Kirby Corporation · NYSE:KEX
Kirby — Non-Deal Roadshow (February 2018)
53 slides from Kirby's roadshow presentation, February 2018
Slide 1: Putting America's Waterways to Work
Putting America’s Waterways to Work NYSE: KEX February 2018
Slide 2: Forward Looking Statements; Non-GAAP Financial Measures
Forward Looking Statements Non-GAAP Financial Measures Statements contained in this presentation with respect to the future are forward-looking statements. These statements reflect management’s reasonable judgment with respect to future events. Forward-looking statements involve risks and uncertaint
Slide 3: Business Segments
Business Segments Marine Transportation Distribution and Services The largest inland and coastwise tank Nationwide service provider and distributor barge fleets in the United States of engines, transmissions, parts, industrial equipment and oilfield service equipment 60% of 2017 Revenue 40% of 2017
Slide 4: Public Market Information
Public Market Information Share Price NYSE: KEX on February 9, 2018 $72.45 Shares Outstanding 59.7MM (as of February 9, 2018) Market Capitalization $4,323MM Net Debt $1,369MM (Proforma post-Higman) Enterprise Value $5,692MM (Proforma post-Higman) 4
Slide 5: Company Overview
Company Overview Marine Transportation • Largest combined inland and coastal tank barge operator – 841 inland tank barges and 227 towboats* – 56 coastal tank barges and 53 tugboats* – 75% of inland revenues under term contracts, of which approximately 51% are under time charters – 80% of coastal rev
Slide 6: Marine Transportation Acquisitions
Marine Transportation Acquisitions Tank Tank Date Barges Description Date Barges Description 1986 5 Alliance Marine 2003 64 SeaRiver Maritime (ExxonMobil) 2005 10 American Commercial Lines (black oil fleet) 1989 35 Alamo Inland Marine Co. 2006 * Capital Towing 1989 53 Brent Towing Company 2007 37 Co
Slide 7: Distribution and Services Expansions
Distribution and Services Expansions Acquisitions Internal Growth 1987 National Marine 1989 Midwest 1991 Ewing Diesel 1992 Seattle 1995 Percle Enterprises 2000 Cooper Nuclear 1996 MKW Power Systems 1997 Crowley (Power Assembly Shop) 2000 West Kentucky Machine Shop 2000 Powerway 2004 Walker Paducah C
Slide 8: Historical Revenue Growth
Historical Revenue Growth Marine Transportation and Distribution and Services Revenue From Continuing Operations 2,600 $2,566 2,400 $2,242 $2,214 2,200 10.6% compound $2,148 2,000 annual growth $1,850 $2,113 In Millions 1,800 1,600 1998-2017 $1,771 $1,360 1,400 $1,173 1,200 $1,082 $984 $1,110 1,000
Slide 9: Historical EPS Growth
Historical EPS Growth Earnings Per Share From Continuing Operations Excluding Non-Recurring Items $6.00 $4.93 $5.00 7.3% compound $4.44 annual growth $4.11 $4.00 1998 - 2017 $3.73 $3.35 $2.91 $3.00 2 $3.00 $2.62 $2.29 $2.34 1 $2.15 $1.99 $2.00 $1.79 2 $2.50 $1.33 $0.98 $1.00 $0.82 $0.94 $0.82 $0.83
Slide 10: Higman Marine Acquisition Overview
Higman Marine Acquisition Overview • $419 million in total consideration Purchase Price • 6.5x – 7.5x multiple of 5-yr prior EBITDA average with synergies • EPS neutral over first-twelve-months Value Created • Accretive in 2019 as inland barge market improves • Anticipated cost synergies of $10-12 m
Slide 11: Overview of Higman Marine
Overview of Higman Marine Founded in 1917, Higman Marine is headquartered in Houston, Texas and is a leading provider of inland marine tank barge and logistics solutions The company transports refined petroleum products, crude oil, condensates, black oil products, chemicals and petrochemicals Fleet
Slide 12: Rationale for Higman Acquisition
Rationale for Higman Acquisition Adding scale in core business Young, high-quality and well-maintained fleet Expands business and relationships with existing customers New capacity and flexibility to better serve customers Ability to retain high-quality Higman personnel Attractive time in cycle to a
Slide 13: Marine Transportation
oo 4 a MARINE TRANSPORTATION 13
Slide 14: U.S. Inland and Coastal Waterway Systems
U.S. Inland and Coastal Waterway Systems 12,000 miles of navigable waterways link America’s heartland to the world Texas and Louisiana account for 80% of the total U.S. production of chemicals and petrochemicals 14
Slide 15: Barge Industry Facts
Barge Industry Facts The U.S. barge industry serves the inland waterways, U.S. coastal ports, Alaska and Hawaii – The inland barge fleet is comprised of approximately 18,000 dry cargo barges and 3,800 liquid tank barges – The coastal market, including Alaska and Hawaii, encompasses approximately 290
Slide 16: Marine Transportation Demand Drivers
Marine Transportation Demand Drivers Revenue by Product1 4% Petrochemicals and Chemicals 17% Black Oil 23% 56% Refined Petroleum Products Agricultural Chemicals Markets and Products Moved Products Drivers Benzene, Styrene, Methanol, Naphtha, 30% Consumer Durables Acrylonitrile, Xylene, Caustic Soda,
Slide 17: Strong Emphasis on Safety
Strong Emphasis on Safety • Safety is the first and foremost concern in everything we do • Our customers place a high value on safety • Safe operations are good for morale and benefit financial performance in the long run • Extensive company-owned and Pictured above is our towboat simulator where op
Slide 18: Inland Tank Barge Markets
Inland Tank Barge Markets oo 18
Slide 19: Number of Inland Tank Barges
Number of Inland Tank Barges Estimated for the years 1998 through 2017 4100 3900 The inland tank barge market has 3700 grown at 1.4% over the last 20 years 3,825 and 3.0% over the last 10 years 3500 3300 3100 121 single hull tank barges industry wide, 2900 9 operated by Kirby 2700 2500 2300 2100 Sou
Slide 20: Inland Tank Barge Fleet Age Profile
Inland Tank Barge Fleet Age Profile Inland Tank Barge Age Distribution1 (Number of barges by age in years) 1200 1071 1000 785 800 600 516 400 354 305 255 217 200 140 40 0 0 to 5 5 to 10 10 to 15 15 to 20 20 to 25 25 to 30 30 to 35 35 to 40 > 40 (1) The total of 3,683 barges in this chart is unadjust
Slide 21: Inland Fleet Size and Flexibility
Inland Fleet Size and Flexibility Better Asset Utilization Tank Barge Fleet • Large fleet facilitates better asset utilization • More backhaul opportunities • Faster barge turnarounds • Diversity of barge products and spot opportunities • Less cleaning Towboat Fleet • Operated an average of 227 towb
Slide 22: Kirby Inland Fleet by Barge Type
Kirby Inland Fleet by Barge Type * * As of February 2018 including barges from Higman acquisition pending closure in Q1 2018 22
Slide 23: Inland Barge Fleet by Operator
Inland Barge Fleet by Operator Dry Cargo Dry Cargo Shipper Owned Independent Tank Barges Barges Shipper Owned Independent Tank Barges Barges Operated Operated Operated Operated Kirby Corporation* 998 - John W. Stone Oil 37 - American Commercial Lines LLC 445 3,346 Martin Midstream Partners 37 - Cana
Slide 24: Coastal Tank Barge Markets
Coastal Tank Barge Markets 24
Slide 25: Coastal Tank Barge Markets
Coastal Tank Barge Markets Largest operator of coastal tank barges and towing vessels participating in the regional distribution of refined petroleum products, black oil, and distribution of petrochemicals between PADDs Fleet consists of 56 tank barges with 5.4 million barrels of capacity and 53 tug
Slide 26: Coastal Tank Barge Age Profile
Coastal Tank Barge Age Profile Coastal Barge Market Age Distribution* Number of barges by age 120 112 The average age of the nation’s coastal tank barge 100 fleet is ~13 years 80 Number of Barges 61 60 40 40 34 19 19 20 6 2 0 0-5 Years 5-10 Years 10-15 Years 15-20 Years 20-25 Years 25-30 Years 30-35
Slide 27: Coastal Tank Barge Owners
Coastal Tank Barge Owners Coastal Tank Estimated Barrel Capacity* Barges Operated * (MM) Vane Brothers 78 2.8 Kirby is Well- Positioned in U.S. Kirby Corporation 56 5.4 Coastal Markets Harley Marine 42 1.9 Reinauer Transportation 25 2.1 Bouchard Transportation1 23 2.4 Crowley Marine2 15 2.5 Moran To
Slide 28: Distribution and Services
Kirby Engine Systems United Holdings Stewart & Stevenson DISTRIBUTION AND SERVICES 28
Slide 29: Distribution and Services
Distribution and Services Revenue Distribution * Markets Services Offered Customers and Market Drivers 69% Oil and Gas Distributes and services high-speed diesel • Oilfield Services engines and transmissions, and • Oil & Gas Operators and Producers manufactures, remanufactures and services oilfield
Slide 30: Distribution and Services: Engines, Transmissions and Reduction Gears
Distribution and Services Engines, Transmissions and Reduction Gears – Electro-Motive Diesel (EMD) Medium-Speed – Cooper-Bessemer – Nordberg – Caterpillar – Cummins – MTU – Detroit Diesel High-Speed – John Deere – Isuzu – Deutz – Volvo Penta – Allison Transmissions/ – Falk Reduction Gears – Twin Dis
Slide 31: Oil and Gas Market
Oil and Gas Market One of the largest distribution and services providers to the land-based oil services market Hydraulic fracturing technology has significantly expanded and reduced the cost of producing U.S. natural gas and oil reserves Manufacturer and remanufacturer of oilfield equipment used in
Slide 32: Kirby Distribution and Services Locations
Kirby Distribution and Services Locations Locations / Branches United Holdings Kirby Engine Systems Stewart & Stevenson Seattle Allison / MTU / DTNA Territories United Holdings Stewart & Stevenson EMD Territories Kirby Engine Systems Stewart & Stevenson Albany Marlborough Casper NYC Middletown Pisca
Slide 33: Pressure Pumping Market Size
Pressure Pumping Market Size Estimated North American Pressure Pumping Horsepower (millions) 2003-2018E Each pressure pumping unit is 24.0 ~2,250 HP and must be replaced or 22.8 22.2 21.0 remanufactured every 3-5 years 18.9 20.7 6 17.8 6 6 9 14.6 6 5 Out of Service 6 13 4 Idle/Repair 4 4 Working 9.9
Slide 34: Outlook
~ QUTLOOK oo 34
Slide 35: 2018 Guidance
2018 Guidance Published 2018 first quarter guidance of $0.45 to $0.65(1) per share versus $0.51 for the 2017 first quarter - Includes $0.08 to $0.12 per share benefit from tax reform Published 2018 full year guidance of $2.50 to $3.00(1) per share versus to $1.99(2) per share for 2017 excluding
Slide 36: Financial Highlights
FINANCIAL HIGHLIGHTS 36
Slide 37: Financial Summary
Financial Summary Change Income Statement FY 2017 FY 2016 $ % Revenues: Marine transportation $ 1,324.1 $ 1,471.9 $ (147.8) -10% Distribution and services 890.3 298.8 591.5 198% Total $ 2,214.4 $ 1,770.7 $ 443.7 25% Operating income (loss): Marine transportation $ 136.0 $ 257.1 $ (121.1) -47% Distri
Slide 38: Operating Margins
Operating Margins 30% 25% 23.6% 23.8% 24.3% 22.4% 21.9% 22.1% 22.5% 21.1% 21.1% 20% 18.9% 18.4% 19.0% 17.4% 16.6% 15.7% 15.6% 17.5% 14.6% 14.9% 15.0% 15% 11.7% 10.0% 10.1% 10.1% 9.5% 10.5% 10.6% 10.4% 9.7% 9.4% 10.3% 10% 8.1% 7.5% 9.7% 5% 3.9% 1.1% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 200
Slide 39: EBITDA Per Share Growth
EBITDA Per Share Growth $12.00 $11.23 8% compound $10.49 $10.38 annual growth $10.00 1997 - 2017 $9.03 $8.32 $7.95 $8.00 $7.22 $6.66 $6.00 $5.60 $5.73 $5.46 $4.39 $4.00 $3.52 $2.95 $2.65 $2.81 $2.53 $2.73 $2.00 $2.00 $1.70 $1.47 $1.59 $1.26 $0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200
Slide 40: Cash Flows
Cash Flows $700 Expansion Barges $601 $600 Operating cash flow Capital expenditures (ex-acquisitions) $524 $500 $439 $416 In Millions $400 $30 $355 $353 $345 $319 $326 $312 $312 $300 $246 $245 $253 $236 $226 $231 1 $215 $193 $200 $173 $177 $164 $142 $150 $1951 $127 $139 $137 $112 $122 $97 $100 $83 $
Slide 41: Capital Structure
Capital Structure 60% 50.4% Debt-to-Total Capital 2001 – 2017 Proforma 50% Debt-to-Capital Ratio of 31.5% post Higman Acquisition 40% 30% 24.2% 20% 10% 0% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 41
Slide 42: Financial Strength
Financial Strength • Investment grade rating – Standard & Poor’s: BBB+, credit watch negative (following Higman acquisition) – Moody’s: Baa2, negative outlook (following Higman acquisition) • $500 million unsecured Private Placement – $150 million 7-year maturity at 2.72% due 2/27/2020 – $350 millio
Slide 43: Why Invest in Kirby?
WHY INVEST IN KIRBY? 43
Slide 44: Why Invest in Kirby?
Why Invest in Kirby? Long-term record of success Experienced management teams in both core businesses Marine Transportation U.S. feedstock position puts our refinery, chemical, and integrated major customers in a globally competitive position and is driving volume growth 75% of inland revenue under
Slide 45: Thank You For Listening to Our Story
Kirby Corporation Putting America’s Waterways to Work Thank You For Listening to Our Story
Slide 46: Reconciliation of GAAP to Non-GAAP Financial Measure
KIRBY CORPORATION Reconciliation of GAAP to Non-GAAP Financial Measure Kirby reports its financial results in accordance with generally accepted accounting principles (GAAP). However, Kirby believes that the non-GAAP financial measure EBITDA is useful in managing Kirby’s businesses and evaluating Ki
Slide 47: Reconciliation of GAAP Net Earnings to Non-GAAP EBITDA
KIRBY CORPORATION Reconciliation of GAAP Net Earnings Attributable to Kirby to Non-GAAP EBITDA KIRBY CORPORATION Reconciliation of GAAP Net Earnings Attributable to Kirby to Non-GAAP EBITDA 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 ($ in millions) Net earnings attributable to Kirby $ 313.2 $
Slide 48: Reconciliation of GAAP Net Earnings to Non-GAAP EBITDA (Quarterly)
KIRBY CORPORATION Reconciliation of GAAP Net Earnings Attributable to Kirby to Non-GAAP EBITDA KIRBY CORPORATION Reconciliation of GAAP Net Earnings Attributable to Kirby to Non-GAAP EBITDA Three Months Ended Three Months Ended Three Months Ended Three Months Ended Year Ended March 31, June 30, Sept
Slide 49: Marine Transportation Performance Measurements
KIRBY CORPORATION MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS 2009 2010 2011 2012 2013 2014 2015 2016 2017 st nd rd th st nd rd th Year Year Year Year Year Year Year 1 Q 2 Q 3 Q 4 Q Year 1 Q 2 Q 3 Q 4 Q Year Inland Performance Measurements: (1) Ton miles (in millions) 11,977 12,957 13,414 12,224
Slide 50: $135+ Billion of U.S. Petrochemical Investments
$135+ Billion of U.S. Petrochemical Investments* Pacific Northwest Ohio Cost ($MM) Cost ($MM) NW Innovation 2020 New methanol 3,600 PTT Global Chem 2021 New ethylene 5,700 Tesoro 2018-19 New xylene 400 PBF 2015 Aromatics exp unk Iowa Monaca, PA Cost ($MM) Cost ($MM) Orascom (OCI) 2017 New fertilizer
Slide 51: U.S. Ethylene Feedstock Forecast
U.S. Ethylene Feedslate Forecast 2,500 Ethylene Feedstock Volume Product, 2017-2022 Thousands of Barrels per Day Growth and CAGR: 2,000 Ethane Growth 43% 5-Year CAGR 7% 1,500 Naptha & ~70% of current Gasoil ethylene Growth -7% production 5-Year CAGR -1% 1,000 is from ethane Butane Growth 8% 5-Year C
Slide 52: U.S. Ethylene Plant Coproduct Output
U.S. Ethylene Plant Coproduct Output 70 Ethylene Plant Coproduct Output Product, 2017-2022 Millions of Pounds per Day Growth and CAGR: 60 Propylene Growth 10% 5-Year CAGR 2% 50 Butadiene & Other C4 40 Growth 19% 5-Year CAGR 4% 30 Benzene Growth 13% 5-Year CAGR 3% 20 Toluene Growth 7% 10 5-Year CAGR
Slide 53: Near-Term U.S. Ethylene and Derivative Capacity Additions
Near-Term U.S. Ethylene and Derivative Capacity Additions U.S. ethylene derivative capacity is ~40% of new derivatives are products expected to expand ~30% over the that are moved by water next 5 years 4,500 Vinyl Acetate Ethylbenzene Monomer 4,000 1% 0% Alpha Olefins 3,500 Ethylene 15% Dichloride 3