Kirby Corporation · NYSE:KEX
Kirby — Investor Day (November 2006)
75 slides from Kirby's investor day presentation, Nov 8, 2006
Slide 1: Analyst/Investor Meeting
Analyst/Investor Meeting Houston, Texas November 8, 2006 Kirby Corporation 1
Slide 2: Agenda
Analyst/Investor Meeting November 8, 2006 Agenda 8:15 – 8:45 Kirby Overview 8:45 – 9:45 Kirby Inland Marine 9:45 – 10:00 Tour Dispatch Operations 10:00 – 10:30 Kirby Engine Systems 10:30 – 11:00 Bus ride to Seamen’s Church Institute 11:00 – 11:45 Simulator Observation 11:45 – 12:15 Bus ride to Peter
Slide 3: Financial Highlights
• Financial Highlights Presented by Norman Nolen CFO, Exec. Vice President Kirby Corporation 3
Slide 4: Financial Highlights
Financial Highlights For First Nine Months Ended September 30, 2006 Change From 2005 Income Statement 2006 2005 $ % Revenues: Marine Transportation $604.5M $500.2M $104.3M 21% Diesel Engine Services 128.3 82.2 46.1 56% Total $732.8 $582.4 $150.4 26% Operating Income: Marine Transportation $ 113.9 $
Slide 5: Marine Transportation EBITDA and Operating Margins
Marine Transportation EBITDA and Operating Margins 27.8% 26.9% 27.0% 26.0% 26.2% 25.3% 24.6% 24.1% 22.0% 18.9% 18.8% 18.4% 17.4% 17.0% 16.6% 15.7% 14.6% 12.0% 2000 2001 2002 2003 2004 2005 2006 Operating Margins EBITDA Margins 5
Slide 6: Diesel Engine Services EBITDA and Operating Margins
Diesel Engine Services EBITDA and Operating Margins 19.0% 16.7% 17.0% 15.5% 15.0% 12.8% 13.0% 11.7% 11.0% 11.1% 11.5% 11.0% 10.4% 10.8% 11.0% 10.1% 10.1% 9.7% 9.5% 9.0% 7.0% 5.0% 2000 2001 2002 2003 2004 2005 2006 Operating Margins EBITDA Margins 6
Slide 7: Marine Transportation Margins
Marine Transportation Margins 22.0% 19.4% 19.0% 18.4% 18.6% 17.8% 17.5% 16.8% 16.0% 13.7% 13.0% 10.0% Q1 Q2 Q3 Q4 Average 2001-2005 2006 7
Slide 8: Barge Capacity Retirement Schedule
Barge Capacity Retirement Schedule Thousands of Barrels 1,200 1,011 1,000 Thousands of Barrels 800 676 600 474 400 346 354 303 230 180 200 141 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 8
Slide 9: New Construction Costs
New Construction Costs Replacement Barges $50 $44 $40 $38 Thousands $30 $28 $28 $24 $22 $20 $17 $17 $11 $10 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 9
Slide 10: New Construction Costs
New Construction Costs $70 $63 $60 $54 $50 $48 $48 $44 Thousands $40 $30 $28 $28 $24 $22 $20 $10 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Replacement Barges Expansion Barges 10
Slide 11: Barge Capacity
Barge Capacity Millions of Barrels 20 19 18 17 16 15 2003 2004 2005 2006 2007 2008 2009 2010 2011 11
Slide 12: New Construction Costs
New Construction Costs $80 $70 $66 $67 $62 $59 $60 Thousands $50 $44 $40 $28 $28 $30 $24 $22 $20 $10 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Replacement Barges Expansion Barges Boats 12
Slide 13: Capitalized Maintenance
Capitalized Maintenance $100 $82 $80 $69 $68 $64 $61 $58 Thousands $60 $56 $48 $50 $40 $20 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 13
Slide 14: Total Capital Expenditures
Total Capital Expenditures $160 $142 $140 $131 $128 $122 $120 Thousands $100 $94 $90 $93 $87 $80 $72 $60 $40 $20 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Capitalized Maintenance & Other Replacement Barges Expansion Barges Boats 14
Slide 15: Cash Flows
Cash Flows $160 $142 $142 $140 $127 $122 $120 $112 $100 $97 $94 $ Millions $83 $80 $73 $72 $59 $60 $48 $48 $40 $20 $0 2000 2001 2002 2003 2004 2005 2006 Proj. Cash Flow From Operations Capex* Expansion Barges & Boats * Capex excludes acquisitions 15
Slide 16: Debt to Capitalization
Kirby Corporation Debt to Capitalization 40% Debt / Capitalization (%) 30% 20% 10% 0% J F M A M J J A S O N D J F M A M J J A S 2005 2006 16
Slide 17: Kirby Inland Marine
Kirby Inland Marine 17
Slide 18: U.S. Inland Boat and Barge Supply; Manning; Charter Boat Strategy
• U.S. Inland Boat and Barge Supply • Manning/Crewing Issues • Charter Boat Strategy Presented by Steve Valerius President Kirby Inland Marine, LP 18
Slide 19: Inland Tank Barge Industry
Inland Tank Barge Industry Total Tank Barges 3,100 3,000 2,850 2,850 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 19
Slide 20: Inland Tank Barge Fleet
Inland Tank Barge Fleet Source: Informa Economics, Barge Fleet Profile, March 2006 815 Number of Tank Barges 615 599 415 386 384 349 345 291 215 193 169 66 15 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 Age of Tank Barges (Years) 20
Slide 21: Industry Fleet Hull Profile
Industry Fleet Hull Profile 1,254 Double Skin 30K barges 1,320 Double Skin 10K barges 124 Double Skin < 10K barges 152 Single Skin barges 2,850 Total 21
Slide 22: Industry Retirement History
Industry Retirement History Barges Barrels (MM) 2000 104 2.6 2001 92 2.3 2002 79 2.0 2003 117 2.8 2004 100 2.4 2005 104 2.5 BBL estimated from Informa Economics 22
Slide 23: High Tech and Diverse Fleet
High Tech and Diverse Fleet 903 Active Tank Barges 704 114 63 12 10 Petrochemical Black Oil Pressure Anhydrous Specialty Refined Self-contained Pressurized Ammonia Stainless steel Products heating systems tanks Refrigeration tanks High Capacity tanks pumps – Specialty coated tanks 23
Slide 24: Fleet Size and Diversity
Fleet Size and Diversity Tank Barge Owners By Number of Tank Barges Informa Economics, Barge Fleet Profile, March 2006-Adjusted Shipper Owned Tank Barges Dry Cargo Shipper Owned Tank Barges Dry Cargo Independent Operated Barges Independent Operated Barges Operated Operated Kirby Corporation 903 - Dy
Slide 25: Kirby New Construction Plan
Kirby New Construction Plan 2 10K Clean 2006 23 30K Clean 25 Total 6 10K Clean 2007 20 30K Clean 26 Total 20 10K Clean 2008 12 30K Clean 32 Total 25
Slide 26: New Construction on Order
New Construction on Order Total Industry 2006 111 2.9 MM BBL 2007 133 3.3 MM BBL 2008 62 1.1 MM BBL 26
Slide 27: New Construction Prices
New Construction Prices 10,000 bbl – Clean $1.25M* 30,000 bbl – Clean $2.30M 30,000 bbl – Heated Black Oil $3.50M *Specialty 27
Slide 28: New Construction Cost Components
New Construction Cost Components Construction labor 38% Steel, steel products 37% Components 17% Engineering 8% 100% 28
Slide 29: Steel Sheet Prices
$ per ton 0 100 200 300 400 500 600 700 800 900 1000 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Source: American Metal Market/CRU Monitor Apr-05 May-05 Jun-05 CR Sheets Jul-05 Aug-05 Sep-05 Oct-05 Steel Sheet Prices Mill Price + Scrap Sur
Slide 30: Kirby Fleet Status
Kirby Fleet Status 950 Number of Barges 930 915 910 903 898 890 885 880 870 850 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 New Construction 23 42 25 26 32 19.00 Barrel Capacity (mm) 18.50 18.00 17.50 17.35 17.00 16.96 16.75 16.50 16.52 16.23 16.00 15.50 15.00 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 30
Slide 31: Kirby Towboat Construction
Kirby Towboat Construction 2006/07 4 – 2100 HP – 90’x34’x10’ Oct 30, Jan 17, March 29, May 11 2007 4 – 1800 HP – 76’x35’x10’ June 10, July 25, Sept 5, Oct 17 2008 4 – 1800 HP – 76’x35’x10’ March, April, May, June 31
Slide 32: Robert G. Stone, Jr.
Robert G. Stone, Jr. 32
Slide 33: Towboat Fleet
Towboat Fleet 157 Kirby-owned boats 90 Full-time charter boats 5 Short-term use boats 252 Total Operated Boats 33
Slide 34: Charter Boats
Charter Boats Kirby operates 94 chartered towboats • 27 different charter boat service providers • Average tenure with Kirby is 12 years Charter Boat Strategy • No capital cost • Variable cost vs. fixed cost 34
Slide 35: Marine Workforce
Marine Workforce 35
Slide 36: Vessel Personnel Profile
Vessel Personnel Profile 1,323 Marine Employees 495 Captains / Pilots 394 Tankermen 341 Deckhands/Tankermen Trainees 93 Engineers 36
Slide 37: Vessel Personnel Profile
Vessel Personnel Profile Average Years of Service 16 Captains 5 Tankermen 12 Engineers 37
Slide 38: Recruit, Train and Retain
Recruit, Train and Retain • Recruit – Develop a large diverse applicant pool – Promote career path/competitive pay – Conduct comprehensive screening • Training and Development – Company-owned and operated Training Center providing US Coast Guard Approved Programs – Safety and job skill training – Cl
Slide 39: Recruit, Train and Retain
Recruit, Train and Retain • Career Path is Critical to Retention – Training Path culminates with industry’s only USCG Approved Mate (Pilot) Program – (Steersmen) – Retention rate of 90% for employees completing the program 39
Slide 40: Provide Advancement Opportunity
Provide Advancement Opportunity Kirby Offers Excellent Benefits Captain • Highly competitive wages • 401(k) In 10 years • Insurance • Disability coverage $94,625 Up to • Pension plan • Annual incentive bonus Relief Captain $107,000 plus bonus • Free training • Longevity pay In 5- 5-10 years $87,250
Slide 41: Shipyards, River Conditions, Regulatory Issues
• Shipyards • River Conditions • Regulatory Issues Presented by Jim Farley Exec. Vice President, Operations Kirby Inland Marine, LP 41
Slide 42: Tank Barge New Construction Shipyards
Tank Barge New Construction Shipyards Jeffboat Trinity – Ashland City Trinity – Madisonville Southwest West Gulf West Gulf - Palacios 42
Slide 43: Dry Cargo New Construction Shipyards
Dry Cargo New Construction Shipyards Jeffboat Tell City Trinity – Caruthersville Trinity – Port Allen 43
Slide 44: Inland Tank Barge Repair Yards
Inland Tank Barge Repair Yards 44
Slide 45: Canal and River Constraints
Canal and River Constraints Upper Mississippi Illinois River River Ohio River Lower Mississippi River Intracoastal Waterway 45
Slide 46: Navigation Delays
Navigation Delays 4,000 3,500 3,289 3,000 2,471 2,500 2,080 1,790 1,863 2,000 1,378 1,500 1,200 1,000 500 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2005 2006 46
Slide 47: Regulatory Issues
Regulatory Issues • TWIC • Inspected Towing Vessel 47
Slide 48: Pricing and Contracts
• Pricing and Contracts Presented by Bill Ivey Exec. Vice President, Sales Kirby Inland Marine, LP 48
Slide 49: Term vs. Spot
Term vs. Spot • 70% Contract – 12 months or longer – Formula driven escalators • Renewable – 25% long term – 35% annually – 10% every two-three years • 30% Spot – Market driven rates 49
Slide 50: Contract Escalators
Contract Escalators • Fuel – Quarterly – Monthly • Labor – Semi-annually – Annually • Inflation – Semi-annually – Annually 50
Slide 51: Pricing
Pricing • Third Quarter Spot Pricing 25% higher year over year • Currently Spot Pricing 10-15% above Contract Pricing • Strong volumes expected to continue • Pricing environment favorable for 2007 51
Slide 52: Kirby Engine Systems: The Diesel Engine Services Market
Kirby Engine Systems The Diesel Engine Services Market
Slide 53: Agenda
Agenda • Diesel Engine Market – Overview • KES Operations • High Speed Market • High Speed Acquisition Synergies • Acquisition of Global Power Holding Company, Inc. • Growth Opportunities Kirby Engine Systems 53
Slide 54: Basic Diesel Engine Types
Basic Diesel Engine Types Engine Speed Horsepower Range Applications Manufacturers Slow Speed Less than 400 RPM 7,000 – 108,000 hp • Large ocean going vessels • Man B&W • Power generation • Sulzer • Wartsila Medium Speed 400 – 1,000 RPM 800 – 32,000 hp • Inland vessels • EMD • Offshore vessels • Cat
Slide 55: Slow Speed Diesel Engine
Slow Speed Diesel Engine Kirby Engine Systems 55
Slide 56: Medium Speed Diesel Engine
Medium Speed Diesel Engine Kirby Engine Systems 56
Slide 57: High Speed Diesel Engine
High Speed Diesel Engine Kirby Engine Systems 57
Slide 58: US Marine Propulsion Engines
US Marine Propulsion Engines 5,000 4,500 Number of Engines 4,000 35% 3,500 3,000 25% 24% 2,500 2,000 1,500 13% 1,000 500 3% 0 Detroit Caterpillar EMD Cummins Other Diesel Kirby Engine Systems 58
Slide 59: KES Services
KES Services Replacement Parts Engine and Gear Repair • OEM new parts • Overhauls • OEM remanufactured parts • Bearing and element replacement • Kirby remanufactured parts • Remanufacture engines • Machining and Welding • Troubleshooting • Alignment Kirby Engine Systems 59
Slide 60: Manufacturer Affiliations
Manufacturer Affiliations Kirby Engine Systems 60
Slide 61: KES Locations
KES Locations Seattle Chesapeake Paducah Rocky Mount High Speed Medium Speed Tampa Miami Galveston Kirby Engine Systems 61
Slide 62: Revenue Growth
Revenue Growth $130 $120 $110 $100 Millions $90 $80 $70 $60 $50 04 05 s) th 20 20 on m (9 06 20 Kirby Engine Systems 62
Slide 63: Operating Income
Operating Income $20 $18 $16 $14 Millions $12 $10 $8 $6 $4 04 05 s) th 20 20 on m (9 06 20 Kirby Engine Systems 63
Slide 64: High Speed Market
High Speed Market • Overview – Engine population • High speed engines provide main propulsion power for over 73% of U.S. flagged commercial vessels – Markets: • Oil Services • Inland Waterways • Offshore Towing – Consolidation Kirby Engine Systems 64
Slide 65: High Speed Acquisition Synergies
High Speed Acquisition Synergies • Synergies – Opportunity to provide multiple products and services to individual customers – Diversifies customer base Kirby Engine Systems 65
Slide 66: Global Acquisition
Global Acquisition • Global Business Overview – Premier high speed diesel engine service provider on the Gulf Coast – 296 employees; 175 service technicians – Projected revenue of $68 - $70 million in 2006 – Six operating locations – Gulf Coast authorized marine dealer: • Caterpillar • Cummins • Det
Slide 67: KES Opportunities
KES Opportunities • High Speed Market Expansion Opportunities – Engine rebuild capacity – Inland waterway business – Land drilling • Market Consolidation – Consolidation in customer base • Acquisitions Kirby Engine Systems 67
Slide 68: Closing Remarks
• Closing Remarks Presented by Joe Pyne CEO, President Kirby Corporation 68
Slide 69: Revenue – Business Operations
Revenue – Business Operations Marine Transportation and Diesel Engine Services Revenue From Continuing Operations 900 17% 17% growth growth $796 800 rate rate from from $675 700 1988-2005 1988-2005 $613 600 $567 In Millions $513 $535 500 400 $335 $366 $320 $327 300 $301 $318 $265 200 $187 $134 $151
Slide 70: Earnings Per Share
Earnings Per Share Earnings Per Share From Continuing Operations Before Adjustments $2.00 14.2% 14.2% growth growth $1.79 $1.75 rate rate from from $1.74 1994 1994 -- 2005 2005 $1.50 $1.33 $1.25 $0.94 $0.98 $1.00 $0.82 $0.82 $0.83 $0.75 $0.63 $0.48 $0.52 $0.50 $0.42 $0.37 $0.31 $0.25 1994 1995 1996
Slide 71: After Tax Return on Capital
Kirby Corporation After Tax Return on Capital* 14.0% 12.0% 10.0% 8.0% J F M A M J J A S O N D J F M A M J J A S 2005 2006 *(Net income + after-tax interest)/(debt + equity) 71
Slide 72: Marine Transportation - Acquisitions
Marine Transportation - Acquisitions Shipper Owned (Blue) Independent (Red) No. of No. of Tank Tank Date Barges Description Date Barges Description 1986 5 Alliance Marine 1999 270 Hollywood Marine, Inc. - Stellman 1989 35 Alamo Inland Marine Co. - Alamo Barge Lines 1989 53 Brent Towing Company - Ell
Slide 73: Diesel Services – Acquisitions
Diesel Services – Acquisitions Acquisitions 1987 National Marine 1991 Ewing Diesel 1995 Percle Enterprises 1996 MKW Power Systems 1997 Crowley (Power Assembly Shop) 2000 West Kentucky Machine Shop 2000 Powerway 2004 Walker Paducah Corp. 2005 TECO (Diesel Services Division) 2006 Global Power Holding
Slide 74: Financial Strength
Financial Strength • Investment grade public debt – Standard & Poor’s – BBB+ – Moody’s – Baa3 • 8-year unsecured Private Placement due 2013 – $200 million outstanding – Floating rate of LIBOR +0.5% – No required principal payments until maturity • $250 Million Revolving Credit Facility – Accordion f
Slide 75: Tank Barge Supply and Demand
Tank Barge Supply and Demand Artificial demand New fleet Steady Demand Old Fleet 1970 1975 1980 1985 1990 1995 2000 2005 2010 75