1775 St. James Place. Suite 300
Kirby's strategy is to enhance shareholders' value by growth through acquisitions in a consolidating industry where attractive industry fundamentals and opportunities to differentiate by providing value added services exist. Since 1989, when Kirby Corporation began a program of consolidation through acquisitions within the marine transportation industry, its total return to shareholders has outperformed the S&P 500 and the Dow Jones Marine Transportation Index. Kirby's acquisitions and internal growth have expanded revenues (excluding insurance) at a compounded 25 percent rate since 1989. Through cost reduction efforts and operating efficiencies generated by its integrated distribution network, Kirby expects continued improvement in operating results. Future acquisitions, be they shipper fleets, independent fleets, or new builds, will present incremental additions to Kirby's fleet. Kirby is not limited to earnings improvement through acquisitions or new construction. In the future, as in the past, Kirby will entertain opportunities to increase shareholder value through stock repurchases.
Kirby Corporation is the largest marine transportation company in the United States, and the country's leading transporter of bulk liquid products. Through its subsidiaries, including Dixie Carriers, Inc., Kirby's Inland Division provides inland tank barge transportation in four major areas: industrial chemicals, petrochemical feedstocks, agricultural chemicals, and refined petroleum products. Kirby's expanding inland fleet includes 513 tank barges, 124 towboats, and six bowboats. The Inland Division provides the bulk of the company's revenues, and the Kirby fleet has captured 20 percent of the total domestic tank barge transportation market. Kirby's Offshore Division, with seven offshore tankers, two offshore tank barges, six offshore dry cargo barges, two offshore break-bulk ships, nine offshore tugboats and seven harbor tugboats, transports refined petroleum products, and dry-bulk, container and palletized cargoes, along the Gulf Coast and to foreign ports in South America, Africa, and Europe. Expansion of Kirby's fleet has come primarily through acquisition. Since 1989 the company has actively engaged in consolidating the domestic marine transportation industry, acquiring a number of competing companies, including Brent Towing Co., Sabine Towing & Transportation, Alamo Inland Marine Co., Ole Man River Towing, Inc., Scott Chotin, Inc., TPT Transportation Co., and AFRAM Lines (USA) Co., Ltd. Kirby has also converted nearly all of its domestic barge fleet to the double-hull type required by federal environmental law; by 1996, of the company's 513 inland tank barges, only 90 were still of the single-skin variety.
While marine transportation provides the largest portion of Kirby's revenues, the company's Diesel Repair operations contribute some $70 million in annual sales. Through that division's three operating subsidiaries, Marine Systems, Inc., Engine Systems, Inc., and Rail Systems, Inc., the company sells, overhauls, and repairs medium-speed large diesel engines and related parts. The company's five service centers help maintain the entire domestic power marine and industrial industry. The company also is a major distributor of diesel engines and parts to the marine and power generator markets, and the railroad and nuclear power industry. In addition, Kirby has been involved in the insurance business, primarily in Puerto Rico, through its Universal Insurance Co. subsidiary; since 1992, however, after merging Universal with Eastern America Insurance Company, Kirby has been exiting the insurance industry. In 1996, after reducing its holdings in Universal to 47 percent, Kirby de-consolidated Universal from its financial statements. Terms of the Eastern merger call for Kirby to reduce its Universal holdings to zero at the turn of the century.
Kirby is led by chairman George Peterkin, who has been with the company since the 1950s, and president and CEO Joseph H. Pyne, Jr. In October 1996 Kirby, which had listed on the American Stock Exchange since 1957, began trading on the New York Stock Exchange.
A Petroleum Spinoff of the 1970s
Kirby started out as a subsidiary of Kirby Industries, Inc.; incorporated as Kirby Jamaica in 1969, the company was formed as part of an oil and gas concession in Jamaica. In the early 1970s, the company's name was changed to Kirby Petroleum Co. But in 1974, despite earnings of $6.5 million on revenues of $85 million, Kirby Industries liquidated its activities, because, as then-president Peterkin told Newsweek, "the market did not value [Kirby's] assets at the proper price." As part of the liquidation, Kirby Petroleum was spun off as a public company, renamed Kirby Exploration Company. The new company brought with it two former Kirby Industries subsidiaries, Dixie Carriers, acquired in 1968, and Universal Insurance, started in 1972. Revenues for the new company were $51 million in 1976.
The company's sales reached $58 million by 1978, and $73 million by 1980, driven largely by a boom in the marine transportation market. But the company's oil and gas business was sagging; in 1980, the company agreed to merge with a company to be formed by the New York investment firm Kohlberg, Kravis, Roberts & Company. That merger was called off in 1981, after the parties could not reach agreement on the distribution of shares in the company to be formed. As the economy slid into the recession of the early 1980s, Kirby's oil and gas business began dragging down the company's profits, producing an operating loss of $118,000 in 1981. But in 1982, the oil and gas units operating loss jumped to $29 million, sinking Kirby into the red by $15 million on $102 million in revenues. In 1983, the company acquired General Energy Corp. in a stock-swap merger, and the following year formed a new subsidiary, Kirby Exploration Co. of Texas.
Kirby also made attempts to diversify its operations, moving into data processing, through an interest in Davenport Data Processors, Inc., and into semiconductor services, through a 97.7 percent ownership position in Materials Technology Corporation. The Davenport interest was sold to Bank of America in 1984. The company sold off the semiconductor business the following year. More successful was the 1982 acquisition of Marine Systems, bringing the company into diesel repair. Meanwhile, Kirby's oil and gas segment continued to falter. When the oil industry collapsed in the second half of the 1980s, Kirby discontinued its oil and gas operations. That portion of the business was sold to American Exploration Company for $62 million in cash in 1988. About half of that went to retiring debt and covering costs of the sale. With the rest, the company began weighing its options for the future, including investing in other industries, or returning to the oil and gas industry. Instead, Kirby turned to its marine transportation unit.
Sailing into the 1990s
Peterkin's involvement in the barge business reached back to 1948, when his father and uncle, who also controlled Kirby, invested in Dixie Carriers. Peterkin, who had graduated from the University of Texas, joined the company that year. Dixie by then operated a 20-barge fleet. Five years later, Peterkin became president of the family-owned company. In 1968, Dixie was acquired as a subsidiary to Kirby Industries. When Kirby Petroleum was spun off after the Kirby Industries liquidation, Dixie was included as a subsidiary to the new public company.
The marine transportation unit already formed a major part of Kirby's operations. By 1981, over half of the company's revenues came from its barge business, which also produced nearly two-thirds of the company's operating income. But that business, too, was under pressure throughout the 1980s. Several factors combined to turn the once-solid marine transportation industry into a financial minefield. Chief among these was rampant overbuilding of barges during an industrywide boom in the 1970s. With demand rising and hauling rates high, companies rapidly began expanding their fleets--by 1981 there were some 28,000 barges, including a historic high of 4,900 tank barges, working the country's waterways. Investment interest from Wall Street helped fuel the expansion of fleets, as investors sought out barges as attractive tax shelters.
In 1980, however, President Carter declared a grain embargo against the Soviet Union--until then the country's biggest grain buyer. At the same time, new federal regulations imposed waterway user fees for the first time in the industry's 200-year history. (Waterways had been decreed free in the Northwest Ordinance of 1787.) The user fee, meant ultimately to recover 100 percent of the cost of waterway improvement and maintenance, which cost taxpayers some $300 million in the early 1980s, started at six cents per gallon of fuel, then rose to 10 cents per gallon. With fuel consumption reaching some 11,000 gallons or more for a single barge's return trip, coupled with a flattening of the market, the marine transportation industry underwent a shakeout, with many smaller--and larger--companies failing. By 1983, 20 percent of the country's barge fleet were idled. Then new environmental regulations, imposed in the wake of such major oil disasters as the Exxon Valdez spill, demanded that companies carrying petroleum and other chemical products convert their fleets from single-skin hulls to more disaster-resistant double-skin hulls. The cost of converting a barge, as well as building new double-skin barges, finally proved too much for many of the companies that had survived the shakeout of the early 1980s.
Kirby's barge subsidiary struggled along with the rest of the industry, with revenues falling in the first half of the 1980s. But Kirby had resisted the urge to expand its fleet during the 1970s boom, building new barges only when they were under contract. At the same time, the company focused on winning primarily long-term, fixed-rate contracts, which served the company well as the bottom dropped out of the spot contract market and rates plunged. By the end of the 1980s, Kirby emerged as one of only a handful of surviving independent barge lines.
Kirby, by then exiting the oil and gas business, recognized an opportunity to expand its marine transportation unit. With many of its competitors floundering, Kirby began adding to its fleet by acquiring other companies, starting with the $25 million cash acquisition of Brent Towing Co. in 1989. That acquisition was followed less than two weeks later by the acquisition of Alamo Inland Marine Co. for another $27 million in cash. The two acquisitions doubled Kirby's fleet, to 164 tank barges and 64 towboats. The expanded operations helped raise Kirby's revenues from $98 million in 1988 to $141 million in 1989. The company also added to its diesel repair operations, opening a fourth service facility, located in St. Louis, Missouri. The following year, the company added nine new double-skin tank barges to its fleet, purchased four used double-skin tank barges and five towboats, and placed an order for the construction of six new double-skin tank barges. Then, in a stock and cash deal worth $145 million, Kirby acquired Western Pioneer, Inc., and its Delta Western subsidiary, bringing Kirby into the Pacific Northwest and Alaskan markets. The company also acquired the assets of International Barges, Inc., which included three cryogenic tank barges serving the anhydrous ammonia market, for $2.6 million.
Kirby changed its name to Kirby Corporation in 1990 to reflect the company's new direction. In 1992, Kirby was back on the acquisition path, purchasing in that year Sabine Towing & Transportation Co., a subsidiary of Sequa Corporation, for $36.9 million in cash; the assets of Ole Man River Towing, including that company's tank barges, towboats, and property holdings, for $25.6 million; and Scott Chotin, Inc., based in Louisiana, and that company's 29 inland tank barges and 10 dry cargo barges, for stock and cash worth $34.9 million. In its diesel repair arm, Kirby opened a fifth service facility, located in Louisiana. The company then made the first step toward exiting the insurance market, merging its Universal insurance arm with Eastern America Insurance Company, with Universal as the surviving entity. Terms of that deal called for Eastern/Universal to redeem Kirby's stock--75 percent after the merger--in the company over the next 12 years.
Kirby's expansion drive continued. In 1993, the company's fleet grew to 468 barges and towboats, and an additional 16 offshore vessels, with the $24 million purchase of 72 inland tank barges from Ashland Oil Co. subsidiary TPT Transportation, and the $25.5 million acquisition of AFRAM Lines. Co., a worldwide shipper of dry bulk and container cargo, primarily for the U.S. government. The company completed the year with the $15 million purchase of 53 inland tank barges from Midland Enterprises, Inc. Revenues for 1993 reached $378 million, providing a net income of $22.8 million.
While not all of Kirby's endeavors were equally successful--in January 1994 the company attempted to open a new shipping line between Memphis and Mexico and South America; the company aborted that line in August 1994 in the face of stiff competition; in 1996, Kirby was forced to idle its AFRAM fleet and began to look into exiting the government/military transport market--Kirby continued to post impressive gains into the mid-1990s as demand for barge transportation underwent a new surge. The company added to its fleet with the purchase of 65 inland tank barges and leases on an addition 31 inland tank barges from Dow Chemical Company for $24 million in cash; at the beginning of 1995, the company placed an order for construction of 12 new double-skin inland take barges. The company's 1995 revenues surged to $440 million, including $45 million from the company's insurance operations. Kirby de-consolidated Universal from its revenue statement for 1996. In that year, the company faced a weaker market for its marine transportation. However, its diesel repair arm posted strong growth, boosting the company's profits to $27 million on revenues of $386 million for the year.
Principal Subsidiaries: Brent Transportation Corporation; Chotin Carriers, Inc.; Dixie Carriers, Inc.; Dixie Marine, Inc.; OMR Transportation Company; Sabine Transportation Company; TPT Transportation Company; Western Towing Company; AFRAM Carriers, Inc.; Dixie Carriers, Inc.; Dixie Fuels Limited; Kirby Tankships, Inc.; Sabine Transportation Company; Marine Systems, Inc.; Rail Systems, Inc.
Principal Divisions: Inland Marine Transportation; Offshore Marine Transportation; Diesel Repair.