income taxes $ 6,217 $ 5,534
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 7
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, 1999 and December 31, 1998, and the results of operations for the three
months and nine months ended September 30, 1999 and 1998.
(1) BASIS FOR PREPARATION OF 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) ACQUISITION
On October 12, 1999, the Company completed the acquisition of Hollywood
Marine, Inc. ("Hollywood"), by means of a merger of Hollywood into Kirby Inland
Marine, Inc., a wholly owned subsidiary of the Company. Pursuant to the
Agreement and Plan of Merger, the Company acquired Hollywood for an aggregate
consideration of $322,200,000, consisting of $89,600,000 in common stock
(4,384,000 shares at $20.44 per share), $128,700,000 in cash, and the
assumption of $103,900,000 of Hollywood's existing debt and certain other
liabilities. The aggregate purchase price is subject to post-closing
adjustments. Hollywood was owned by C. Berdon Lawrence and certain trusts for
members of his family. Hollywood's operations will be included as part of the
Company's operations effective October 12, in accordance with the purchase
method of accounting. The Company is currently in the process of preparing the
purchase price allocation. Goodwill will be amortized over 30 years.
Financing for the cash portion of the transaction and the repayment of
Hollywood's existing debt was through the Company's existing $100,000,000
undrawn bank revolving credit agreement with Chase Bank of Texas, N.A. as agent
bank and through a new $200,000,000 credit facility with Bank of America, N.A.
as syndication agent bank; Chase Bank of Texas, N.A. as administrative agent;
and Bank One, Texas, N.A. as documentation agent.
Hollywood, located in Houston, Texas, was engaged in the inland tank barge
transportation of chemicals and petrochemicals, refined petroleum products,
black oil and pressurized products primarily along the Gulf Intracoastal
Waterway, the Houston Ship Channel and the lower Mississippi River. Hollywood
operated a fleet of 256 inland tank barges, with 4.6 million barrels of
capacity, and 104 inland towboats. The Company has continued to use the assets
of Hollywood in the same business that Hollywood conducted prior to the merger.
<PAGE> 8
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(2) ACQUISITION - (Continued)
The following unaudited pro forma combined financial information for the
nine months ended September 30, 1999 and 1998 is based on historical financial
information of the Company and Hollywood. The financial information assumes
the merger was completed as of the beginning of the periods indicated. The
unaudited pro forma financial information is not necessarily indicative of the
results of operations that would have occurred had the merger been consummated
at the beginning of the periods indicated, nor is the information necessarily
indicative of the future results of operations (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $369,035 $376,175
Earnings before taxes on income $ 31,784 $ 11,734
Net earnings per share of common stock - diluted $ .75 $ .21
</TABLE>
(3) ADOPTION OF ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," ("SFAS No. 133") issued in
June 1998, establishes accounting and reporting standards for derivative
instruments and hedging activities. This statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Based on the
May 1999 announcement by the Financial Accounting Standards Board to delay the
implementation date by one year, SFAS No. 133 is now effective for all quarters
of fiscal years beginning after June 15, 2000. SFAS No. 133 is effective for
the Company's year ending December 31, 2001 and is not expected to have a
material effect on the Company's financial position or results of operations.
<PAGE> 9
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(4) COMPREHENSIVE INCOME
The Company's total comprehensive income for the three months and nine
months ended September 30, 1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
1999 1998 1999 1998
------- -------- -------- ------
<S> <C> <C> <C> <C>
Net earnings (loss) $6,864 $(6,571) $17,467 $5,144
Other comprehensive income (loss),
net of tax (23) (255) (602) 1
----- ------ ------ -----
Total comprehensive income (loss) $6,841 $(6,826) $16,865 $5,145
===== ====== ====== =====
</TABLE>
<PAGE> 10
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(5) SEGMENT INFORMATION
The following table sets forth the Company's summarized financial
information by reportable segment for the three months and nine months ended
September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------------
1999 1998 1999 1998
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Marine transportation $63,571 $ 62,700 $184,972 $184,955
Diesel engine services 16,933 19,627 58,068 63,951
Other 467 426 848 1,479
------ ------- ------- -------
$80,971 $ 82,753 $243,888 $250,385
====== ======= ======= =======
Segment profit (loss):
Marine transportation $11,329 $ 10,210 $ 29,647 $ 29,029
Diesel engine services 1,518 1,999 5,799 6,527
Other (1,843) (21,941) (7,342) (26,482)
------ ------- ------- -------
$11,004 $ (9,732) $ 28,104 $ 9,074
====== ======= ======= =======
September 30, December 31,
1999 1998
------------- ------------
Total assets:
Marine transportation $281,368 $301,020
Diesel engine services 33,507 38,588
Other 46,522 50,691
------- -------
$361,397 $390,299
======= =======
</TABLE>
<PAGE> 11
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(5) SEGMENT INFORMATION - (Continued)
The following table presents the details of "Other" segment profit (loss)
for the three months and nine months ended September 30, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
General corporate expenses $ (938) $ (1,714) $(3,194) $ (4,081)
Interest expense (2,289) (3,236) (7,403) (9,235)
Equity in earnings of affiliates 917 1,452 2,407 4,224
Gain (loss) on sale of assets (27) (138) 8 106
Impairment of long-lived assets -- (8,333) -- (8,333)
Loss on sale of insurance affiliate -- (10,536) -- (10,536)
Other 494 564 840 1,373
------ ------- ------ -------
$(1,843) $(21,941) $(7,342) $(26,482)
====== ======= ====== =======
</TABLE>
The following table presents the details of "Other" total assets as of
September 30, 1999 and December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
General corporate assets $33,476 $37,896
Investments in marine affiliates 13,046 12,795
------ ------
$46,522 $50,691
====== ======
</TABLE>
<PAGE> 12
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
(6) TAXES ON INCOME
Earnings before taxes on income and details of the provision for taxes on
income for the three months and nine months ended September 30, 1999 and 1998
were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- --------------------
1999 1998 1999 1998
-------- --------- ------- --------
<S> <C> <C> <C> <C>
Earnings (loss) before taxes on income:
United States $11,004 $(10,150) $28,104 $ 7,749
Puerto Rico -- 418 -- 1,325
------ ------- ------ ------
$11,004 $ (9,732) $28,104 $ 9,074
====== ======= ====== ======
Provision (benefit) for taxes on income:
United States:
Current $ 4,130 $ 4,604 $ 8,877 $ 7,229
Deferred (266) (7,974) 983 (3,987)
State and local 276 209 777 688
------ ------- ------ ------
4,140 (3,161) 10,637 3,930
Puerto Rico - current -- -- -- --
------ ------- ------ ------
$ 4,140 $ (3,161) $10,637 $ 3,930
====== ======= ====== ======
</TABLE>
<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.
The Company is a provider of marine transportation services, operating
inland tank barges and towing vessels transporting industrial chemicals,
petrochemicals, refined petroleum products and agricultural chemicals
throughout the entire United States waterway system. The Company serves as
managing partner of a 35% owned offshore marine partnership and a 50% owned
offshore marine partnership, transporting dry-bulk commodities port-to-port,
primarily in the Gulf of Mexico. The partnerships are accounted for under the
equity method of accounting. The Company is also engaged through its diesel
engine services segment in the overhaul and servicing of large medium-speed
diesel engines employed in marine, power generation and railroad applications.
On October 12, 1999, the Company completed the acquisition of Hollywood
Marine, Inc. for an aggregate consideration of $322,200,000, subject to post-
closing adjustments. The acquisition is being accounted for using the purchase
method of accounting, therefore, the reported results for the 1999 third
quarter and first nine months do not include Hollywood. The acquisition is
more fully described below under Subsequent Event.
Hollywood, like the Company, was a provider of marine transportation
services, operating inland tank barges and towing vessels. Hollywood
transported industrial chemicals, petrochemicals, refined petroleum products,
black oil and pressurized products along the Gulf Intracoastal Waterway, the
Houston Ship Channel and the lower Mississippi River. Hollywood operated a
fleet of 256 inland tank barges and 104 towing vessels.
The Company, with the acquisition of Hollywood, operates 767 inland tank
barges, with 14.1 million barrels of capacity, and 230 towing vessels. The
Company also operates six barge and tug units transporting dry-bulk
commodities.
<PAGE> 14
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 $6,864,000, or $.34 per share, on
revenues of $80,971,000 for the 1999 third quarter, compared with a net loss of
$6,571,000, or $.31 per share, on revenues of $82,753,000 for the 1998 third
quarter. Net earnings for the nine months ended September 30, 1999 were
$17,467,000, or $.86 per share, on revenues of $243,888,000, compared with net
earnings of $5,144,000, or $.23 per share, on revenues of $250,385,000 for the
1998 first nine months. For purposes of this Management's Discussion, all
earnings (loss) per share amounts presented are "Diluted Earnings (Loss) Per
Share." The weighted average number of common shares applicable to diluted
earnings (loss) for the third quarter of 1999 and 1998 were 20,287,000 and
21,175,000, respectively, and for the 1999 and 1998 first nine months were
20,322,000 and 22,487,000, respectively. The reduction in common shares for
the 1999 periods compared with the applicable 1998 periods primarily reflected
the acquisition of treasury stock under the Company's Dutch Auction self-tender
offer completed on March 23, 1998 and through open market share repurchases
from January through April of 1999, more fully discussed below.
<PAGE> 15
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS - (Continued)
The following tables set forth the Company's revenues and percentage of
such revenues for the three months and nine months ended September 30, 1999
compared with the three months and nine months ended September 30, 1998
(dollars in thousands):
<TABLE>
<CAPTION>
Three months ended September 30,
---------------------------------
1999 1998 Increase (decrease)
-------------- -------------- -------------------
Amounts % Amounts % Amounts %
------- ---- ------- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Marine transportation $63,571 79% $62,700 76% $ 871 1 %
Diesel engine services 16,933 21 19,627 24 (2,694) (14)
Other income 467 -- 426 -- 41 10
------ --- ------ --- ------ ---
$80,971 100% $82,753 100% $(1,782) (2)%
====== === ====== === ====== ===
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30,
---------------------------------
1999 1998 Increase (decrease)
-------------- -------------- -------------------
Amounts % Amounts % Amounts %
-------- ---- -------- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Marine transportation $184,972 76% $184,955 74% $ 17 -- %
Diesel engine services 58,068 24 63,951 26 (5,883) (9)
Other income 848 -- 1,479 -- (631) (43)
------- --- ------- --- ------ ---
$243,888 100% $250,385 100% $(6,497) (3)%
======= === ======= === ====== ===
</TABLE>
<PAGE> 16
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS - (Continued)
Revenues for the marine transportation segment increased 1% for the 1999
third quarter and increased less than 1% for the 1999 first nine months
compared with the 1998 corresponding periods. The 1998 third quarter and first
nine months included approximately $800,000 and $4,400,000, respectively, of
revenues from two offshore tank barge and tug units which were sold in October
1998.
During the 1999 third quarter and first nine months, chemical and
petrochemical volumes remained strong. Refined products volumes, more seasonal
in nature, increased during the summer months and were steady during the non-
summer months. Liquid fertilizer and ammonia levels fell well below normal
expectations for both the 1999 third quarter and first nine months due to high
inventory levels in the Midwest. Overproduction of nitrogen in 1998 and 1999,
coupled with a 30-year low corn price level, have deterred farmers from
planting corn. In the 1999 second and third quarters, producers curtailed
output of nitrogen products which resulted in decreased shipments by barge into
the Midwest. Spot market rates have continued to reflect modest quarter-to-
quarter increases during 1999 and term contracts are generally being renewed at
higher levels. During the 1999 first quarter, poor operating conditions
resulted in significant navigational delays (weather, locks and other
restrictions), which lowered the quarter's revenues due to increased transit
times.
For the 1998 third quarter and first nine months, chemical and
petrochemical volumes were strong and refined product volumes were firm through
the summer driving season. The month of September 1998 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 its marine transportation revenues and incurred
approximately $400,000 of additional expenses due to the storm events. The
effect of the storm events reduced the Company's 1998 third quarter and first
nine months operating earnings by an estimated $.02 to $.03 per share.
<PAGE> 17
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The diesel engine services segment's revenues for the 1999 third quarter
and first nine months decreased 14% and 9%, respectively, when compared with
the 1998 corresponding periods. The 1998 third quarter and first nine months
revenues included approximately $1,400,000 and $4,300,000, respectively, of
revenues from a product line that the segment sold in September 1998. The
segment continued to experience softness in its Gulf Coast oil and gas services
market during the 1999 third quarter and first nine months. In the 1999 first
six months, strong Midwest and East Coast engine overhauls and parts sales
primarily offset the weak Gulf Coast market as Gulf Coast mechanics were
dispatched to the stronger markets to meet the increased demands of those
markets. During the 1999 third quarter, the Midwest and East Coast demands
returned to normal, resulting in the overall reduction in revenues. In
addition, the segment's shortline and industrial railroad markets continued to
experience slower activity levels during the 1999 periods when compared with
the corresponding prior year periods.
The diesel engine services segment's revenues for the first nine months of
1998 benefited from a strong nationwide engine overhaul and direct parts
market. The Gulf Coast market, 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.
Other income, comprised primarily of investment income and gain in
disposition of assets, declined 43% for the 1999 first nine months when
compared with the 1998 corresponding periods. The 43% decline primarily
reflected a smaller securities portfolio and correspondingly lower investment
income from the Company's wholly owned captive insurance subsidiary in 1999
when compared with the 1998 corresponding period. The 1998 results also
reflected the recognition of gains from the sale of marine transportation
equipment during the 1998 first and second quarters.
<PAGE> 18
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The following tables set forth the costs and expenses and percentage of
such costs and expenses for the three months and nine months ended September
30, 1999 compared with the three months and nine months ended September 30,
1998 (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended September 30,
---------------------------------
1999 1998 Increase (decrease)
-------------- -------------- -------------------
Amounts % Amounts % Amounts %
------- ---- ------- ---- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Costs of sales and operating expenses $51,275 75% $53,055 66% $ (1,780) (3)%
Selling, general and administrative 8,724 13 10,039 13 (1,315) (13)
Taxes, other than on income 1,818 2 1,938 2 (120) (6)
Depreciation and amortization 6,778 10 6,800 9 (22) --
Impairment of long-lived assets -- -- 8,333 10 (8,333) (100)
------ --- ------ --- ------- ----
$68,595 100% $80,165 100% $(11,570) (14)%
====== === ====== === ======= ====
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30,
---------------------------------
1999 1998 Increase (decrease)
-------------- -------------- -------------------
Amounts % Amounts % Amounts %
-------- ---- -------- ---- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Costs of sales and operating expenses $158,370 75% $161,730 71% $ (3,360) (2)%
Selling, general and administrative 26,624 13 29,345 13 (2,721) (9)
Taxes, other than on income 5,507 2 5,897 3 (390) (7)
Depreciation and amortization 20,287 10 20,459 9 (172) (1)
Impairment of long-lived assets -- -- 8,333 4 (8,333) (100)
------- --- ------- --- ------- ----
$210,788 100% $225,764 100% $(14,976) (7)%
======= === ======= === ======= ====
</TABLE>
<PAGE> 19
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
Costs of sales and operating expenses for the 1999 third quarter and the
1999 first nine months reflected 3% and 2% decreases, respectively, when
compared with the corresponding periods of 1998. 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 and tug unit was reduced in
accordance with SFAS No. 121. The unit was sold in October 1998 for a price
approximating the revised carrying value of the unit. The 1998 third quarter
and first nine months also included the costs and expenses associated with the
revenues generated from the two offshore tank barge and tug units sold in
October 1998 and the diesel engine services product line sold in September
1998. The costs of sales and operating expenses applicable to the assets sold
totaled approximately $1,900,000 and $6,900,000 during the 1998 third quarter
and first nine months, respectively.
Excluding the impact of the events described above, costs of sales and
operating expenses for the 1999 third quarter were in line with the 1998 third
quarter, while costs of sales and operating expenses for the 1999 first nine
months were 2% higher than the 1998 first nine months. As noted above, the
marine transportation navigational delays incurred during the 1999 first
quarter not only negatively impacted revenues, but also increased operating
expenses. The ice and high water conditions required additional horsepower to
complete the movements, additional fuel and other variable expenses. Costs of
sales and operating expenses for the 1999 third quarter and first nine months
also reflected the full impact of the overall 20% afloat wage increases
implemented during 1998, the result of a tight afloat labor market. During
1998, the Company increased afloat compensation by 6% effective March 1, by 11%
effective August 1, as well as increased longevity pay, trip pay, travel pay
and mileage reimbursement. The 20% increase was necessary not only to retain
current employees, but also to increase compensation to levels that were
competitive with other industries so as to attract new afloat personnel. During
the 1999 third quarter and first nine months, the marine transportation segment
benefited from lower maintenance costs compared with the corresponding periods
of 1998, as the segment is not competing for shipyard space with companies
participating in the oil and gas drilling activities in the Gulf of Mexico.
The segment also benefited from continued costs savings from its ongoing cost
reduction procurement program.
Selling, general and administrative expenses decreased 13% for the 1999
third quarter and 9% for the 1999 first nine months compared with the
corresponding periods of 1998. The decrease primarily reflects savings in
administrative expenses due to the relocation of facilities, continuing cost
reduction efforts and the sale of the offshore equipment and diesel engine
services business line noted above. 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.
<PAGE> 20
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The following tables set forth the operating income and operating margins
by segment for the three months and nine months ended September 30, 1999
compared with the three months and nine months ended September 30, 1998
(dollars in thousands):
<TABLE>
<CAPTION>
Three months ended September 30,
------------------------------------------
1999 1998
-------------------- --------------------
Operating Operating Increase (decrease)
income Operating income Operating -------------------
(loss) margin (loss) margin Amounts %
--------- --------- --------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Marine transportation $11,329 17.8% $10,210 16.3% $1,119 11 %
Diesel engine services 1,518 9.0% 1,999 10.2% (481) (24)
Corporate (938) (1,714) 776 45
Impairment of assets -- (8,333) 8,333 100
------ ------ ----- ---
$11,909 $ 2,162 $9,747 451 %
====== ====== ===== ===
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------------
1999 1998
-------------------- --------------------
Operating Operating Increase (decrease)
income Operating income Operating -------------------
(loss) margin (loss) margin Amounts %
--------- --------- --------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Marine transportation $29,647 16.0% $29,029 15.7% $ 618 2 %
Diesel engine services 5,799 10.0% 6,527 10.2% (728) (11)
Corporate (3,194) (4,081) 887 22
Impairment of assets -- (8,333) 8,333 100
------ ------ ----- ---
$32,252 $23,142 $9,110 39 %
====== ====== ===== ===
</TABLE>
<PAGE> 21
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The following tables set 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, 1999 compared with the three months
and nine months ended September 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Three months
ended September 30, Increase (decrease)
-------------------- -------------------
1999 1998 Amount %
-------- --------- -------- ------
<S> <C> <C> <C> <C>
Equity in earnings of marine affiliates $ 917 $ 1,034 $ (117) (11)%
Equity in earnings of insurance affiliate $ -- $ 418 $ (418) (100)%
Loss on sale of insurance affiliate $ -- $(10,536) $10,536 100 %
Interest expense $(2,289) $ (3,236) $ (947) (29)%
</TABLE>
<TABLE>
<CAPTION>
Nine months
ended September 30, Increase (decrease)
-------------------- -------------------
1999 1998 Amount %
-------- --------- -------- ------
<S> <C> <C> <C> <C>
Equity in earnings of marine affiliates $ 2,407 $ 2,899 $ (492) (17)%
Equity in earnings of insurance affiliate $ -- $ 1,325 $(1,325) (100)%
Loss on sale of insurance affiliate $ -- $(10,536) $10,536 100 %
Interest expense $(7,403) $ (9,235) $(1,832) (20)%
</TABLE>
Equity in earnings of marine affiliates reflected an 11% decrease for the
1999 third quarter compared with the third quarter of 1998, and a 17% decrease
for the 1999 first nine months compared with the first nine months of 1998.
During the 1999 third quarter, four of the partnership's five offshore dry-
cargo barge and tug units were employed under the partnership's coal and rock
contracts. The remaining partnership unit was in lay-up the entire 1999 third
quarter and the Company is exploring various options for this unit. During the
1998 third quarter, and for the majority of the 1998 first nine months, the
partnership's five offshore barge and tug units were fully employed.
<PAGE> 22
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS, Continued
The 1998 third quarter and first nine months included $418,000 and
$1,325,000, respectively, of equity in earnings from the Company's 45% voting
common stock interest and its 100% non-voting preferred stock interest in
Universal Insurance Company ("Universal"). Universal, a property and casualty
insurance company formed by the Company in 1972, operates exclusively in the
Commonwealth of Puerto Rico. In September 1992, the Company merged Universal
with Eastern America Insurance Company, a subsidiary of Eastern America
Insurance Group, Inc. ("Eastern America Group"). Effective September 30, 1998,
the Company sold its remaining 45% voting common stock interest and its 100%
non-voting preferred stock interest in Universal for $36,000,000 in cash. The
Company closed the sale on October 7, 1998.
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. 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
financial 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.
Interest expense reflected a 29% decrease for the 1999 third quarter
compared with the third quarter of 1998, and a 20% decrease for the 1999 first
nine months compared with the 1998 first nine months. The average debt and
average interest rate for the 1999 third quarter was $119,259,000 and 7.7%,
compared with $178,342,000 and 7.3% for the third quarter of 1998,
respectively. For the 1999 first nine months, the average debt was
$129,003,000 and average interest rate was 7.7%. This compared favorably with
average debt of $167,715,000 and average interest rate of 7.3% for the 1998
first nine months. The higher average interest rate for the 1999 third quarter
and first nine months when compared with the average interest rate for the
corresponding periods reflects the significant reduction in the Company's
revolving credit agreement which carries a lower variable interest rate.
<PAGE> 23
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, 1999 were $361,397,000, a decrease of 7%
compared with $390,299,000 as of December 31, 1998. The following table sets
forth the significant components of the balance sheet as of September 30, 1999
compared with December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Increase (decrease)
September 30, December 31, -------------------
1999 1998 Amount %
------------- ------------ --------- -----
<S> <C> <C> <C> <C>
Assets:
Current assets $ 93,384 $112,358 $(18,974) (17)%
Property and equipment, net 247,923 256,899 (8,976) (3)
Investments in marine affiliates 13,046 12,795 251 2
Other assets 7,044 8,247 (1,203) (15)
------- ------- ------- ---
$361,397 $390,299 $(28,902) (7)%
======= ======= ======= ===
Liabilities and stockholders' equity:
Current liabilities $ 61,471 $ 65,940 $ (4,469) (7)%
Long-term debt 106,302 137,552 (31,250) (23)
Deferred taxes 40,990 40,045 945 2
Other long-term liabilities 6,344 5,722 622 11
Stockholders' equity 146,290 141,040 5,250 4
------- ------- ------- ---
$361,397 $390,299 $(28,902) (7)%
======= ======= ======= ===
</TABLE>
Working capital as of September 30, 1999 totaled $31,913,000, a 31%
decrease compared with $46,418,000 at December 31, 1998. Cash and cash
equivalents increased to $8,238,000 at September 30, 1999 from $861,000 at
December 31, 1998. The Company paid down all available variable debt and was
accumulating cash for the Hollywood acquisition. Available-for-sale securities
decreased 34% due to the Company's use of its captive insurance subsidiary
during 1999 for only the procurement of reinsurance in international markets.
Trade accounts receivable decreased 14%, reflecting the Company's continuing
emphasis on reducing collection time on trade accounts receivable. Diesel
engine services inventories decreased 8% reflecting the Company's continuing
emphasis on inventory management. Accrued liabilities decreased 16%, primarily
reflecting the settlement of an outstanding claim. The 69% reduction in
accounts receivable - insurance claims and other primarily reflected the
reimbursement of the settlement from the Company's insurance carrier.
<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
Long-term debt, less current portion, decreased 23%, the result of
favorable net cash provided by operating activities during the 1999 first nine
months of $54,549,000. During the 1999 first nine months, the Company incurred
$11,062,000 of capital expenditures. In addition, the Company purchased
$11,838,000 of treasury stock through open market common stock repurchases,
more fully described below.
Stockholders' equity as of September 30, 1999 increased 4% during the 1999
first nine months, reflecting net earnings of $17,467,000, net of $11,838,000
of treasury stock purchases, more fully described below.
TREASURY STOCK PURCHASES
From January through April 1999, the Company purchased in the open market
683,000 shares of its common stock at a total price of $11,838,000, for an
average price of $17.33 per share. The treasury stock purchases were financed
by borrowing under the Company's $100,000,000 revolving credit agreement.
On April 20, 1999, the Board of Directors increased the Company's common
stock repurchase authorization to 6,250,000 shares, an increase of 2,000,000
shares over the 2,250,000 shares authorized in October 1995 and 2,000,000
shares authorized in August 1994. The Company, as of November 9, 1999, had
2,392,000 shares available under the repurchase authorization. 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, 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
$54,549,000 and $39,911,000 for the nine months ended September 30, 1999 and
1998, respectively. The 1999 first nine months were positively impacted by a
$16,636,000 increase in cash flow, resulting from changes in working capital,
compared with a $980,000 increase in the 1998 first nine months. For the 1999
and 1998 first nine months, the Company received net cash from the marine
partnerships of $2,156,000 and $3,541,000, respectively.
<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
Funds generated are available for capital construction projects, treasury
stock repurchases, acquisitions, repayment of borrowings associated with each
of the above and for other operating requirements. In addition to its net cash
flow provided by operating activities, the Company, after the Hollywood
acquisition, has available as of November 12, 1999, $82,500,000 under its
$100,000,000 revolving 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 $50,333,000. On June 1, 2000, $45,000,000 of the
Company's medium term notes mature. These notes were classified as long-term
at September 30, 1999 as the Company has the ability and intent to refinance
the notes through available credit facilities.
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. The
repair portion of the diesel engine services segment is based on prevailing
current market rates.
The Company has no present plan to pay dividends on its common stock.
YEAR 2000
Certain computer systems, software programs and semiconductors are not
capable of recognizing certain dates in 1999 and after December 31, 1999, and
will read dates in the year 2000 and thereafter as if those dates represent the
year 1900 or thereafter, or will fail to process those dates. This "Year 2000
Issue" could result in the failure of certain systems or other errors that
could disrupt normal business activities.
The Company has designed and implemented an action plan to determine the
likely exposures of the Company and its subsidiaries to the Year 2000 Issue and
to take the necessary action to minimize the impact of those exposures. The
Company's Year 2000 action plan addresses both internal and external exposures
to the Year 2000 Issue.
With respect to the Company's internal Year 2000 Issue exposures, the
action plan addresses both land-based and vessel-based systems. The land-based
systems include all of the Company's network components, core corporate
software applications, personal computers, telephone systems, building
management control systems and critical office equipment. The vessel-based
systems include electronic navigation equipment, diesel engine controlling
systems, and fire and other emergency monitors and alarms.
<PAGE> 26
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY - (Continued)
The Company's external exposures to the Year 2000 Issue include vendors
and suppliers of critical services including communications, fuel and supplies,
barge cleaning and repair, and government waterways maintenance and management.
The Company's external exposures also include general business support systems
such as electric power, telephone and banking services, as well as customers'
accounts payable systems. The Company may experience Year 2000 problems as a
result of these external exposures. The Company is attempting to address all
Year 2000 exposures in advance; however, the Company could potentially
experience temporary disruptions to certain aspects of activities or operations
as a result of the external exposures noted above. It is not possible to
determine whether, or to what extent, any or all of these exposures are likely
to occur or the costs involved in any of the exposures. However, the costs to
the Company could be material.
The Company's Year 2000 action plan divides the Company's actions with
respect to its internal and external exposures to the Year 2000 Issue into
three sequential stages:
* INVESTIGATION. This stage, substantially completed in the 1999 first
quarter, included a complete physical inventorying of all computer
systems, software applications, and equipment relying on computer
software or embedded semiconductors. The Company has completed the
process of mailing requests for Year 2000 Issues to the manufacturers
and distributors of the systems and equipment. Responses have been
positive, as most manufacturers and distributors have indicated the
Year 2000 status of their equipment or systems as Year 2000 compliant.
* REMEDIATION. This stage involves the repair or replacement of the
Company's equipment and systems which have been identified as not being
Year 2000 compliant in the investigation stage and the validation of
the compliance of the equipment and systems which have been repaired or
replaced. This stage has been substantially completed. The Company
continues to be proactive in additional communication with key systems'
manufacturers and distributors to ensure awareness of any unanticipated
problems that have not been previously addressed.
* CONTINGENCY PLANNING. Based on the findings of the investigation
stage, the Company's actions in this stage include the development of
business scenarios likely to result from Year 2000 compliance failures
by external suppliers or their equipment, systems or services, and the
development of remedies to minimize the consequences of such failures
on the Company's business. Those remedies may include preventative
measures and "work around" solutions. This stage has been
substantially completed.
<PAGE> 27
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY - (Continued)
While the Company has substantially completed the remediation and
contingency planning stages of its Year 2000 action plan, the Company must rely
on third parties including government agencies, manufacturers, distributors,
vendors and suppliers, to provide information and to take actions which are
beyond the Company's control. While the responses to the investigation stage
have been positive, it is not possible for the Company to predict either the
timeliness of the manufacturers or distributors who have not responded to the
Company's requests, or the substance of the information and actions provided by
third parties. Accordingly, the Company cannot predict whether or to what
extent the information provided by third parties will affect the timely
completion of each stage of the Year 2000 action plan, as the information
provided by third parties may require additional investigation, remediation,
and/or contingency planning. Further, the Company's ability to timely complete
its Year 2000 action plan is dependent upon the ability of third party
manufacturers and distributors to provide necessary replacement equipment
during the remediation stage.
The total amount expended on the Year 2000 action plan through September
30, 1999 is approximately $100,000. Remaining costs related to the Year 2000
action plan are not expected to be material. The Company will continue to
utilize internal resources to assist in the implementation of the Year 2000
action plan. The costs expended to date, and the costs anticipated to be
expended in the fourth quarter of 1999, do not include the Company's internal
costs, as the Company does not track such costs separately. The costs also do
not include software upgrades that, while Year 2000 compliant, were not
specifically upgraded for the Year 2000 Issue. The completion of the Year 2000
action plan is expected to significantly reduce both the level of uncertainty
related to the Company's reliance on third parties for Year 2000 compliance and
the possibility of significant interruptions of normal business operations.
The forward-looking statements contained in this discussion should be read in
conjunction with the Company's disclosure in the opening paragraph of this
Management's Discussion and Analysis.
ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," issued in June 1998, establishes accounting and reporting
standards for derivative instruments and hedging activities. This statement
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Based on the May 1999 announcement by the Financial
Accounting Standards Board to delay the implementation date by one year, SFAS
No. 133 is now effective for all quarters of fiscal years beginning after June
15, 2000. SFAS No. 133 is effective for the Company's year ending December 31,
2001 and is not expected to have a material effect on the Company's financial
position or results of operations.
<PAGE> 28
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations - (Continued)
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY - (Continued)
SUBSEQUENT EVENT
On October 12, 1999, the Company completed the acquisition of Hollywood,
by means of a merger of Hollywood into Kirby Inland Marine, Inc., a wholly
owned subsidiary of the Company. Pursuant to the Agreement and Plan of Merger,
the Company acquired Hollywood for an aggregate consideration of $322,200,000
consisting of $89,600,000 in common stock (4,384,000 shares at $20.44 per
share), $128,700,000 in cash, and the assumption of $103,900,000 of Hollywood's
existing debt and certain other liabilities. The aggregate purchase price is
subject to post-closing adjustments. Hollywood was owned by C. Berdon Lawrence
and certain trusts for members of his family. Hollywood's operations were
included as part of the Company's operations effective October 12, in
accordance with the purchase method of accounting. The Company is currently in
the process of preparing the purchase price allocation. Goodwill will be
amortized over 30 years.
Financing for the cash portion of the transaction and the repayment of
Hollywood's existing debt was through the Company's existing $100,000,000
undrawn bank revolving credit agreement with Chase Bank of Texas, N.A. as agent
bank and through a new $200,000,000 credit facility with Bank of America, N.A.
as syndication agent bank; Chase Bank of Texas, N.A. as administrative agent;
and Bank One, Texas, N.A. as documentation agent.
Hollywood, located in Houston, Texas, was engaged in the inland tank barge
transportation of chemicals and petrochemicals, refined petroleum products,
black oil and pressurized products primarily along the Gulf Intracoastal
Waterway, the Houston Ship Channel and the lower Mississippi River. Hollywood
operated a fleet of 256 inland tank barges, with 4.6 million barrels of
capacity, and 104 inland towboats. The Company has continued to use the assets
of Hollywood in the same business that Hollywood conducted prior to the merger.
With the combination of the Company and Hollywood, certain administrative
and operating synergies estimated to be at least $10,000,000 annually are
expected to be achieved. The synergies include the consolidation of corporate
headquarters, the elimination of duplicate administrative and operating staffs
and expenses, and improved operating efficiencies within the marine
transportation operations. A significant portion of the savings is expected to
be realized in the year ended December 31, 2000 and substantially all of the
savings are expected to be realized in the year ended December 31, 2001.
<PAGE> 29
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, 1998.
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:
On July 30, 1999, the Company filed a report on Form 8-K reporting
the signing of an Agreement and Plan of Merger with Hollywood for the
merger of Hollywood into Kirby Inland Marine, Inc., a wholly owned
subsidiary of the Company.
On October 14, 1999, the Company filed a report on Form 8-K reporting
the completion on October 12, 1999 of the merger of Hollywood into
Kirby Inland Marine, Inc., a wholly owned subsidiary of the Company.
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 12, 1999
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,
------------------ -----------------
1999 1998 1999 1998
------- -------- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C.
Net earnings (loss) $ 6,864 $(6,571) $17,467 $ 5,144
====== ====== ====== ======
Basic earnings (loss) per share:
Weighted average number of common
shares outstanding 20,117 21,175 20,192 22,181
====== ====== ====== ======
Basic earnings (loss) per share $ .34 $ (.31) $ .87 $ .23
====== ====== ====== ======
Diluted earnings (loss) per share:
Weighted average number of common shares
outstanding 20,117 21,175 20,192 22,181
Dilutive shares applicable to stock options 170 -- 130 306
------ ------ ------ ------
Shares applicable to diluted earnings 20,287 21,175 20,322 22,487
====== ====== ====== ======
Diluted earnings (loss) per share $ .34 $ (.31) $ .86 $ .23
====== ====== ====== ======
</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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,238
<SECURITIES> 13,753
<RECEIVABLES> 51,722
<ALLOWANCES> 557
<INVENTORY> 13,098
<CURRENT-ASSETS> 93,384
<PP&E> 476,041
<DEPRECIATION> 228,118
<TOTAL-ASSETS> 361,397
<CURRENT-LIABILITIES> 61,471
<BONDS> 106,302
0
0
<COMMON> 3,091
<OTHER-SE> 143,199
<TOTAL-LIABILITY-AND-EQUITY> 361,397
<SALES> 42,877
<TOTAL-REVENUES> 243,888
<CGS> 32,863
<TOTAL-COSTS> 158,370
<OTHER-EXPENSES> 52,418
<LOSS-PROVISION> (70)
<INTEREST-EXPENSE> 7,403
<INCOME-PRETAX> 28,104
<INCOME-TAX> 10,637
<INCOME-CONTINUING> 17,467
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,467
<EPS-BASIC> .87
<EPS-DILUTED> .86
</TABLE>
