Kirby Corporation (KEX)

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Kirby Corporation (KEX)

Citi 2012 Global Industrials Conference

September 20, 2012 2:00 p.m. ET

Executives

Greg Binion - President and COO

David Grzebinski - CFO

Analysts

[Unidentified Analyst]

Presentation

Greg Binion

Thank you for having us and we appreciate your interest in Kirby Corporation. I’m going to start today’s comments with an overview of what Kirby – who Kirby is and what we do and then David’s going to follow up with the current financial outlook and financial performance.

So Kirby is essentially in two key businesses -- the marine transportation that delivers about two-thirds of our revenue and our diesel engine segment that delivers about one-third. Some public facts about our company, you can see we have close to 56 million shares outstanding at the current share price, delivers a market cap of about $3.2 billion. Debt about $800 million given this enterprise of just over $4 billion and today we have 4250 employees.

Some facts about Kirby, we’re the nation's largest inland and coastal tank barge operator. There are some details on the fleet size and we’ll dig into these little more deeply in a moment. In the inland space about 75% of our revenue comes from term contracts a year or longer, and about 55% of that comes from term -- from time charters which protect us from short-term market fluctuations and weather risk.

And in the coastal space, about 60% of our revenue is under term contracts, 90% of that is under time charters. And you may have noticed that we announced the signing of agreement to purchase Allied Transportation Company’s marine assets which includes 10 tank barges which are predominantly in the petrochemical trade coastwise and three dry bulk cargoes along with seven tugboats.

We’re also in the diesel engine business serving as a nationwide service provider and parts provider for medium and high speed engines, and we’re also engaged in the manufacturing and remanufacturing of oilfield service equipment and compression equipment serving predominantly the natural gas business. And I point out we’re the successful integration of 30 marine and 16 diesel acquisitions. These are the 30 marine acquisitions, you can see dating back to 1986. Those in red are the shipper owned fleets. So you will recognize some of their names, Dow Chemical, Union Carbide, MC River and then most recently Lyondell that occurred in 2012.

And then you can also see the activity that we've had since 2011, including Kinder Morgan facility, the enterprise acquisition, which is the ship bunkering operation in Miami, the KC acquisition of tuck-in of Seaboats and finally the Lyondell acquisition. And then the 16 acquisitions that are in the diesel engine space, most recently the United Holdings which occurred in April of 2001. So this acquisition activity has driven our revenue growth rate to 16.5% from 1988 to 2011 to just over $1.8 billion in 2011. And our earnings-per-share have grown by 15% annually from 1994 to 2011.

Digging into the marine transportation business a little bit deeper, this chart depicts our service area and we’re one of the few operators which can serve our customer base on – in all U.S. coasts, the Gulfs, the Atlantic and West Coast along with Alaska and Hawaii as well as the entire Western River systems as the Mississippi and Ohio and Illinois are known as long as along the Gulf Coast – the Gulf Intracoastal Waterway, which is that red ribbon running along the Gulf Coast.

On any given day in the inland space, two-thirds of our barges can be found operating along the Gulf Coast with about one-third of river. And I’ll also point out that Texas and Louisiana, it’s where 80% of the U.S. petrochemical production resides.

Just some more facts about the barge industry, and of course we serve the operating area that I previously mentioned. The tank barge inland space is part of a much larger dry cargo network, there’s 18,000 dry cargo barges and 3100 tank barges in the inland space. And then the coastwise business which includes all coasts, Alaska and Hawaii is about 270 barges.

Kirby is in the liquid business predominantly but we do serve our customer in the coastal business delivering coal across the Gulf of Mexico. The U.S. is protected from foreign competition by the Jones Act as our many countries have a law of – capitalist law protecting indigenous transportation. Our equipment, because of the inland equipment, because of the locks and dams and the shape of the inland waterway space is not subject to economic obsolescence. And barging is one of the most environmentally green and safest ways to move a customer’s cargo.

This slide gives you an idea of the types of cargoes that we move. Just over 50% is petrochemical. You can see the types of cargoes that we move and the demand drivers are 70% of the volumes we touch, still in the consumer nondurable and 30% in durables, 25% refined products, just under 20% black oil products which are refinery intermediates as well as fuel for ships as for power plant production and then 4% serve agricultural markets.

Given what we move and who we move it for, we have an extremely strong emphasis on safety. We have our own internal training process that covers new hires coming in as deckhands all the way to getting our mariners ready to get the pilot’s license and drive the boats. That picture in the right-hand side is actually a simulator that we use to make our training process more effective. And safety has been part of our culture for a very long time. We were the first winner of the Benkert award which is awarded by the department of transportation. We received this award in the early ‘90s just to give you an idea, that is for a very long time.

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