Kirby Corporation · NYSE:KEX
Kirby — Investor Day (May 2005)
193 slides from Kirby's investor day presentation, May 19, 2005
Slide 1: Kirby Analyst/Investor Meeting Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 2: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 3: The State of the Waterways
The State of the Waterways Kirby Corporation Analysts’ Briefing Berdon Lawrence , Chairman Kirby Corporation John Doyle , Vice President Waterways Council, Inc. & Special Counsel, Jones Walker LLP
Slide 4: The waterways are an American success story
The waterways are an American success story: They helped make America great They create and maintain good agricultural and manufacturing jobs But, our leaders in Washington began to take them for granted So, industry and agriculture organized to defend and improve the waterways We have been successf
Slide 5: The System
The System Canals Dams Locks Rivers
Slide 6: Waterway system facts
-Nearly 12,000 Miles 9 ft & Over -192 Lock Sites / 238 Chambers -About 2/3rds Cost of Rail and Cost of Truck
Slide 7: We Conserve Fuel & Reduce Air Emissions
0 100 200 300 400 500 600 Miles Barge transportation enjoys similar efficiencies in air emissions per ton mile. We Conserve Fuel & Reduce Air Emissions How far one gallon of fuel moves one ton of freight, average by mode… Truck: 70 miles Rail: 420 miles Barge: 530 miles
Slide 8: We offer a solution to Congestion
We offer a solution to Congestion:
Slide 9: Truck Volumes — 1998
Truck Volumes —1998 ia ree 0100 200 30 —a liter Battelle, February 25,2002
Slide 10: The waterways serve key future transportation corridors
The waterways serve key future transportation corridors
Slide 11: The waterways serve many traffic growth corridors
The waterways serve many traffic growth corridors.
Slide 12: America's Waterways Advantage
America’s Waterways Advantage American farmers and industries compete in a tough global marketplace – If you get the goods to the customer cheaper, you get the sale – Efficient, low cost waterways transportation reduces total costs and allows us to compete The Result: American exports win and vital,
Slide 13: Value of Inland and Intracoastal Waterborne Cargo by State
Based on data developed by TVA and USACE. Value of Inland and Intracoastal Waterborne Cargo by State of Origin Over $112 billion in cargo Shipped from 31 states At average savings of $11 / ton over competing modes Over $10 Billion $2 - Billion $1 - Billion $100 Million to $1 Billion Lock Constructio
Slide 14: Waterways Role in Nation's Economic Prosperity: Grain
Waterways Role in Nation’s Economic Prosperity • Grain Exports – million tons annually – 70% of soybean and 62% of corn exports move by barge
Slide 15: Waterways Role in Nation's Economic Prosperity: Coal
Waterways Role in Nation’s Economic Prosperity Coal for power plants – 227 million tons annually – inland, Lakes, coastal – 20 % of utility coal supplied by waterway •
Slide 16: Waterways Role in Nation's Economic Prosperity: Petrochemicals
Waterways Role in Nation’s Economic Prosperity Petrochemicals & Petroleum Products – 350 million tons annually between domestic points •
Slide 17: We are having success
We are having success… …because we have a good story to tell Keeping our industries and farmers competitive in a very tough global marketplace preserves U.S. jobs Reduces congestion on our highways This is an easy story to understand, but somebody has to tell it to the Washington lawmakers. • •
Slide 18: The 90's
The 90’s Declining support in the Administration and Congress Corps spending on waterways diverted elsewhere Trust fund balance starts to rise “Environmentalists” mount attack on the Corps Media & editorial campaigns against the Corps and water resources development Traditionally, the industry did n
Slide 19: Waterways Council, Inc. formation
Waterways Work! was formed in 2001 to counter negative publicity about the industry In 2003, Waterways Work merged with DINAMO, the Association for the Ohio Valley, and formed the Waterways Council, Inc. • Professional staff based in Washington, DC • Media relations team • Annual budget now over $1
Slide 20: Who are WCI Members?
Who are WCI Members? All waterway business interests: – Carriers – Shippers – Waterways Service Providers – Port Authorities & Governmental Entities – Regional Associations Geographically Diverse All major commodity groups: – Oil, chemical and petrochemical – Grain – Coal – Building Materials – Stee
Slide 21: The Objectives
The Objectives: Get the President to propose adequate budgets Get Congress to pass laws that authorize projects and appropriate the money needed each year to build and maintain them Ensure the Corps of Engineers actually spends the money as intended by Congress • • •
Slide 22: Major Navigation Projects Underway
New Construction Major Rehabilitation Inner Harbor New Construction and Modernization: Major Navigation Projects Underway Based on FY 2005 Appropriations Olmsted Marmet McAlpine Kentucky L&D 11 Rehab L&D 19 Rehab L&D 24 Rehab Lower Mon 2-4 Myers Chickamauga Active new lock construction and major reh
Slide 23: Inland Waterways Trust Fund
Year Estimated Outlays Tax Revenues Interest Earnings Year-End Balances ($Millions) 1990 117.3 62.8 26.2 1991 148.6 60.5 21.2 1992 122.7 69.9 13.7 1993 74.5 78.6 7.5 1994 75.7 88.4 9.3 1995 94.8 103.4 13.3 1996 85.5 108.4 15.6 1997 89.5 96.4 17.0 1998 76.9 91.1 18.3 1999 88.2 104.4 16.0 2000 102.4 9
Slide 24: Trust fund balance chart
1990 1992 1994 1996 1998 2000 2002 2004 2006
Slide 25: Trust Fund Spending: New Construction and Major Rehab
50 70 90 110 130 150 170 190 210 96 97 98 99 OO O1 O2 O3 O4 O5 O6 Fiscal Year $184 Mil. in Bush Budget. Appropriations bill pending. Waterways Work / Waterways Council Formed Trust Fund Spending: New Construction and Major Rehab Money from 20 cent per gallon fuel tax. This is matched with an equal s
Slide 26: Recent Trust Fund Spending
Millions of dollars from trust fund. Matched with general revenues. Recent Trust Fund Spending
Slide 27: Inland Waterways Trust Fund Appropriations Comparison
FY 2002 Enacted FY 2003 Enacted FY 2004 Enacted FY 2005 Enacted % Difference (05 vs. 02) Construction General 1,712 1,745 1,731 1,782 4.1 Inland Waterways Trust Fund 189 253 270 332 75.7 Corps Civil Works Total 4,650 4,699 4,563 4,668 0.4 FY 2006 Request % Difference (06 vs. 02) 1,637 (-4.4) 94.7 4,
Slide 28: Goals for Fiscal Year 2006 Appropriations
Goals for Fiscal Year 2006 Appropriations: At least $300 million ($150 million from the Inland Waterways Trust Fund) for Building Priority Projects An additional $100 million above the President’s budget for inland navigation Operations and Maintenance priority needs • •
Slide 29: O&M funding is our next major challenge
Operations & Maintenance (O&M) funding is our next major challenge 1977 1980 1983 1986 1989 1992 1995 1998 2001 Current $ and 1996 Constant $, Fuel-Taxed Waterways Only 2004 Real O&M funding remains flat even as project portfolio grows and ages… Current $ Constant $
Slide 30: The O&M Challenge
The O&M Challenge Intensified Focus in 2005 System-Wide Examination Joint Industry/Corps Initiative Maintain and Improve System Reliability Secure Adequate Resources and Invest to Maximize Results – Reduce Risk and Increase Reliability • • • • •
Slide 31: Industry/Corps O&M Workshops in 2005
Industry/Corps O&M Workshops in 2005 Conducted – January Cincinnati, OH Ohio River System – January St. Louis, MO Upper Miss./Illinois – February Tampa, FL Integration – April New Orleans, LA Gulf Intracoastal Being Planned – TBD TBD Lower Miss. & Tribs. – TBD TBD Columbia/Snake • •
Slide 32: Industry/Corps O&M Workshops
Industry/Corps O&M Workshops Identify most pressing problems from perspective of Corps and industry Allocate resources to address most pressing needs We are committed to both short term and long term solutions to navigational issues • • •
Slide 33: Also Where We Are Going
Also Where We Are Going… Passage of Water Resources Development Act (WRDA) – Authorize Lock Modernization on the Upper Mississippi and Illinois Rivers – Reasonable, Non-Damaging “Corps Reform” Provisions •
Slide 34: Kirby supports national efforts
Kirby supports national efforts: – Berdon Lawrence, Chair, Waterways Works/Waterways Council 2001- March, 2005 – Steve Valerius, Incoming Chair, American Waterways Operators – Joe Pyne, Chair, National Waterways Foundation Kirby is a leader in efforts to maintain and improve our waterways infrastruc
Slide 35: Kirby also supports regional efforts
Kirby also supports regional efforts. Examples: Gulf Intracoastal Canal Association (GICA) – Midwest Area River Coalition (MARC 2000) Louisiana Association of Waterways Operators and Shipyards (LAWS) Texas Waterway Operators Association (TWOA) Warrior Tombigbee Waterway Association Kirby is a leader
Slide 36: Things are getting better
Things are getting better …yet we still have much work to do. Some of the images in this presentation are courtesy of the U.S. Army Corps of Engineers
Slide 37: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 38: Kirby Corporation: Putting America's Waterways to Work
Kirby Corporation Putting America’s Waterways to Work NYSE: KEX May 2005
Slide 39: Forward-looking statements
Statements contained in this presentation with respect to the future are forward-looking statements. These statements reflect management’s reasonable judgement with respect to future events. Forward-looking statements involve risks and uncertainties. Actual results could differ materially from those
Slide 40: Kirby Business Operations
Marine Transportation 87% of 2004 Revenue - $588.8 million Largest U.S. Inland Tank Barge Operator Diesel Engine Services 13% of 2004 Revenue - $86.5 million Largest Domestic EMD Diesel Services Company Kirby... Business Operations
Slide 41: Kirby Facts
– Lowest cost due to economies of scale – Best positioned for growth opportunities – “One Stop Shop” for customers Kirby Facts • Largest inland tank barge operator • Operates 878 barges and 239 towing vessels • Sustainable competitive advantages: • 70% of Kirby’s business is under contract, 30% spot
Slide 42: Revenue growth
17% growth rate from 1988-2004 Revenue... Business Operations
Slide 43: Earnings Per Share
1994-2001 adjusted to exclude goodwill amortization expense 2002 adjusted to exclude impairment charges of $12.5 million, net of taxes, or $.51 per share See Appendix for reconciliation of GAAP to Non-GAAP earnings per share Earnings Per Share From Continuing Operations Before Adjustments Guidance 1
Slide 44: Recent Demands and Pricing Trends
• Record 1 st quarter 2005 earnings of $.52, 44% increase over 1 st quarter 2004 earnings of $.36 • Raised 2005 annual forecast to $2.45 - $2.55, 24% to 29% above 2004 • 1 st quarter 2005 spot and contract rates increased 4% to 5% • 2004 chemical volumes up 4% to 5%; 2005 chemical volumes expected t
Slide 45: Contract to Spot Market Mix
• 70% Contract, 30% Spot – Reduces volatility and improves predictability – Allows Kirby to service peak demand from contract customers – Long-term approach to business • Ideally would want higher spot exposure when spot rates were higher than contract rates – Short-term approach to business – More
Slide 46: Issues
• Why has Kirby not benefited more from the problems that rail and trucks are having with their infrastructure? Issues
Slide 47: Compete Successfully With Rails and Trucks
Kirby’s fleet capacity of 16.4 million bbls. equates to trucks, or rail cars 60,000 bbl. two-barge tow is equivalent to: 82,000 21,900 Rail Cars Trucks Barges Compete Successfully With Rails and Trucks
Slide 48: Inland Waterway System
St. Paul Sioux City Chicago Pittsburgh Charleston St. Marks Tulsa Brownsville Corpus Christi Houston New Orleans St. Louis Cincinnati Mobile Kirby is one of the few operators offering distribution throughout the Mississippi River System and Gulf Intracoastal Waterway 12,000 miles of navigable waterw
Slide 49: Barges are Efficient
One gallon of fuel in a barge can move one ton of freight 522 miles, compared to 403 miles by rail and only 80 miles for a truck. Barge Rail Truck Barges… Efficient
Slide 50: Barges are Environmentally Friendly
While moving one ton of freight 1,000 miles: • Smog is a major problem in most major cities • Oxides of nitrogen are the chemicals that produce smog Trains produce 3.5 times as much oxides of nitrogen as barges Trucks produce 19 times as much oxides of nitrogen as barges Barges… Environmentally Frie
Slide 51: Issues
• Why has Kirby not benefited more from the problems that rail and trucks are having with their infrastructure? • What has been the cost of security measures required by the Homeland Security Act? • What are the prospects for an acquisition this year? Issues
Slide 52: Tank Barge Owners By Number of Tank Barges
Sparks Companies, March 2005 Tank Barge Owners By Number of Tank Barges Shipper Owned Independent Tank Barges Operated Dry Cargo Barges Operated Kirby Corporation - American Commercial Lines LLC 2,861 Marathon Ashland Petroleum - Ingram Barge Company 3,468 Canal Barge Company, Inc. Florida Marine -
Slide 53: Issues
• Why has Kirby not benefited more from the problems that rail and trucks are having with their infrastructure? • What has been the cost of security measures required by the Homeland Security Act? • What are the prospects for an acquisition this year? • How is Osprey doing? Issues
Slide 54: Osprey
Osprey • Container on barge operation – Developing a new market – Challenge is to divert traffic from other modes and routes – Shorebased infrastructure more important than actual movement • Inland service shows great potential – Developing infrastructure – Building volume – Testing pricing • Coasta
Slide 55: Observations About Market
Observations About Market • Bear Sterns Conference – Disconnect between Wall Street’s perception and what transportation companies are seeing • Kirby’s current business conditions – Saw no February/March soft patch – Remain very busy – Customers are not telling us they are worried about their volume
Slide 56: Financial Highlights
Financial Highlights
Slide 57: For Three Months Ended March
For Three Months Ended March 31
Slide 58: Operating Margins
12.7% 15.2% Operating Margins
Slide 59: EBITDA Per Share Growth
See Appendix for reconciliation of GAAP net earnings to Non-GAAP EBITDA 11.2% growth rate from 1994 - 2004 EBITDA Per Share Growth
Slide 60: Cash Flows
* Excluding acquisitions Cash Flows
Slide 61: 2eeeranreaeaereeoae sea e we oe a
2eeeranreaeaereeoae sea e we oe a
Slide 62: Balance sheet
3/31/05 Current Assets Property & Equipment 583 574 9 Goodwill 161 161 - Other Assets 28 30 —) Total Assets $922M $.905M 12M Liabilities & Equity Current Liabilities $ 118M $ 103M $ 15M Total Debt 205 219 (e)) Other Liabilities 144 148 (4) Stockholders’ Equity Total Liabilities & Equity Debt to Capi
Slide 63: Financial Strength
– Standard & Poor’s – BBB – Moody’s – Baa3 – $200 million outstanding – Floating rate of LIBOR +1.2% – Callable at par after one year without penalty – No required principal payments until maturity – Maturity extended three years to December 2007 – Accordion feature added to allow maximum amount to
Slide 64: Interest Rate Risk
• Approximately $200 million of outstanding debt – Floating rate private placement maturing 2013 – $150 million bank revolving credit maturing December 2007 (expandable to $225 million) • $150 million hedged against interest rate movements – $50 million hedged until May 2009 – $100 million hedged un
Slide 65: Section 404 Sarbanes-Oxley Act of 2002
• Completed first annual assessment of internal controls over financial reporting – No material weaknesses – No significant deficiencies – Clean opinion from KPMG • Total cost for 2004 compliance - $1 million plus • 2005 Compliance – Minimal effort to update controls – Testing of controls • PCAOB an
Slide 66: Defined Benefit Pension Plan
• Covers only vessel employees • Kirby’s policy is to fund 100% of Accumulated Benefit Obligation (ABO) – Plan assets: $76.4 million at 12/31/04 – ABO: $75.6 million at 12/31/04 • Pension expense – 2003: $4.0 million – 2004: $5.2 million – 2005 Projected: $5.2 million • Contribution – 2003: $5.6 mil
Slide 67: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 68: Kirby Inland Marine
May 2005 Kirby Inland Marine
Slide 69: Focus
Industry Fleet Profile Logistics Management Marine Workforce • • • Focus
Slide 70: Industry Fleet Profile
Industry Fleet Profile
Slide 71: Market Segments
Refined Products 10% Black Oil 20% Agricultural Chemicals 5% Petrochemicals 65% Market Segments
Slide 72: High Tech and Diverse Fleet
High Capacity pumps – Specialty coated tanks Pressurized tanks Self-contained heating systems Refrigeration tanks Stainless steel tanks Active Tank Barges Petrochemical Refined Products Pressure Black Oil Anhydrous Ammonia Specialty High Tech and Diverse Fleet
Slide 73: Tank Barges Operated
Tank Barges Operated Dry Cargo Barges Operated Tank Barges Operated Dry Cargo Barges Operated Sparks Companies, March 2005 6 Shipper Owned Independent Kirby Corporation - American Commercial Lines LLC 2,861 Marathon Ashland Petroleum - Ingram Barge Company 3,468 Canal Barge Company, Inc. Florida Mar
Slide 74: Inland Tank Barge Industry
2,816 Total Tank Barges Inland Tank Barge Industry
Slide 75: Industry Fleet Hull Profile
1,205 Double Skin 30K barges 1,292 Double Skin 10K barges Double Skin < 10K barges Single Skin barges 2,816 Total Industry Fleet Hull Profile
Slide 76: Inland Tank Barge Fleet
Source: Sparks Companies, March 2005 Inland Tank Barge Fleet
Slide 77: Industry New Construction on Order
113 29 2005 2006 Total Industry New Construction on Order
Slide 78: Kirby New Construction Plan
31 Clean 8 Black Oil 7 Clean 8 Black Oil 2005 2006 39 Total 15 Total Kirby New Construction Plan
Slide 79: Kirby Fleet Status
New Construction Number of Barges Barrel Capacity (mm) Kirby Fleet Status
Slide 80: New Construction Prices
$1.0M $2.1M $2.7M 10,000 bbl – Clean 30,000 bbl – Clean 30,000 bbl – Heated Black Oil New Construction Prices
Slide 81: New Construction Cost Components
Construction labor Steel, steel products Components Engineering 38% 37% 17% 8% 100% New Construction Cost Components
Slide 82: Logistics Management System
Logistics Management System
Slide 83: State-of-the-Art Communication and Positioning
Logistics Management System State-of-the-Art Communication and Positioning
Slide 84: Kirby Leads Industry Logistics Management
• All equipment locations instantly available to customer – Current position – ETA to customer’s dock – Information available from booking to final invoice Kirby Leads Industry Logistics Management
Slide 85: Equipment Positioning
Equipment Positioning
Slide 86: Logistics system screenshot
oat: LANA LOUISE ‘Pome an rT — foe — =a} san) D8” Biveicinars_| Brieaions. | Pomnaries [Fiemme Qurntne.. | CROSAMNEOT wil
Slide 87: Kirby Leads Industry Logistics Management
• All equipment locations instantly available to customers – Current position – ETA to customer’s dock – Information available from booking to final invoice Kirby Leads Industry Logistics Management • Advanced logistics system enables higher equipment utilization and increased efficiency • Kirby’s s
Slide 88: Marine Workforce
Marine Workforce
Slide 89: Recruit, Train and Retain
Focus on Safety Recruit Train to be the best Retain skilled personnel Offer excellent pay and benefits Provide advancement opportunity Foster community environment • • • • • • • Recruit, Train and Retain
Slide 90: Vessel Personnel Profile
Captains / Pilots Tankermen Deckhands / Tankerman Trainees Engineers 468 424 307 96 1,295 Marine Employees Vessel Personnel Profile
Slide 91: Vessel Personnel Profile
Captains / Pilots Tankermen Engineers 12 5 13 Average Years of Service Vessel Personnel Profile
Slide 92: Recruit, Train and Retain
Hire the right people Provide opportunity in rural areas with weak job markets Comprehensive screening Only company-owned and operated Training Center in industry U.S. Coast Guard-approved programs Provide safety and job skill training Steersmen Training Program ensures lower turnover • Recruit – –
Slide 93: Recruit, Train and Retain
Retain 30% we hire licensed from the outside Retain 90% of the personnel we train in our program from deckhand to pilot • Retain skilled personnel – – Recruit, Train and Retain
Slide 94: Provide Advancement Opportunity
Starting salary $29,000 As soon as 6 mos. $31,200 to $44,300 In 2-3 years $46,900 In 3-5 years $71,900 In 5-10 years $76,500 In 10 years $82,000* Up to $100,000 plus bonus Highly competitive wages 401(k) Insurance Disability coverage Pension plan Annual incentive bonus Free training Longevity pay* P
Slide 95: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 96: The Diesel Engine Service Market
The Diesel Engine Service Market
Slide 97: Basic Diesel Engine Types
Engine Speed Horsepower Range Applications Manufacturers Basic Diesel Engine Types Slow Speed Less than 400 RPM 7,000 – 108,000 hp Large diesel-powered ocean going tankers, cruise ships, container ships and cargo carriers Man B&W, Sulzer, Wartsila Medium Speed 400 – 1,000 RPM 800 – 32,000 hp Locomot
Slide 98: Slow Speed Diesel Engine
Slow Speed Diesel Engine
Slide 99: Medium Speed Diesel Engine
Medium Speed Diesel Engine
Slide 100: High Speed Diesel Engine
High Speed Diesel Engine
Slide 101: Marine Engines Outstanding Population
No. of Engines* % of Outstanding Population Marine Engines EMD 4,500 39% Detroit Diesel 3,300 29% Caterpillar 2,400 21% Cummins 1,200 11% * Estimated marine engines
Slide 102: What We Do
What We Do EMD and Alco medium speed diesel engines Caterpillar, Cummins and Detroit Diesel high speed diesel engines in Midwest market Diesel engine repairs, overhauls & rebuilding Marine reduction gear repairs & overhauls • Sell new & remanufactured OEM parts – – • Provide skilled labor & specialt
Slide 103: Facility Locations
Facility Locations Seattle Paducah Houma Chesapeake Rocky Mount Tampa Miami
Slide 104: KES Primary Markets
Rail 21% Marine 59% Power Generation 20% KES Primary Markets 2004 Revenue
Slide 105: Revenue Sources
Revenue Sources New parts Nuclear parts dedication Rebuilt parts Complete overhauls to OEM specifications ABS certified block welding In-place machining Laser alignment Troubleshooting Preventive maintenance Engine controls modifications • Part Sales (51%) – – – • Services (49%) – – – – – – –
Slide 106: Top Ten Customers
Top Ten Customers America Electric Power (AEP) Amtrak Crowley ENSCO (ESV) Exelon (EXC) Ingram Barge Company Maritrans (TUG) Moran Towing New Jersey Transit Tidewater, Inc. (TDW) • • • • • • • • • •
Slide 107: Marine Markets
Marine Markets 59% of Total Revenue
Slide 108: Marine Market Drivers
Marine Market Drivers Chemicals, petrochemicals, fertilizer, black oil, refined products, grain, coal, cement & steel General import/export activity Containers Break bulk Exploration and drilling • Market Drivers – – • • –
Slide 109: Rail Markets
Rail Markets 21% of Total Revenue
Slide 110: Rail Market Drivers
Rail Market Drivers Commuter demand Chemicals, petrochemicals, fertilizer, black oil, grain, coal, cement, automotive and steel Containers • Market Drivers – – –
Slide 111: Power Generation Markets
Power Generation Markets 20% of Total Revenue
Slide 112: Power Generation Market Drivers
Power Generation Market Drivers Increasing electrical demand Nuclear license renewals Technology upgrades/modifications Maintenance outsourcing • Market Drivers – – – –
Slide 113: Growth Opportunities
Growth Opportunities Emissions Reduction Programs - new services to existing customers Term Maintenance Contracts Competitors Engine Populations New product lines for existing customers New product lines for new customers • Organic – – • Acquisition – • High Speed Diesel Engine Services – • •
Slide 114: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 115: Outlook for Commodity Chemicals in the United States
Outlook for Commodity Chemicals in the United States May 19, 2005 Presented to: Transportation Analyst Group
Slide 116: Outline
- Global Economic view, petrochemical cycle, new investment – Changing role of U.S. olefins industry, impact on feedstocks & derivatives – Bottom line, things are changing, but liquid movements expected to trend higher Outline • 40,000 ft • 10,000 ft • River Level
Slide 117: Current Global Market Conditions
Chemicals & plastics markets are in a full revival mode Economic recovery firmly entrenched – especially in Asia & Americas. The rate of new capacity additions increasing but remaining measured Hyper natural gas & oil markets maintaining high price levels Producers leveraged their position of market
Slide 118: Short-term Outlook Is Somewhat Tempered
Short-term Outlook Is Somewhat Tempered Sustained by Longer-term Supporting Strengths Global Expansion Remains Firmly Entrenched Developing world healthy, Japan and Europe slowing Geopolitical Uncertainties & High Energy are a big negative Services Sector still very strong. Can China moderate? Monet
Slide 119: Global GDP Growth Rates
Constant 2000 Dollars -2 -1 0 1 2 3 4 5 6 7 8 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 Percent Change Global U.S. Global GDP Growth Rates
Slide 120: Demand Is Robust!
Petrochemicals Health Care Household Goods Rubber & Plastics Transportation Construction Food & Beverage Textiles Electronics Demand Is Robust!
Slide 121: Impact of High Energy Prices
• Economies have underperformed by about 0.75 points • Extreme volatility • Declining energy prices will be supportive of economic growth in 2007 - - 2009 Impact of High Energy Prices
Slide 122: Feedstock Cost: Impacts all Regions
• Dramatic Increase in North America with higher natural gas prices • Up in West Europe, Latin America & Asia with $50+ per barrel crude oil • Middle East remains the lowest Feedstock Cost: Impacts all Regions (well, some more than others…)
Slide 123: Middle East Advantage is All Natural Gas Based
/$50 /$47 /$45 /$49 / Crude Oil $/bbl Middle East Advantage is All Natural Gas Based $7.50 $5.50 $1.00 $4.50 Nat Gas $/MMbtu
Slide 124: Ratio of Natural Gas vs. Crude Oil Price in the U.S.
40% 50% 60% 70% 80% 90% 100% 110% 120% Environmental emphasis was not offset with sufficient supply incentives Drilling (replacement) rates have not maintained pace - steady demand growth Market will produce sufficient supply/demand reaction – at best, back to parity (Conservation – Demand Switching
Slide 125: Market Forces Will Eventually Return Energy Prices To Fundamental Levels
Current Crude Oil Current Nat Gas U.S. Energy Values 10 15 20 25 30 35 40 45 50 55 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 ($ per barrel) ($ per mmBtu) Market Forces Will Eventually Return Energy Prices To Fundament
Slide 126: Sector Leverages High Energy Prices
Rising crude oil prices impact chemicals sector earnings most severely in periods of oversupply allow producers to pass through rising costs (and more), building up margins Strong market conditions Cost push supported price increases facilitate higher earnings when cost fall – but tight conditions m
Slide 127: Basic Chemicals and Plastics Annual Demand Growth
Annual Demand Growth 0 5 10 15 20 25 30 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Million Metric Tons Basic Chemicals and Plastics
Slide 128: Up Cycle Peak Earnings Profile
Ethylene Glycol There now or may not get there Remain above for several more years Lower than before Higher than previous peaks PET Resins PE Resins PP Resins Ethylene Propylene Benzene ECUs Methanol Paraxylene Styrene PS Resins PVC Resins Timing & Duration From a Re-Investment Perspective From a Hi
Slide 129: Global Ethylene Capacity Growth
Americas Europe Middle East/Africa Asia Pacific -2 0 2 4 6 8 10 Million Tons 00 01 02 03 04 05 06 07 08 09 10 Global Ethylene Capacity Growth
Slide 130: Global Assembly Line
Growth In Chemicals Demand Will Continue To Outpace That Of The World Economies Extremely Efficient Supply Chains Have Been Developed - Internationals and WTO Very Supportive Improving Standard Of Living In China Has Significantly Increase Internal Consumption Implies That Current Pace Of Additions
Slide 131: World Ethylene Demand Forecast
0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 99 00 01 02 03 04 05 06 07 08 09 PE 3.6 / 4.9* Ethylene Oxide 4.0 / 5.3* EDC 2.4 / 3.2* EBZ 3.4 / 4.1* Others 1.2 / 3.0* Capacity 3.6 / 4.8* Million Metric Tons *%AAGR 99-04 / %AAGR 04-09 World Ethylene Demand Forecast Total Demand Growth = 4.4% AAGR 2
Slide 132: Global Ethylene Cash Margins
0 100 200 300 400 500 600 700 800 00 01 02 03 04 05 06 07 08 09 Dollars Per Ton U.S. Ethane U.S. Light Naphtha WEP Naphtha NEA Naphtha Global Ethylene Cash Margins Ethylene Margin Outlook Very Positive
Slide 133: U.S. Producers Respond by Closing or Revamping E/P Units
U.S. Producers Respond by Closing or Revamping E/P Units
Slide 134: Feedstock Required Per Ton of Ethylene
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Ethane Propane Butane Light Naphtha Gasoil Tons Feedstock Required Per Ton of Ethylene
Slide 135: Volume of Liquid Co-products per Ton of Ethylene
0 0.5 1.0 1.5 2.0 2.5 3.0 Ethane Propane Butane Light Naphtha Gasoil Tons Volume of Liquid Co-products per Ton of Ethylene
Slide 136: U.S. Ethylene Production by Feedstock
0 5 10 15 20 25 30 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Tons Ethane/Propane Naphtha Gas Oil Others Butane U.S. Ethylene Production by Feedstock (trend is flat to declining)
Slide 137: U.S. Ethylene Feedstock Requirements
0 10 20 30 40 50 60 70 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Tons Naphtha Gas Oil Butane Ethane/Propane (pipeline) Co-Product Yield Avg 2.7 million tons/yr more than 2004 baseline U.S. Ethylene Feedstock Requirements (heavier feedslate will require increased liquid movements
Slide 138: U.S. Propylene & Butadiene Domestic Demand Forecast
0 2 4 6 8 10 12 14 16 18 20 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Tons Propylene Butadiene Avg 1.0 million tons/yr more than 2004 baseline U.S. Propylene & Butadiene Domestic Demand Forecast
Slide 139: Regional Refining & Reforming
0 5 10 15 20 25 SAM ISC/SEA AFR/MDE CEP/FSU NEA WEP NAM Crude Refining Capacity Reforming Capacity MMBPCD Sources: PGI/CMAI Regional Refining & Reforming
Slide 140: Refinery Sourced BTX
Refinery Sourced BTX (91.5 Million Metric Tons) Refinery 16% Non-Refinery 24% LY
Slide 141: U.S. Benzene & Derivative Domestic Demand Forecast
0 5 10 15 20 25 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Tons Benzene Styrene Cumene Phenol Cyclohexane Avg 500 thousand tons/yr more than 2004 baseline U.S. Benzene & Derivative Domestic Demand Forecast
Slide 142: U.S. Xylene & Toluene Domestic Demand Forecast
0 2 4 6 8 10 12 14 16 18 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Tons Mixed Xylene Paraxylene Toluene Avg 600 thousand tons/yr more than 2004 baseline U.S. Xylene & Toluene Domestic Demand Forecast
Slide 143: U.S. MTBE Federal Actions – Will it Pass?
• Federal Ban to pass eventually, but tough negotiation still required. • Energy Bill has been stalled in Congress since 2000, high priority for 2005. – Oxygen Mandate removed effective 270 days after the bill is signed – MTBE banned explicitly beginning 2015, but individual states can override and
Slide 144: Global MTBE Demand
NAM 49.3% SAM 1.6% WEP 16.7% CEP 6.4% NEA 13.4 % SEA 3.8% MDE 7.7% ISC 0.4% AFR 0.8% Total Demand = 16.1 Million Tons 2004 2009 NAM 26% SAM 2% WEP 12% CEP 12% NEA 23% SEA 6% AFR 1% MDE 17% ISC 1% Total Demand = 10.8 Million Tons Global MTBE Demand
Slide 145: States with MTBE Ban
- adopted ban prior to 2004 - adopted ban in/after 2004 - pending States with MTBE Ban
Slide 146: States with MTBE Ban
3.1% States with MTBE Ban % consumption - adopted ban prior to 2004 - adopted ban in/after 2004 - pending
Slide 147: States with MTBE Ban
31.7% 0.8% 1.1% 7.5% States with MTBE Ban % consumption - adopted ban prior to 2004 - adopted ban in/after 2004 - pending
Slide 148: States with MTBE Ban
States with MTBE Ban - adopted ban prior to 2004 - adopted ban in/after 2004 - pending
Slide 149: U.S. MTBE, Methanol & Ethanol Domestic Demand Forecast
0 5 10 15 20 25 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Million Tons MTBE Methanol Ethanol U.S. MTBE, Methanol & Ethanol Domestic Demand Forecast
Slide 150: Mitigating Factors Around MTBE
• Vast Majority of MTBE moves via pipeline • States retaining MTBE are in Gulf Coast region • MTBE ban requires greater movement of other octane components • RFS will ultimately lead to longer mid-west to coast and inter-coastal barge movement of ethanol (all forms of ethanol are prohibited in pipel
Slide 151: Conclusions
• Global petrochemical markets are enjoying a significant up-cycle • Naphtha/gas oil based ethylene production remains competitive in the industrialized regions • U.S. producers have moved towards cracking more liquids that increase both feedstock and co-product volumes and traffic • Basic aromatics
Slide 152: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 153: U.S. Refining Industry Outlook
U.S. Refining Industry Outlook Bill Sanderson May 19, 2005
Slide 154: Agenda
Agenda Ø U.S. Economic and Product Demand Outlook Ø Refining Industry Outlook Ø Regional Product Movements
Slide 155: U.S. GDP and petroleum demand growth are expected to remain strong
U.S. GDP and petroleum demand growth are expected to remain strong short-term . . .. Percent Annual Growth Note: GDP forecast provided by CMAI.
Slide 156: U.S. refined product demand is expected to stay strong
U.S. refined product demand is expected to stay strong through this economic cycle . . .. 2005 – 2010 Year-to-Year Change, Thousand B/D
Slide 157: Will gasoline demand growth slow down longer term?
Will gasoline demand growth slow down longer term? Ø Higher prices are beginning to affect consumer choices § Large SUV sales are beginning to fall § Hybrid sales are beginning to gain acceptance Ø In our view, policy and market factors are likely to increase vehicle efficiency after 2010 Ø Greenhou
Slide 158: New vehicle efficiency expected to increase long-term
Technology, policy and market factors expected to increase new vehicle efficiency long-term ... Note: Average U.S. new car efficiency Miles per Gallon
Slide 159: Gasoline and diesel/jet fuel demand to stay strong
Gasoline demand to stay strong through 2010. Diesel/jet fuel demand will remain strong . . . Five-Year Demand Change (Millions of B/D)
Slide 160: Regulatory changes will influence U.S. refining and distribution
Regulatory changes will continue to strongly influence U.S. refining and distribution . .. . MTBE Ban (Cal. and NY) Low Sulfur Diesel (15 ppm) Low Sulfur Gasoline (30 ppm) (Tier 2) Carbon taxes or emissions controls? 2000-2006 2006-2010 Renewable Fuel Requirements MTBE Phaseouts Increasing Vehicle E
Slide 161: Gasoline quality will continue improving
Gasoline quality will continue improving . . . Ø Sulfur is being reduced to 30 ppm § Sulfur poisons automobile emissions catalysts § Sulfur reductions provide … • Immediate emissions reduction impact on entire fleet • NOx trap capability Ø MTBE and Ethanol use will change § Nationwide MTBE ban expec
Slide 162: Both programs will affect refining and distribution industries
Both programs will affect the refining and distribution industries . . .. Gasoline Supply and Cost Impacts Diesel Supply and Cost Impacts Ø Upgrading of existing desulfurization capacity most common Ø May tighten international low-sulfur markets Ø Distribution, contamination issues remain unresolved
Slide 163: Supply/Demand Conclusions
Supply/Demand Conclusions Ø Strong U.S. petroleum demand growth should continue through 2010 Ø Vehicle efficiency gains expected to reduce growth after the turn of the decade Ø Diesel growth will be stronger than gasoline Ø Refining capacity should remain tight for several years, due to investment l
Slide 164: Agenda
Agenda Ø U.S. Economic and Product Demand Outlook Ø Refining Industry Outlook Ø Regional Product Movements
Slide 165: U.S. refinery utilization at or near capacity
U.S. refinery utilization has been operating at or near capacity since the late 1990s . . . U.S. Refinery Utilization of Operating Capacity, % Maximum Sustainable Capacity Annual Average Note: Figures are distillation capacity utilization for operating refineries.
Slide 166: Growth in crude oil supplies from imports and Canada
Growth in crude oil supplies will be sourced by offshore imports and Canadian supplies .. . . U.S. Crude Supplies by Source – Million B/D
Slide 167: Petroleum Administration for Defense Districts (PADDs)
The U.S. market is divided into five Petroleum Administration for Defense Districts (PADDs) . . . V IV III II I
Slide 168: PADD III is the largest refining region
PADD III includes the U.S. Gulf Coast which is the largest refining region in the U.S. .. . . 2,270 1,770 2,130 Total PADD III Distillation Capacity = 8.2 Million B/D Note: Figures are distillation capacity for operating refineries in ‘000 B/D.
Slide 169: Gulf Coast crude runs by region
The Gulf Coast (PADD III) is the largest refining region, at roughly 50% of the U.S. total . . . Crude Runs by Region - Million Barrels per Day
Slide 170: Gulf Coast crude runs becoming heavier
Gulf Coast (PADD III) crude runs will continue to become heavier, driving refining investment ... Gulf Coast Crude Oil Runs by Source, Million B/D
Slide 171: PADD II sub-regions
PADD II includes a number of sub-regions comprised of smaller, local refining centers .. . . Midcontinent Upper Midwest Midwest Note: Figures are distillation capacity for operating refineries in ‘000 B/D. Total PADD II Distillation Capacity = 3.6 Million B/D
Slide 172: Midwest crude supply balance
Midwest (PADD II) crude supply balance reflects growth of Canadian production . . .. Midwest Crude Oil Runs, Million B/D
Slide 173: Midwest crude runs become heavier
Midwest crude runs become heavier requiring conversion capacity investment . . .. Midwest Crude Oil Runs, Million B/D
Slide 174: U.S. Refinery Distillation Capacity Changes
U.S. Refinery Distillation Capacity Changes Thousand B/D of Capacity (Announced projects, excludes creep)
Slide 175: U.S. gasoline imports expected to increase
U.S. gasoline imports are expected to increase until demand begins to slow late in decade . . . Million Barrels per Day
Slide 176: Gulf Coast and Midwest margins
Comparable Gulf Coast and Midwest margins track relatively well due to market factors . .. . Forecast in Constant 2005 Dollars per Barrel
Slide 177: Agenda
Agenda Ø U.S. Economic and Product Demand Outlook Ø Refining Industry Outlook Ø Regional Refined Product Movements
Slide 178: Refined product pipelines help integrate the U.S. market
Refined product pipelines help integrate the U.S. market . . . Refinery Refining Centers Refined Product Transportation Routes
Slide 179: Inland waterway system remains crucial in supplying certain markets
But the inland waterway system remains crucial in supplying certain markets . . .. Refinery Refining Centers Inland Waterways
Slide 180: About 65% of PADD III products move to PADDs I and II
About 65% of PADD III products move to consumers in PADDS I and II . . .. PADD III Production Major Light Products - Million B/D Note: Major light products include gasoline, jet fuel and diesel fuels.
Slide 181: PADD II depends on PADD III for light product supply
PADD II depends on PADD III for over 20% of the total light product supply . . .. Major Light Products - Million B/D PADD II Consumption Note: Major light products include gasoline, jet fuel and diesel fuels.
Slide 182: PADD II receives light refined products from PADD III
PADD II receives large volumes of all light refined products from PADD III . . .. PADD II Net Receipts - Million B/D
Slide 183: Most light products move to PADD II by pipeline
Most light products move to PADD II by pipeline . . . Thousand B/D Note: Product movements from PADD III to PADD II in 2004.
Slide 184: Waterborne commerce between PADD III and PADD II
Waterborne commerce between PADD III and PADD II has increased steadily . . .. Thousand B/D
Slide 185: Movements from PADD III are primarily light products
Movements from PADD III are primarily light products . . .. Note: Waterborne product movements from PADD III to PADD II. Thousand B/D
Slide 186: PADD II moves out surplus heavy products by water
PADD II generally moves out surplus heavy products by water, some light products move .. . . Note: Waterborne product movements from PADD II to PADD III. Thousand B/D
Slide 187: Waterborne light product movements projected to grow
Waterborne light product movements from PADD III to PADD II are projected to grow . . .. Thousand B/D Note: Waterborne movements from PADD II to PADD III. Figures for 2004 are estimated.
Slide 188: PADD II will remain in surplus for residual fuel and asphalt
PADD II will remain in surplus for residual fuel and asphalt . . .. Note: Waterborne movements from PADD II to PADD III. Figures for 2004 are estimated. Thousand B/D
Slide 189: Conclusions
Conclusions Ø Continued demand growth in PADD II will require additional movements to markets served by the inland waterway system Ø Growing heavy crude processing in PADD II will increase the local surplus of asphalt and residual fuel
Slide 190: Terms and Conditions
Terms and Conditions This analysis has been prepared for the sole benefit of Kirby Corporation. Neither the analysis nor any part of the analysis shall be provided to third parties without the written consent of Purvin & Gertz. Any third party in possession of the analysis may not rely upon its conc
Slide 191: U.S. Refining Industry Outlook
U.S. Refining Industry Outlook Bill Sanderson May 19, 2005
Slide 192: Agenda
2:00 – 2:05 Welcome and Introductions 2:05 – 2:30 U.S. Inland Waterways 2:30 – 3:00 Kirby Overview 3:00 – 3:15 Kirby Inland Marine · Kirby and Industry Fleet Profile 3:15 – 3:30 Break 15 minutes 3:30 – 3:50 Kirby Engine Systems Overview 3:50 – 4:35 Outlook for the Petrochemical Industry · Chemical M
Slide 193: Why is Kirby a Good Investment?
• Fundamentals have not been this good in 25 years • Business will continue to consolidate. Kirby is best positioned company to be the consolidator. • Strong free cash flow • Great operating leverage • Age profile of fleet provides hedge against over building • Best transportation franchise around W