Core Lab Reports First Quarter 2018 Results From Continuing Operations:

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Core Lab Reports First Quarter 2018 Results From Continuing Operations:

– REVENUE OF $170 MILLION, UP MORE THAN 8% YEAR-OVER-YEAR; FLAT SEQUENTIALLY

– OPERATING MARGINS OF 19%, UP 400 BPS YEAR-OVER-YEAR

– YEAR-OVER-YEAR INCREMENTAL OPERATING MARGINS OF 65%; 68% EX-ITEMS

– GAAP EPS OF $0.54; $0.57 EX-ITEMS, UP 39% YEAR-OVER-YEAR

– SEQUENTIALLY, PERFORATING SYSTEM SALES UP 19%; U.S. COMPLETIONS UP 9%

– COMPANY POSTS OILFIELD SERVICE-LEADING ROIC

– COMPANY INCLUSION INTO BLOOMBERG’S GENDER-EQUALITY INDEX

– CORE LAB INITIATES Q2 2018 EPS GUIDANCE $0.64 TO $0.66

PR Newswire

AMSTERDAM, April 25, 2018 /PRNewswire/ — Core Laboratories N.V. (NYSE: “CLB US” and Euronext Amsterdam: “CLB NA”) (“Core”, “Core Lab”, or the “Company”) reported that continuing operations resulted in first quarter 2018 revenue of $170,000,000, up over 8% year-over-year, with operating income of $32,300,000, up almost 40% year-over-year, and earnings per diluted share (“EPS”) increased 32% to $0.54, all in accordance with U.S. generally accepted accounting principles (“GAAP”). EPS, ex-items, a non-GAAP financial measure, increased 39% year-over-year to $0.57. Reconciliations of non-GAAP financial measures are included in the attached financial tables.

Operating margins for the Company increased 400 basis points (“BPS”) year-over-year to 19%, ex-items. Year-over-year incremental operating margins were 68%.  The improving operating and incremental operating margins are the result of higher-technology services and products being requested by Core’s technologically sophisticated client base and increased utilization of our services and products.

In the first quarter of 2018, the Company committed to divest the business of our full range of permanent downhole monitoring systems and related services, which have been part of our Production Enhancement segment.  The associated results of operations and cash flows from this discontinued business are separately reported as Discontinued Operations for all periods presented.  As such, the results from continuing operations for the Company and segment highlights for Production Enhancement, exclude these discontinued operations.

Core’s Board of Supervisory Directors (“Board”) and the Company’s Executive Management continue to focus on strategies that maximize return on invested capital (“ROIC”) and free cash flow (“FCF”), a non-GAAP financial measure defined as cash from operations less capital expenditures, while exercising capital discipline, factors which have high correlation with maximum total shareholder return. Core’s asset-lite business model promotes asset efficiency, designed to produce predictable, superior long-term, and sustainable ROIC.  Bloomberg’s calculations using the latest comparable data available indicates that Core’s ROIC is the highest of any member of the Philadelphia Stock Exchange Oil Service Sector Index (the “OSX”) as well as any comparably-sized companies in oilfield services.  Core also had the highest ratio of ROIC-to-Weighted Average Cost of Capital (“WACC”) for all major oilfield service companies.

On 22 January 2018, Bloomberg announced that Core Lab would be one of the 104 companies out of over 5,000 publicly-traded companies from ten sectors, representing 24 countries and regions, to join the inaugural 2018 Bloomberg Gender-Equality Index (“BGEI”).  The BGEI, with its focus on gender equality in the workplace, is yet another metric by which investors can gauge a company’s commitment to environmental, social and governance (“ESG”) factors across industries.

Segment Highlights


Reservoir Description

Reservoir Description operations, primarily focused on worldwide producing oil and gas fields, performed as guided on the Company’s prior earnings call reflecting the traditional seasonal pattern that occurred in the first quarter.  Revenue in the first quarter of 2018 was $100,800,000 with operating income on a GAAP basis of $14,800,000. Ex-items, operating income was $15,000,000, yielding operating margins of 15%.

While international activity remained relatively unchanged in the first quarter of 2018, the Company experienced increased demand for our highly-specialized core and reservoir fluids services in U.S. unconventional plays, Alaska and the Gulf of Mexico (“GOM”), in addition to a number of countries in the Middle East and Asia-Pacific regions.

As part of the continual growth in Core’s Digital Rock Characterization services, high resolution Computed-Tomography (“CT”) scanners were recently installed in Anchorage and Kuwait.  This accelerated the delivery of critical geological and petrophysical data derived from core samples.  This aided Core’s clients by helping them to quickly assess the quality of their reservoirs and make time-sensitive decisions such as in designing well completions.  The CT-based logs provide detailed and accurate information on properties such as lithology, porosity, density, rock strength and acoustic properties, along with full three-dimensional digital visualization of the core.

In the first quarter of 2018, Core conducted a large geological and petrophysical evaluation of a potential unconventional reservoir target for a national oil company in the Middle East. This project included detailed geologic descriptions of shale cores, measurement of petrophysical properties using proprietary Core Lab technologies and log analysis. As a complement to the newly acquired information, data analytics were extensively employed.  These analytics compared the observed rock and petrophysical properties of this potential Middle East target with analogs of producing unconventional reservoir plays contained within Core Lab’s worldwide proprietary database. This unique perspective on unconventional reservoirs allowed Core to generate attribute maps, calculate potential reserves, identify optimal completion practices, and delineate optimal locations for the client across a broad geographic area. Based upon the results presented to the client, this project has expanded in scope and will continue into subsequent quarters.

The analysis of reservoir fluids (crude oil and natural gas) continues to be an important driver of Reservoir Description results, representing approximately 60% of total revenue for the segment.  Pressure-Volume-Temperature (“PVT”) data sets are used to determine the phase behavior of hydrocarbons at reservoir conditions.  In turn, these physical properties are key inputs for estimating hydrocarbon reserves and predicting reservoir performance over time.

During the first quarter of 2018, Core provided its clients with onsite sample collection services and PVT laboratory measurements that allowed clients to calculate the economic value of their reservoirs under primary production.  Furthermore, these data form the criteria necessary to determine when secondary, and possibly tertiary, recovery techniques should be applied to optimize the estimated ultimate recovery (“EUR”) from these reservoirs.  New fluid phase behavior projects were initiated in the Eagle Ford, the Permian Basin and the GOM, along with Guyana, Malaysia and other international locations.  In addition to these PVT services, Core Lab performed customized reservoir condition Enhanced Oil Recovery (“EOR”) studies. These include the determination of minimum miscibility pressures, physical measurements of crude oil properties following gas injection and thermodynamic testing for reservoir simulation models.  These test results allow Core’s clients to calculate the economic viability of miscible tertiary recovery processes, which could extend reservoir life and improve incremental hydrocarbon production.


Production Enhancement

Production Enhancement operations, largely focused on complex completions in unconventional tight-oil reservoirs and conventional offshore development projects, posted first quarter 2018 revenue of $69,200,000, up 34% year-over-year and 6% sequentially. Operating income, on a GAAP basis, was $17,700,000, up 128% year-over-year. Operating income, ex-items, was $17,800,000, up 135% year-over-year, while operating margins expanded 1,110 BPS year-over-year to 26%.  Sequential incremental operating margins were 64% as a result of Core’s client demand for technological solutions using enhanced completion techniques.

Sales of Core’s perforating systems increased 19% sequentially during the first quarter of 2018, while the Energy Information Agency reported that U.S. completions were up 9% sequentially.  Therefore, Core continues to gain market share in the technologically advanced perforating markets.

Core’s clients continue to seek technological perforating charge solutions for increasing daily production and EURs. This is demonstrated by the continued revenue and margin growth for Production Enhancement, which was bolstered by increased demand for Core’s HERO®PerFRAC perforating charge systems.  Client acceptance of HERO®PerFRAC technology is among the highest of all new product lines introduced by Core over the past five-plus years.  HERO®PerFrac product sales were up nearly four-fold year-over-year.  The rapid market acceptance is evidence of the Company’s technological advantage in shale plays.

By eliminating uncertainty created by perforation entry hole-size heterogeneity, clients gain operational efficiencies.  These come in the form of reduced surface horsepower required to break down the formation, more effective proppant placement during fracture operations, and increased hydrocarbon flow across all stimulated zones.   Client acceptance of Core’s HERO®PerFRAC technology, during the most recent downturn, confirms the value-added nature of the Company’s technologies services which increase incremental recovery rates and EURs.

In the first quarter of 2018, Core saw broadening acceptance of FlowProfilerTM EDS, a proprietary technology, which is an engineered delivery system (“EDS”). The break-through EDS technology delivers time-released diagnostics for evaluating the crude oil flow from each stage of a hydraulically fractured completion.  Crude oil production by stage is determined by using this Core Lab-developed technology that enables the diagnostic tracer to be absorbed and chemically-bonded to durable, proppant-size particles that accompany the frac sand.  The tracer will release from the engineered particles once they contact the reservoir’s crude oil, enabling Core to assess which stages are contributing to crude oil production.


Free Cash Flow and Dividends

During the first quarter of 2018, Core continued to generate FCF, with cash from operations of $23,100,000 and capital expenditures of $4,400,000, yielding FCF of $18,700,000. As revenue and business activities increase, as they have over the past year, investment in working capital and capital expenditures are also expected to increase.  Core’s free cash will continue to be returned to its shareholders via the Company’s regular quarterly dividend and share repurchases.  The Company repurchased 30,298 shares during the first quarter of 2018 at an average share price of $109.26.

On 16 January 2018, the Board announced a quarterly cash dividend of $0.55 per share of common stock, which was paid on 16 February 2018 to shareholders of record on 26 January 2018. Dutch withholding tax was deducted from the dividend at a rate of 15%.

On 17 April 2018, the Board announced a quarterly cash dividend of $0.55 per share of common stock, payable in the second quarter of 2018. The quarterly cash dividend will be payable on 22 May 2018 to shareholders of record on 27 April 2018. Dutch withholding tax will be deducted from the dividend at a rate of 15%.


Return On Invested Capital

Core Lab’s ROIC exceeds that of all members of the OSX as reported by Bloomberg.  The Company’s Board has established an internal performance metric of achieving a leading relative ROIC performance compared with the oilfield service companies listed as Core’s Comp Group by Bloomberg Financial. The Company and its Board believe that ROIC is a leading long-term performance metric used by shareholders to determine the relative investment value of publicly traded companies. Further, the Company and its Board believe that shareholders will benefit if Core consistently performs at high levels of ROIC relative to its Comp Group.

According to the latest Comp Group financial information from Bloomberg, Core’s ROIC is the highest of any comparably-sized oilfield service company (greater than $2 billion market capitalization). Comp Group companies listed by Bloomberg include Halliburton, Schlumberger, Oceaneering, National Oilwell Varco, RPC, TGS, and the Wood Group, among others.  Only Core Lab and one of the other twenty-one companies listed in the Comp Group posted ROIC that exceeded their WACC. Core’s ratio of ROIC to WACC is the highest of any company in the Comp Group.


Second Quarter 2018 Revenue and EPS Guidance

The Company believes second quarter 2018 international exploration and production activity levels will be flat sequentially, with most international development projects continuing to be funded largely from operating budgets. Core Lab expects the average second quarter 2018 U.S. rig count to be slightly up sequentially, with completion activity levels showing modest growth. Core Lab believes the U.S. completion growth rate will moderate until logistical bottlenecks are resolved (e.g., for the industry to hire and train new frac crews, acquire and/or update pressure pumping equipment, and supply chain optimization).  In addition, an emerging trend to larger pad drilling sites, increasing up to 24 wells, will create an increase in drilled but uncompleted (“DUC”) wells over the next several quarters.  Combined, these issues could impact the rate of revenue growth opportunity for any company that is reliant on completions as a catalyst for growth.

Core expects Reservoir Description revenue and operating margins to be similar to the first quarter of 2018 due to continued muted international activity levels.  This is consistent with other international service company commentary.  Production Enhancement is expected to experience continued growth with year-over-year incremental margins in line with historical 60% levels.  Therefore, Core expects consolidated second quarter 2018 revenue of approximately $177,000,000 to $179,000,000 and operating income of approximately $36,200,000 to $37,200,000, yielding operating margins that exceed 20%, up 100 BPS sequentially.  Based on these ranges, incremental margins of 50% are expected in the second quarter. EPS for the second quarter 2018 is expected to be approximately $0.64 to $0.66.  The Company’s second quarter 2018 guidance excludes gains or losses in foreign exchange and assumes an effective tax rate of 15%.

Several consecutive years of significant international under-investment will lead to steepening legacy declines in crude oil production outside of North America, the Middle East and the former Soviet Union.  Therefore, Core has an optimistic view for 2018’s industry activity and Core’s financial performance for the following reasons: crude oil industry fundamentals continue to improve with falling global crude oil inventories; continued increases in worldwide crude demand; a tightening in the number of days of consumption held in global crude oil inventory; and the impact these fundamentals may have on increasing the price of crude oil.

Core is also encouraged by the increased focus of its major clients on capital management, ROIC, FCF and returning capital back to their shareholders, as opposed to just production growth at any cost.  The companies adopting value versus volume metrics tend to be the more technologically sophisticated operators and form the foundation of Core’s worldwide client base.  Client planning for international and offshore projects are in the early stages.  This will benefit Core’s leverage to both markets, especially in late 2018 and 2019.

Additionally, renewed investment at a global level is critical in order to meet future supply needs.  Oil company recognition of the need for investment is evidenced by the approximately 25 – 30 final investment decisions (“FIDs”) estimated to be announced in 2018, with six already announced year-to-date (e.g., Royal Dutch Shell’s Penguin development in the North Sea, Shell’s Vito in the GOM and BP’s Ghazeer development in Oman).  These FIDs would follow the more than 20 FIDs announced in 2017.  The oil companies’ ability to invest is due to their successful efforts in increasing their EURs, along with reduced capital project costs that are better aligned with today’s crude oil price per barrel.  Although the FID activity is positive and shows progress of a global crude oil industry recovery, sustainability of supply needs, when compared to demand projections, will require more projects on a larger scale, which Core expects in the future.


Earnings Call Scheduled

The Company has scheduled a conference call to discuss Core’s first quarter 2018 earnings announcement. The call will begin at 7:30 a.m. CDT / 2:30 p.m. CEST on Thursday, 26 April 2018. To listen to the call, please go to Core’s website at www.corelab.com.

Core Laboratories N.V. (www.corelab.com) is a leading provider of proprietary and patented reservoir description and production enhancement services used to optimize petroleum reservoir performance.  The Company has over 70 offices in more than 50 countries and is located in every major oil-producing province in the world. This release includes forward-looking statements regarding the future revenue, profitability, business strategies and developments of the Company made in reliance upon the safe harbor provisions of Federal securities law. The Company’s outlook is subject to various important cautionary factors, including risks and uncertainties related to the oil and natural gas industry, business conditions, international markets, international political climates and other factors as more fully described in the Company’s 2017 Form 10-K filed on 12 February 2018 and in other securities filings. These important factors could cause the Company’s actual results to differ materially from those described in these forward-looking statements. Such statements are based on current expectations of the Company’s performance and are subject to a variety of factors, some of which are not under the control of the Company. Because the information herein is based solely on data currently available, and because it is subject to change as a result of changes in conditions over which the Company has no control or influence, such forward-looking statements should not be viewed as assurance regarding the Company’s future performance. The Company undertakes no obligation to publicly update any forward looking statement to reflect events or circumstances that may arise after the date of this press release, except as required by law.

Visit the Company’s website at www.corelab.com.  Connect with Core Lab on Facebook, LinkedIn and YouTube.

 


CORE LABORATORIES N.V. & SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(Unaudited)


Three Months Ended


% Variance


3/31/18


12/31/17


3/31/17


vs Q4-17


vs Q1-17

REVENUE

$

170,018

$

170,111

$

156,609

(0.1)%

8.6%

OPERATING EXPENSES:

Costs of services and sales

119,318

119,942

113,021

(0.5)%

5.6%

General and administrative expenses

12,709

11,994

12,756

6.0%

(0.4)%

Depreciation and amortization

5,818

6,038

6,304

(3.6)%

(7.7)%

Other (income) expense, net

(143)

(269)

989

NM

NM

Total operating expenses

137,702

137,705

133,070

—%

3.5%

OPERATING INCOME

32,316

32,406

23,539

(0.3)%

37.3%

Interest expense

3,120

2,717

2,618

14.8%

19.2%

Income from continuing operations before income tax expense

29,196

29,689

20,921

(1.7)%

39.6%

Income tax expense

5,273

8,017

2,929

(34.2)%

80.0%

Net income from continuing operations

23,923

21,672

17,992

10.4%

33.0%

Net income (loss) from discontinued operations

(346)

(20)

(310)

NM

(11.6)%

Net income

23,577

21,652

17,682

8.9%

33.3%

Net income attributable to non-controlling interest

50

(39)

24

NM

NM

Net income attributable to Core Laboratories N.V.

$

23,527

$

21,691

$

17,658

8.5%

33.2%


Diluted Earnings Per Share from continuing operations:

$

0.54

$

0.49

$

0.41

10.2%

31.7%

Weighted Avg Diluted Common Shares Outstanding

44,463

44,374

44,347

0.2%

0.3%

Effective Tax Rate

18

%

27

%

14

%

NM

NM


SEGMENT INFORMATION:


Revenue:

Reservoir Description

$

100,809

$

104,571

$

104,895

(3.6)%

(3.9)%

Production Enhancement

69,209

65,540

51,714

5.6%

33.8%

Total

$

170,018

$

170,111

$

156,609

(0.1)%

8.6%


Operating income:

Reservoir Description

$

14,757

$

17,269

$

15,940

(14.5)%

(7.4)%

Production Enhancement

17,687

15,357

7,755

15.2%

128.1%

Corporate and other

(128)

(220)

(156)

NM

NM

Total

$

32,316

$

32,406

$

23,539

(0.3)%

37.3%


“NM”  means not meaningful

 


CORE LABORATORIES N.V. & SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

(Unaudited)


% Variance


ASSETS:


3/31/18


12/31/17


vs Q4-17

Cash and Cash Equivalents

$

13,244

$

14,400

(7.7)%

Accounts Receivable, net

137,661

133,097

13.0%

Inventory

36,438

33,317

(2.9)%

Other Current Assets

32,842

26,613

20.3%

Total Current Assets

220,185

207,427

9.6%

Property, Plant and Equipment, net

122,333

123,098

(4.2)%

Intangibles, Goodwill and Other Long Term Assets, net

254,622

254,287

1.2%

Total Assets

$

597,140

$

584,812

2.9%


LIABILITIES AND EQUITY:

Accounts Payable

$

45,541

$

41,697

24.8%

Other Current Liabilities

58,786

58,879

(18.7)%

Total Current Liabilities

104,327

100,576

(4.1)%

Long-Term Debt & Lease Obligations

235,114

226,989

7.5%

Other Long-Term Liabilities

106,123

108,515

6.5%

Total Equity

151,576

148,732

(73.9)%

Total Liabilities and Equity

$

597,140

$

584,812

(40.7)%

 


CORE LABORATORIES N.V. & SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(amounts in thousands)

(Unaudited)


Three Months Ended


3/31/18


3/31/17


CASH FLOWS FROM OPERATING ACTIVITIES

Net Income from continuing operations

$

23,923

$

17,992

Income from discontinued operations

(346)

(310)

Net Income

23,577

17,682

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

6,291

5,723

Depreciation and amortization

5,876

6,427

Accounts Receivable

(5,913)

(7,525)

Inventory

(3,686)

(3,898)

Accounts Payable

2,634

4,576

Other adjustments to net income

(5,686)

6,776


Net cash provided by operating activities

$

23,093

$

29,761


CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

$

(4,443)

$

(6,449)

Other investing activities

(174)

(177)


Net cash used in investing activities

$

(4,617)

$

(6,626)


CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of debt borrowings

$

(29,000)

$

(49,000)

Proceeds from debt borrowings

37,000

51,000

Dividends paid

(24,322)

(24,284)

Repurchase of treasury shares

(3,310)

(1,273)

Other financing activities


Net cash used in financing activities

$

(19,632)

$

(23,557)

NET CHANGE IN CASH AND CASH EQUIVALENTS

(1,156)

(422)

CASH AND CASH EQUIVALENTS, beginning of period

14,400

14,764

CASH AND CASH EQUIVALENTS, end of period

$

13,244

$

14,342

 


Non-GAAP Information

Management believes that the exclusion of certain income and expenses enables management, our investors and the public to more effectively evaluate the Company’s operations period-over-period and to identify operating trends that could otherwise be masked by the excluded items. For this reason, we used certain non-GAAP measures that exclude these items; and we feel that this presentation provides the public a better understanding of the underlying operations’ current period financial results on a more comparable basis to those reported in prior periods. The non-GAAP financial measures should be considered in addition to, and not as a substitute for, the financial results prepared in accordance with GAAP, as more fully discussed in Core Lab’s financial statements and filings with the Securities and Exchange Commission.

 


Reconciliation of Net Income, Operating Income and Earnings Per Diluted Share

(amounts in thousands, except per share data)

(Unaudited)


Operating Income from Continuing Operations


Three Months Ended


3/31/2018


12/31/2017


3/31/2017

GAAP reported

$

32,316

$

32,406

$

23,539

Foreign exchange losses

432

357

97

Excluding specific items

$

32,748

$

32,763

$

23,636


Net Income from Continuing Operations


Three Months Ended


3/31/2018


12/31/2017


3/31/2017

GAAP reported

$

23,923

$

21,672

$

17,992

Foreign exchange losses

354

260

83

Impact of higher tax rate 1

907

3,595

Excluding specific items

$

25,184

$

25,527

$

18,075


(1) 2018 Quarter 1 tax rate of 18%; guidance given at 15%
     2017 Quarter 4 tax rate of 27%; guidance given at 15%


Earnings Per Diluted Share from Continuing Operations


Three Months Ended


3/31/2018


12/31/2017


3/31/2017

GAAP reported

$

0.54

$

0.49

$

0.41

Foreign exchange losses

0.01

0.01

Impact of higher tax rate 1

0.02

0.08

Excluding specific items

$

0.57

$

0.58

$

0.41


(1) 2018 Quarter 1 tax rate of 18%; guidance given at 15%
     2017 Quarter 4 tax rate of 27%; guidance given at 15%

 


Segment Information

(amounts in thousands)

(Unaudited)


Three Months Ended 31 March 2018


Reservoir


 Description


Production Enhancement


Corporate and Other

Operating income

$

14,757

$

17,687

$

(128)

Foreign exchange (gains) losses

209

105

118

Operating income excluding specific items

$

14,966

$

17,792

$

(10)


Three Months Ended 31 December 2017


Reservoir


 Description


Production Enhancement


Corporate and Other

Operating income

$

17,269

$

15,357

$

(220)

Foreign exchange losses

184

70

103

Operating income excluding specific items

$

17,453

$

15,427

$

(117)


Three Months Ended 31 March 2017


Reservoir


 Description


Production Enhancement


Corporate and Other

Operating income

$

15,940

$

7,755

$

(156)

Foreign exchange losses

237

(181)

40

Severance, compensation and other charges

Operating income excluding specific items

$

16,177

$

7,574

$

(116)


Free Cash Flow

Core uses the non-GAAP measure of free cash flow to evaluate its cash flows and results of operations. Free cash flow is an important measurement because it represents the cash from operations, in excess of capital expenditures, available to operate the business and fund non-discretionary obligations. Free cash flow is not a measure of operating performance under GAAP, and should not be considered in isolation nor construed as an alternative consideration to operating income, net income, earnings per share, or cash flows from operating, investing, or financing activities, each as determined in accordance with GAAP. You should also not consider free cash flow as a measure of liquidity. Moreover, since free cash flow is not a measure determined in accordance with GAAP and thus is susceptible to varying interpretations and calculations, free cash flow as presented may not be comparable to similarly titled measures presented by other companies.


Computation of Free Cash Flow

(amounts in thousands)

(Unaudited)


Three Months Ended


3/31/18

Net cash provided by operating activities

$

23,093

Capital expenditures

(4,443)

Free cash flow

$

18,650

 

Core Laboratories N.V. logo (PRNewsFoto/Core Laboratories N.V.)

 

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SOURCE Core Laboratories N.V.

Grupo Financiero Interacciones reports operating income up 36.21% YoY and 10.70% QoQ, to Ps.993 million[1]

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Grupo Financiero Interacciones reports operating income up 36.21% YoY and 10.70% QoQ, to Ps.993 million[1]

– ROE of 15.70% in 1Q18, up 26 bps YoY.

– Bank’s Financial margin (“SFI”) up 38.22% YoY.

– Bank’s Business Commissions (“SFI”) up 38.39% YoY.

– NPL ratio of 0.03% in 1Q18, a 3 basis point YoY improvement.

PR Newswire

MEXICO CITY, April 25, 2018 /PRNewswire/ – Grupo Financiero Interacciones, S.A.B. de C.V., (BMV: GFINTERO), (“Grupo Financiero Interacciones” or “GFI”), the largest specialized Mexican financial group with a business model focused on providing financing, risk management and financial advisory services mainly to the Mexican public sector, today announced results for the three-month period ended March 31, 2018.

Grupo Financiero Interacciones Logo

To obtain the full text of this earnings release, please visit

http://www.investorsinteracciones.com/images/media/quartelyResults/2018/1Q18/1Q18_Earnings_Release_Ingles_VF.pdf

Executive Summary: Simplified Financial Information (“SFI”)

Disclaimer:
 
As a result of the uniqueness of our business model, we simplified GFI’s financial information in an effort to make it more efficient for market participants to analyze our financial group. Simplified Financial Information (“SFI”) is adjusted for valuation effects, non-recurring items and includes reclassifications of regulatory financial statements.


Fundamentals

  • As part of GFI’s fundamentals during the quarter, states and municipalities presented a liquidity surplus of 14.5% relative to their originally budgeted infrastructure agenda, which is below last year’s surplus of 16.5%, in addition to an annual three-month federal transfer growth of 5.6%.

Given this year’s upcoming elections and its implications within the Financial Discipline Law’s (“FDL”) framework, states and municipalities covered their demand for short term needs through the use of factoring products, which have no debt ceiling within the FDL. State elections in particular not only made these debt acquisitions preferable to states and municipalities, but also accelerated them before the elections take place. GFI’s expertise and deep understanding in the application of the FDL as well as its proactive approach in preparing its business model to leverage these opportunities, enabled it to offer and capture the most attractive opportunities available in the market.

It’s important to note that GFI had to reconstitute its loan portfolio due to payments of Ps.109,479 million during the last twelve months.

Additionally, infrastructure spending in the country continues with a strong momentum of growth, reaching a 9 year high with Ps.14 billion invested in the month of January[2], which adds an additional driver of growth in conjunction with GFI’s current pipeline of opportunities.

Simplified Financial Statements 


Grupo Financiero Interacciones


Simplified Financial Information (“SFI”)


1Q18


4Q17


1Q17


Var.vs 


4Q17


1Q17

     Bank – Interest Income

3,242

3,027

2,679

7.10%

21.02%

     Bank – Interest Expense

-2,356

-2,159

-2,038

9.12%

15.60%


Bank’s Financial Margin


886


868


641


2.07%


38.22%

     Provisions for Loan Losses

152

-269

39

-156.51%

289.74%

     Net Commissions

276

848

359

-67.45%

-23.12%

     Business Commissions

429

594

310

-27.78%

38.39%

     Temporary Commissions

-153

254

49

-160.24%

-412.24%

     Income from Brokerage Activities

142

22

100

545.45%

42.00%

     Other Operating Income (Expenses)

10

-22

40

-145.45%

-75.00%

     IPAB

-126

-123

-120

2.44%

5.00%

     Administrative and Promotional Expenses (“SG&A”)

-488

-599

-433

-18.53%

12.70%

Subsidiary Result

-2

2

-200.00%

100.00%


Bank’s Income before Income Taxes


850


727


626


16.92%


35.78%


Brokerage Unit’s Income before Income Taxes


156


73


153


113.70%


1.96%


Insurance Unit’s Income before Income Taxes


-4


111


-24


-103.60%


-83.33%


Extraordinary Items


-148


-136




8.82%


100.00%


Other Subsidiary Results


-11


-12


-26


-8.33%


-57.69%

     Taxes

-173

-96

-111

80.21%

55.86%


Net Income


670


667


618


0.45%


8.41%


* Millions of pesos


*Simplified Financial Information (“SFI”) is adjusted for valuation effects, non-recurring items and includes reclassifications of regulatory financial statements

   


Main Indicators – Simplified Financial Information (“SFI”)


4Q17


3Q17


4Q16


Var.vs 


3Q17


4Q16


Main Financial Ratios

Bank – Loan Portfolio Financial Margin 

3.08%

3.12%

2.31%

-4bp

76bp

ROE – Bank

15.76%

18.22%

15.20%

-246bp

56bp

ROE – GFI

15.70%

16.14%

15.44%

-44bp

26bp

Bank´s Efficiency Ratio

46.73%

42.07%

48.51%

466pb

-178bp

NPL Ratio

0.03%

0.02%

0.06%

1bp

-3bp

Coverage Ratio

39.05x

62.41x

23.34x

-23.4x

15.71x


*Millions of pesos


*Simplified Financial Information (“SFI”) is adjusted for valuation effects, non-recurring items and includes reclassifications of regulatory financial statements

  • The Bank’s financial margin for 1Q18 increased 38.22% YoY and 2.07% QoQ. The YoY change resulted from the positive contribution from GFI’s loan book, in addition to a reduction in cost of funds from TIIE minus 5 basis points at 1Q17 to TIIE minus 73 basis points at 1Q18. Infrastructure Banking, not only represented the business unit with the strongest growth but also represented higher yields than other banking units. The QoQ change is mainly explained by the widening of credit spreads relative to the cost of liabilities, in spite of a seasonal sequential contraction in the loan portfolio.
       
  • During 1Q18, GFI released Ps.152 million in provisions, mainly as a result to the change in the credit profile of GFI’s clients during both time periods, as well as a change in the portfolio mix. It is important to note that this release is also partially reflected in commissions paid during the corresponding periods, which generates a neutralizing effect in earnings.
        
  • Net Commissions decreased 23.12% YoY and 67.45% relative to 4Q17. The YoY change is mainly explained by a 38.39% increase in business commissions reflecting higher demand for Infrastructure products as well as for short term borrowing in the form of factoring structures in the Government business line, as mentioned above; this YoY increase in business commissions was outweighed by a 412.24% decrease in temporary commissions as a result of the 5.92% decrease in the Government loan portfolio and by the 41.88% YoY growth in the Infrastructure loan book, which does not generate temporary commissions.

The QoQ change reflects the same dynamics in temporary commissions mentioned above, in addition to a 27.78% decrease in business commissions in line with GFI’s intrinsic business model seasonality.

  • Income from Brokerage Activities amounted to Ps.142 million in 1Q18, representing an increase of 42.00% YoY and 545.45% QoQ. These changes are explained by the widening of spreads, as well as from better profit-making opportunities during this time period in the fixed income market.
       
  • Other Operating Income (Expenses) amounted to Ps.10 million in 1Q18, compared to other operating income of Ps.40 million in 1Q17 and a Ps.22 million expense in 4Q17. This line includes changes in Other Real Estate Owned (“OREO”) and OREO discount adjustments, among others.
       
  • Administrative and Promotional Expenses (SG&A) increased 12.70% YoY and decreased 18.53% QoQ. The YoY change is mainly driven by a greater origination of infrastructure banking projects, including projects that were deferred from 4Q17 to 1Q18, which require legal services related to their structuring. The QoQ decrease reflects GFI’s business model seasonality.
        
  • The Brokerage Unit reported income before taxes of Ps.156 million in 1Q18, increasing 1.96% YoY and 113.70% QoQ. The YoY increase reflects a 69.05% increase in trading income, which offset the 16.03% decrease in commissions, while the QoQ increase is explained by an 80.51% higher trading income. Both increases in trading income resulted from higher margins in debt trading activities during this time period.
       
  • Aseguradora Interacciones, the Insurance unit, reported a loss before taxes of Ps.4 million in 1Q18, compared to a Ps.24 million loss in 1Q17 and a Ps.111 million profit in 4Q17. The YoY change resulted from the alignment of costs to revenues stemming from premiums with lower risk exposures as part of this business unit’s strategy. This strategy implied the release of technical reserves as well as lower claims during 1Q18. The QoQ change is explained by a Ps.204 million catastrophic reserve release during 4Q17, in addition to a technical reserve release related with the non-renewal of Property & Casualty businesses with a much higher risk exposure, in line with this business unit’s strategy.
       
  • Extraordinary Items regarding the recent transaction with Banorte announced on October 25th, 2017, amounted to Ps.148 million, these expenses reflect legal fees and integration costs.
        
  • Grupo Financiero Interacciones reported net income of Ps.670 million in 1Q18, representing an increase of 8.41% YoY and 0.45% QoQ. The YoY change is mainly explained by an increase of 38.22% in the Bank’s financial margin, as well as a 38.39% increase in business commissions, in addition to a 42.00% increase in income from brokerage activities, which more than offset the 12.70% increase in SG&A, as well as the Ps.148 million in extraordinary items mentioned above. The QoQ change reflects an 18.53% decrease in SG&A, a 545.45% increase in income from brokerage activities, and a Ps.83 million increase in the Brokerage Unit’s income before taxes, which offset the flat financial margin performance.

 

REGULATORY FINANCIAL STATEMENTS – Income Statement


Grupo Financiero Interacciones


Regulatory Income Statement


1Q18


4Q17


1Q17


Var.vs 


4Q17


1Q17

     Interest Income

5,000

4,491

4,256

11.33%

17.48%

     Premium Income (Net) 

12

52

10

-76.92%

20.00%

     Interest Expense

-4,198

-3,272

-4,134

28.30%

1.55%

     Net Increase in Technical Reserves

204

-3

-100.00%

100.00%

     Damages, Claims and Other Obligations (Net) 

-5

-4

-8

25.00%

-37.50%


Financial Margin


809


1471


121


-45.00%


568.60%

     Provisions for Loan Losses

152

-264

39

157.58%

289.74%


Financial Margin Adjusted for Credit Risk


961


1207


160


-20.38%


500.63%

          Commissions and Fees Charged

699

1,667

806

-58.07%

-13.28%

          Commissions and Fees Paid

-308

-433

-208

-28.87%

48.08%


     Commissions (Net)


391


1,234


598


-68.31%


-34.62%


     Income from Brokerage Actiities


437


-115


769


-480.00%


-43.17%


     Other Operating Income (Expenses)


-114


-493


-84


-76.88%


35.71%


     Administrative and Promotional Expenses


-830


-1,072


-714


-22.57%


16.25%


Operating Income


845


761


729


11.04%


15.91%

     Equity in Results of Non-Consolidated Subsidiaries and Associates

-2

2

-200.00%

-100.00%


Income before Income Taxes


843


763


729


10.48%


15.64%

     Income Taxes

-16

-270

-100

-94.07%

-84.00%

     Deferred Income Taxes

-157

174

-11

-190.23%

1327.27%


Income Before Discontinued Operations


670


667


618


0.45%


8.41%

     Discontinued Operations

0.00%

0.00%


Net Income


670


667


618


0.45%


8.41%

     Non-Controlling Interest

0.00%

0.00%


Total Net Income


670


667


618


0.45%


8.41%


* Millions of pesos


Main Indicators – Regulatory Income Statement


1Q18


4Q17


1Q17


Var.vs 


4Q17


1Q17


Main Financial Ratios

NIM

1.35%

2.65%

0.21%

-130pb

114pb

ROE – Bank

15.76%

18.22%

15.20%

-246pb

56pb

ROE -GFI

15.70%

16.14%

15.44%

-44pb

26pb

Bank´s Efficiency Ratio

52.93%

42.96%

48.60%

997pb

433pb

Efficiency Ratio – GFI

54.50%

51.12%

50.85%

338pb

365pb

NPL Ratio

0.03%

0.02%

0.06%

1pb

-3pb

Coverage Ratio

39.05x

62.41x

23.34x

-23.36x

15.71x


*Millions of pesos

 

REGULATORY FINANCIAL STATEMENTS – Balance Sheet


Grupo Financiero Interacciones


Regulatory Balance Sheet


1Q18


4Q17


1Q17


Var.vs 


4Q17


1Q17


Cash and Due from Banks


17,166


10,102


19,539


69.93%


-12.14%


Margin Accounts








0.00%


0.00%


Investment in Securities


107,750


114,048


96,390


-5.52%


11.79%


Debtors Under Sale and Repurchase Agreements


5




4


100.00%


25.00%


Derivatives


615


561


274


9.63%


124.45%


Total Loan Portoflio (Net)


111,908


115,122


105,173


-2.79%


6.40%

Loan Portfolio

113,431

116,807

106,597

-2.89%

6.41%

Performing Loan Portfolio

113,392

116,780

106,536

-2.90%

6.44%

Commercial Loans

113,253

116,383

106,368

-2.69%

6.47%

                         Commercial or Business Activity

33,034

28,458

24,540

16.08%

34.61%

                         Financial Entities

685

1,456

608

-52.95%

12.66%

                         Government Entities

79,534

86,469

81,220

-8.02%

-2.08%

Consumer Loans

19

270

20

-92.96%

-5.00%

Mortgages

120

127

148

-5.51%

-18.92%

Non-Performing Loan Portfolio

39

27

61

44.44%

-36.07%

Commercial Non-Performing Loans

35

22

50

59.09%

-30.00%

Commercial or Business Activity

22

22

50

0.00%

-56.00%

Government Entities

13

100.00%

100.00%

Non-Performing Mortgages

4

5

11

-20.00%

-63.64%

Allowances for Loan Losses 

-1,523

-1,685

-1,424

-9.61%

6.95%


Accounts Receivables Loan Derivatives, Discounts and Credits (Net)


3


3


3


0.00%


0.00%


Premium Debtors (Net)


19


60


59


-68.33%


-67.80%


Accounts Receivables from Reinsurers and Re-guarantee Companies (Net)


288


444


804


-35.14%


-64.18%


Accounts Receivables (Net)


4,661


4,122


6,572


13.08%


-29.08%


Foreclosed Assets (Net)


58


133


164


-56.39%


-64.63%


Real Estate, Furniture & Equipment (Net)


719


725


752


-0.83%


-4.39%


Investment in Subsidiaries


70


73


61


-4.11%


14.75%


Deferred Taxes (Net)


1,070


1,211


812


-11.64%


31.77%


Other Assets


714


626


1,829


14.06%


-60.96%


Total Assets


245,046


247,230


232,436


-0.88%


5.43%


Traditional Funding


109,249


104,203


112,410


4.84%


-2.81%

          Demand Deposits

68,771

58,975

55,101

16.61%

24.81%

          Term Deposits

25,736

26,630

36,731

-3.36%

-29.93%

          Credit Instruments Issued

14,742

18,598

20,578

-20.73%

-28.36%


Bank Loans


17,842


25,181


16,877


-29.14%


5.72%

          Instant Loans Flexibility

590

-100.00%

0.00%

          Short Term

10,119

10,008

6,271

1.11%

61.36%

          Long Term

7,723

14,583

10,606

-47.04%

-27.18%


Assigned Values For Liquidity








0.00%


0.00%


Technical Reserves


560


711


1,222


-21.24%


-54.17%


Creditors For Repurchase / Resale Agreements


91,867


91,783


76,508


0.09%


20.08%


Collateral Sold






457


0.00%


-100.00%


Derivatives


117


232




-49.57%


100.00%


Valuation Ajustment For Financial Coverage Of Liabilities








0.00%


0.00%


Accounts Payables To Reinsurers And Re-Guarantee Companies


8


65


79


-87.69%


-89.87%


Outstanding Debt In Securitization Transactions








0.00%


0.00%


Other Payables


4,778


5,004


4,503


-4.52%


6.11%


Outstanding Subordinated Debt


2,865


2,860


3,559


0.17%


-19.50%


Deferred Taxes And Employee Profits Sharing (Net)


11


13


15


-15.38%


-26.67%


Deferred Credits And Advanced Collections


397


390


454


1.79%


-12.56%


Total Liabilities


227,694


230,442


216,084


-1.19%


5.37%


Paid-In Capital


4,213


4,213


4,231


0.00%


-0.43%

               Capital Stock

2,345

2,345

2,345

0.00%

0.00%

               Share Subscription Premiums 

1,868

1,868

1,886

0.00%

-0.95%


Subscribed Capital


13,137


12,574


12,121


4.48%


8.38%

               Capital Reserves

801

801

671

0.00%

19.37%

               Retained Earnings

11,570

8,629

10,515

34.08%

10.03%

               Surplus (deficit) from Mark-to-Market of Securities Available for Sale 

116

224

315

-48.21%

-63.17%

               Foreign currency translation adjustment

4

5

5

-20.00%

-20.00%

               Results from Non-monetary Assets

-24

-25

-3

-4.00%

700.00%


               Net Income with Participation of Subsidiaries


670


2,940


618


-77.21%


8.41%

 Not Holding Interest

2

1


100.00%


100.00%


Shareholders’ Equity


17,352


16,788


16,352


3.36%


6.12%


* Millions of pesos

RELEVANT EVENTS

  • Since the first quarter of 2018, the change in provisions for loan losses is presented as a net figure in the line “Provisions for Loan Losses” in the Income Statement. The comparative figures of 2017 have been updated to reflect this change.

This change is due to the implementation in advance of a new rule issued by the local regulator with respect to provisions for loan losses, which will be mandatory in 2019 and may be adopted by the Mexican banking system with prior notice to the relevant authority.

  • GRUPO FINANCIERO INTERACCIONES, S.A.B. DE C.V. (“GFINTER”) hereby informs that on October 25, 2017, GRUPO FINANCIERO BANORTE, S.A.B. DE C.V. (“GFNORTE”), entered into a master merger agreement pursuant to which GFINTER will merge into GFNORTE. The merger and the effects of the Master Merger Agreement were approved by the shareholders of both issuers, gathered at general extraordinary meetings on December 5, 2017. Approval by the financial and economic competition authorities (anti-trust) is still pending.
        
  • During 1Q18 GFI incurred in extraordinary expenses regarding the recent transaction with Banorte that amounted to Ps.148 million. These expenses reflect legal fees and integration costs.

DISCLAIMER

The financial information referring to 1Q18 disclosed in this earnings report is unaudited and subject to adjustments and modifications in the future.

Adjustments and modifications identified when audit work is performed on the Company’s year-end financial statements could result in differences from this unaudited financial information.

Simplified Financial Information (“SFI”) is presented as supporting material to facilitate the analysis and understanding of the financial reporting of Grupo Financiero Interacciones and do not replace the regulatory financial statements. 


1Q18 EARNINGS CONFERENCE CALL

Date:

Thursday, April 26, 2018

Time:

9:00 am CT (Mexico), 10:00 am ET

The conference call can be accessed by dialing +1-844-824-3835 (U.S.A. / Canada), 001-855-817-7630 (Mexico), or +1-412-317-5160 (Other International) and asking to be joined into the Grupo Financiero Interacciones call. The earnings release for the first quarter ending March 31, 2018 will be issued after the close of the U.S. market on Wednesday, April 25, 2018.

A simultaneous webcast of the conference call can be accessed by clicking the following link:  https://www.webcaster4.com/Webcast/Page/1449/25320

A telephonic replay of the conference call will be available after 12:00pm on April 27, 2018 on GFI’s Investor Relations website at www.investorsinteracciones.com.

About Grupo Financiero Interacciones

Grupo Financiero Interacciones, S.A. de C.V. (“Grupo Financiero Interacciones” or “GFI”), is the largest specialized Mexican financial group with a business model focused on providing financing, risk management and financial advisory services mainly to the Mexican public sector, which includes federal, state and municipal governments, quasi-government entities and government suppliers. Grupo Financiero Interacciones conducts its business mainly through Banco Interacciones, its banking subsidiary, and through Interacciones Casa de Bolsa, its broker-dealer subsidiary, and Aseguradora Interacciones, its insurance company subsidiary. Grupo Financiero Interacciones is listed on the Bolsa Mexicana de Valores under the symbol “GFINTERO”. For more information, please visit http://www.investorsinteracciones.com

This press release contains forward-looking statements and information that are necessarily subject to risks, uncertainties, and assumptions. By their very nature, forward-looking statements and such information involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved or will differ from actual results. A number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed or implied in such forward-looking statements. Should one or more of these factors or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. Grupo Interacciones assumes no obligation to update or correct the information contained in this press release.


Contact:



Adolfo Werner Fritz Rubio, Corporate Development Officer & Head of Investor Relations



Telephone: +52-55-53-26-86-00 Ext: 6825



E-mail:



iro@interacciones.com

[1] Operating Income excluding Extraordinary Items (“SFI”) amounting to Ps.148 million in 1Q18 and Ps.136 million in 4Q17

[2] Source: El Economista

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/grupo-financiero-interacciones-reports-operating-income-up-36-21-yoy-and-10-70-qoq-to-ps993-million1-300636788.html

SOURCE Grupo Financiero Interacciones, S.A. de C.V.

Kirby Corporation Announces 2018 First Quarter Results

Kirby Corporation Announces 2018 First Quarter Results

– 2018 first quarter GAAP earnings per share of $0.54 compared with $0.51 per share in the 2017 first quarter

– 2018 first quarter earnings include one-time Higman transaction fees and expenses of $0.04 per share, non-cash expenses related to an amendment to the employee stock plan of $0.05 per share, and severance of $0.04 per share

– 2018 second quarter GAAP earnings per share guidance of $0.30 to $0.50 including approximately $0.30 per share of one-time expenses related to the Executive Chairman’s retirement

– 2018 full year GAAP earnings per share guidance of $2.15 to $2.65 including expenses of approximately $0.30 per share related to the Executive Chairman’s retirement and $0.05 per share for non-cash expenses related to the amendment to the employee stock plan

PR Newswire

HOUSTON, April 25, 2018 /PRNewswire/ — Kirby Corporation (“Kirby“) (NYSE: KEX) today announced GAAP net earnings attributable to Kirby for the first quarter ended March 31, 2018 of $32.5 million, or $0.54 per share, compared with $27.5 million, or $0.51 per share, for the 2017 first quarter.  Consolidated revenues for the 2018 first quarter were $741.7 million compared with $491.7 million reported for the 2017 first quarter. 

Kirby’s first quarter results were impacted by one-time expenses associated with the recent acquisition of Higman Marine, Inc. (“Higman”), an amendment to the employee stock plan, and severance as follows:


First Quarter 2018

 


Pre-Tax


After-
Tax


Per
Share


(unaudited, $ in millions except per
share amounts)

GAAP earnings

$  42.3

$ 32.5

$  0.54

Higman transaction fees and expenses

(3.3)

(2.5)

(0.04)

Amendment to employee stock plan

(3.9)

(3.0)

(0.05)

Severance expense

(2.9)

(2.2)

(0.04)

David Grzebinski, Kirby’s President and Chief Executive Officer, commented, “Operationally, Kirby’s first quarter results were in line with expectations, with strength in Distribution and Services offsetting some temporary weakness in Marine Transportation due to weather.  Despite the temporary challenges in marine transportation, the inland sector continued to show early signs of a recovery during the first quarter, with spot market pricing increasing 10% to 15% compared to the 2017 fourth quarter.  Increased customer demand and unusually poor seasonal operating conditions contributed to tight market dynamics across the industry.  Although our barge utilization rates were in the mid-90% range throughout the quarter, our operations were challenged by increased delay days caused by adverse weather conditions across much of inland waterway system.  Transaction fees and maintenance costs related to Higman also negatively impacted the quarter’s results, but we are very pleased with the progress integrating Higman.”

Mr. Grzebinski continued, “In our coastal marine business, market conditions stabilized during the quarter, with term and spot contract pricing remaining unchanged relative to the 2017 fourth quarter.  Utilization rates were in the high 70% range.  While recent pricing stabilization is encouraging, we continue to expect difficult coastal market conditions in the near term.  As a result, we took additional measures to reduce costs, including further workforce reductions and temporarily taking additional barges out of service.” 

Mr. Grzebinski also commented, “The Distribution and Services segment delivered good sequential and year-on-year growth.  During the quarter, we experienced continued robust demand for new and remanufactured pressure pumping units and new and overhauled transmissions.  In our commercial and industrial market, improved market conditions in our marine medium-speed engine business, particularly in the inland sector, led to favorable sequential and year-on-year improvement.”

Mr. Grzebinski continued, “On a personal note, I’d like to express my appreciation to Joe Pyne as he prepares to retire from Kirby at the end of the month.  For 40 years, Joe has served Kirby, its employees, and its shareholders.  Joe’s vision and leadership have transformed Kirby into the industry leading marine transportation and distribution and services company that it is today.  I am grateful for Joe’s mentorship and advice over the years, and I am pleased that he has agreed to retain his role as non-executive Chairman of the Board.  I look forward to continuing to work with Joe in his role as Chairman of Kirby.”

Segment Results – Marine Transportation
Marine transportation revenues for the 2018 first quarter were $340.4 million compared with $343.7 million for the 2017 first quarter.  Operating income for the 2018 first quarter was $16.2 million compared with $35.8 million for the 2017 first quarter. 

In the inland market, barge utilization was in the mid-90% range for the quarter, compared to the high 80% to low 90% range in the 2017 first quarter.  Operating conditions during the quarter were challenged by ice on the Illinois River, high water on the Ohio and Mississippi Rivers, and continued infrastructure challenges on the Ohio River.  Seasonal fog and strong winds, as well as lock delays along the Gulf Intracoastal Waterway, also resulted in increased delay days throughout the quarter.  These conditions challenged inland operations for much of the 2018 first quarter, and consequently reduced operational efficiency on work performed under affreightment contracts.  Term contract pricing was at lower levels relative to the first quarter of 2017 as contracts renewed at lower levels throughout 2017, however, spot contract pricing increased 10% to 15% sequentially and year-on-year.  Overall, revenues in the inland market increased compared to the 2017 first quarter, primarily due to the contribution from Higman.  The operating margin for the inland business was in the low double digits during the quarter, and was impacted by the Higman acquisition, the adoption of an amended employee stock plan, and severance.

In the coastal market, barge utilization rates improved into the high 70% range primarily due to the impairment and early retirement of 12 barges during the 2017 fourth quarter.  Revenues from the transportation of black oil and refined petroleum products were lower than the 2017 first quarter, while revenues from the transportation crude oil and petrochemicals were higher.  Term contract and spot market pricing were down compared to the 2017 first quarter; however, pricing did stabilize compared to the 2017 fourth quarter.  The coastal business was adversely impacted by severance and the adoption of an amended employee stock plan, and its operating margin was in the negative low double digits.

The marine transportation segment’s 2018 first quarter operating margin was 4.8% compared with 10.4% for the 2017 first quarter as a result of weaker term pricing in both marine markets and lower spot pricing in the coastal market.  Results were also negatively impacted by Higman acquisition expenses of $3.3 million, severance of $2.6 million, and non-cash expenses related to an amendment to an employee stock plan of $2.4 million.    

Segment Results – Distribution and Services
Distribution and services 2018 first quarter revenues were $401.3 million with operating income of $37.0 million, compared with 2017 first quarter revenues of $148.1 million and operating income of $13.7 million.

Higher revenues and operating income compared to the 2017 first quarter were primarily due to the acquisition of Stewart & Stevenson which was completed in the 2017 third quarter, as well as accelerated growth in the oil and gas market.  Increasing oilfield commodity prices, high rig counts and activity completing drilled-but-uncompleted well inventories all contributed to strong demand for Kirby’s products and services.  During the quarter, the oil and gas businesses experienced strong demand for new and remanufactured pressure pumping units, new and overhauled transmissions, and new engines and parts.  Vendor supply chain bottlenecks, however, reduced availability of new engines, transmissions and parts, resulting in delayed deliveries of new and remanufactured pressure pumping units.

In the commercial and industrial market, revenues and operating income increased compared to the 2017 first quarter primarily due to the acquisition of Stewart & Stevenson and higher service levels in the marine-based business as more customers performed major maintenance overhauls of medium-speed diesel engines, particularly in the inland sector. Demand in the power generation market was stable compared to the 2017 first quarter. 

The distribution and services operating margin was 9.2% for the 2018 first quarter compared with 9.3% for the 2017 first quarter.  Results were negatively impacted by non-cash expenses related to an amendment to the employee stock plan of $1.2 million.

Cash Generation
EBITDA of $106.3 million for the 2018 first quarter compares with EBITDA of $93.5 million for the 2017 first quarter.  Cash flow was used to fund capital expenditures of $41.0 million, including $4.7 million for new inland tank barge and towboat construction, $6.7 million for progress payments on the construction of six 5000 horsepower coastal ATB tugboats, and $29.6 million primarily for upgrades to existing inland and coastal fleets and marine transportation and distribution and services facilities.  In addition, cash used in acquisitions was $430.0 million, including $419.6 million for the acquisition of Higman and $10.4 million for two pressure barges acquired from a competitor.  Total debt as of March 31, 2018 was $1,423.3 million and Kirby’s debt-to-capitalization ratio was 31.2%.

Outlook
Commenting on the 2018 second quarter and full year market outlook and guidance, Mr. Grzebinski said, “Our earnings guidance for the second quarter is $0.30 to $0.50 per share inclusive of approximately $0.30 per share for the one-time expenses associated with Mr. Pyne’s retirement as Executive Chairman.  For the full year, we are lowering our earnings guidance from $2.50 to $3.00 per share to $2.15 to $2.65 per share, reflecting the $0.30 per share charge for Mr. Pyne’s retirement, and the $0.05 per share non-cash expenses related to the amendment to the employee stock plan incurred in the first quarter.  Operationally, our expected results for 2018 are unchanged.”

Mr. Grzebinski continued, “In our marine transportation segment, second quarter and full year guidance, which now includes Higman, contemplates inland marine utilization in the low to mid-90% range and the full-year effect of pricing declines experienced during 2017.  We continue to expect that industry-wide barge retirements, minimal new-builds, and additional petrochemical capacity will yield high industry utilization rates throughout the remainder of 2018.  This should lead to continued improvement in spot market pricing and a modest mid-single digit pricing inflection on term contracts renewed in the second half of 2018.  Regarding Higman, we continue to anticipate that this acquisition will be earnings neutral for the first 12 months in total; however, we will incur some additional costs during the second quarter as we integrate their fleet and perform deferred maintenance.  We do, however, expect that Higman will be accretive to earnings in the second half of the year.  In our coastal market, we expect utilization in the high 70% to low 80% range for the remainder of 2018.  Our guidance range assumes a stabilized pricing environment in this market for the remainder of 2018.” 

Mr. Grzebinski also said, “In our distribution and services segment, we expect favorable market fundamentals in the oil and gas sector to continue to support the sales and service of pressure pumping units, equipment and parts throughout 2018; however, we expect that this market will continue to be somewhat affected by vendor supply chain constraints that could limit the availability of new engines, transmissions and parts.  In our commercial and industrial market, we expect a seasonal decline in the second quarter in the marine medium-speed diesel engine service and power generation businesses.  These businesses are expected to rebound, together with increased seasonal demand for standby-power generation packages and rentals, in the third and fourth quarters.”

Kirby expects 2018 capital spending to be in the $200 to $225 million range.  Capital spending guidance includes approximately $75 million in progress payments on new marine vessels, including six 5000 horsepower coastal tugboats, and fifteen inland towboats of varying horsepower to be delivered over a period of three years.  Approximately $100 to $120 million is associated with capital upgrades and improvements to existing inland, including Higman, and coastal marine equipment, ballast water treatment systems for coastal vessels, and facility improvements.  The balance largely relates to rental fleet growth, new machinery and equipment, and facility improvements in the distribution and services segment. 

Accounting Standards and Other
As previously disclosed, Kirby adopted ASU2014-09 “Revenues from Contracts with Customers” on January 1, 2018 using the modified retrospective method. The Company reduced the opening balance of retained earnings by approximately $9.7 million rather than restating previously reported results. This relates to recognition of revenues under certain manufacturing activities which had previously been recognized utilizing the percentage of completion method. The Company now recognizes revenue on contract manufacturing upon shipment and transfer of control.

During the 2018 first quarter, Kirby amended its employee stock plan resulting in shorter expense accrual periods on new restricted stock units and stock option awards for employees who are nearing retirement and meet certain years of service and age requirements.  The amendment of this plan resulted in a $3.9 million, or $0.05 per share, non-cash charge to the quarter’s earnings.

Conference Call
A conference call is scheduled for 7:30 a.m. Central time tomorrow, Thursday, April 26, 2018, to discuss the 2018 first quarter performance as well as the outlook for the 2018 second quarter and full year.  The conference call number is 888-317-6003 for domestic callers and 412-317-6061 for international callers.  The confirmation number is 2184339.  An audio playback will be available at 10:00 a.m. Central time on Thursday, April 26, 2018, through 11:00 p.m. Central time on Thursday, May 3, 2018, by dialing 877-344-7529 for domestic callers and 412-317-0088 for international callers.  The replay access code is 10118495.  A live audio webcast of the conference call will be available to the public and a replay available after the call by visiting Kirby’s website at http://www.kirbycorp.com

GAAP to Non-GAAP Financial Measures
The financial and other information to be discussed in the conference call is available in this press release and in a Form 8-K filed with the Securities and Exchange Commission.  This press release and the Form 8-K include a non-GAAP financial measure, EBITDA, which Kirby defines as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, and impairment of long-lived assets.  A reconciliation of EBITDA with GAAP net earnings attributable to Kirby is included in this press release.  This earnings press release includes marine transportation performance measures, consisting of ton miles, revenue per ton mile, towboats operated and delay days.  Comparable performance measures for the 2017 year and quarters are available at Kirby’s website, http://www.kirbycorp.com, under the caption Performance Measurements in the Investor Relations section. 

Forward-Looking Statements
Statements contained in this press release 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 uncertainties.  Actual results could differ materially from those anticipated as a result of various factors, including cyclical or other downturns in demand, significant pricing competition, unanticipated additions to industry capacity, changes in the Jones Act or in U.S. maritime policy and practice, fuel costs, interest rates, weather conditions and timing, magnitude and number of acquisitions made by Kirby.  Forward-looking statements are based on currently available information and Kirby assumes no obligation to update any such statements.  A list of additional risk factors can be found in Kirby’s annual report on Form 10-K for the year ended December 31, 2017.

About Kirby Corporation
Kirby Corporation, based in Houston, Texas, is the nation’s largest domestic tank barge operator transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, coastwise along all three United States coasts, and in Alaska and Hawaii.  Kirby transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge.  In addition, Kirby participates in the transportation of dry-bulk commodities in United States coastwise trade.  Through the distribution and services segment, Kirby provides after-market service and parts for engines, transmissions, reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications.  Kirby also rents equipment including generators, forklifts, pumps, and compressors for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, for land-based oilfield service customers.



CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS



First Quarter



2018



2017



(unaudited, $ in thousands except

per share amounts)

Revenues:

     Marine transportation

$     340,403

$     343,652

     Distribution and services


401,285


148,053


741,688


491,705

Costs and expenses:

     Costs of sales and operating expenses

553,317

344,799

     Selling, general and administrative

76,796

46,142

     Taxes, other than on income

8,535

6,649

     Depreciation and amortization

54,218

48,170

     Gain on disposition of assets


(1,898)


(99)


690,968


445,661

    Operating income

50,720

46,044

Other income (expense)

1,591

(589)

Interest expense


(9,780)


(4,457)

    Earnings before taxes on income

42,531

40,998

Provision for taxes on income


(9,865)


(13,353)

    Net earnings

32,666

27,645

Less:  Net earnings attributable to noncontrolling interests


(195)


(162)

    Net earnings attributable to Kirby


$      32,471


$      27,483

Net earnings per share attributable to Kirby common stockholders:

     Basic

$         0.54

$         0.51

     Diluted

$         0.54

$         0.51

Common stock outstanding (in thousands):

     Basic

59,392

53,542

     Diluted

59,493

53,609



CONDENSED CONSOLIDATED FINANCIAL INFORMATION



First Quarter



2018



2017


(unaudited, $ in thousands)

EBITDA: (1)

     Net earnings attributable to Kirby

$       32,471

$       27,483

     Interest expense

9,780

4,457

     Provision for taxes on income

9,865

13,353

     Depreciation and amortization


54,218


48,170


$     106,334


$      93,463

Capital expenditures

$        40,961

$      45,765

Acquisitions of businesses and marine equipment

$      429,977

$             —


 March 31,



2018



2017


(unaudited, $ in thousands)

Long-term debt, including current portion

$  1,423,294

$     674,552

Total equity

$  3,141,868

$  2,433,673

Debt to capitalization ratio

31.2%

21.7%



MARINE TRANSPORTATION STATEMENTS OF EARNINGS



First Quarter



2018



2017


(unaudited, $ in thousands)

Marine transportation revenues


$     340,403


$     343,652

Costs and expenses:

     Costs of sales and operating expenses

238,785

229,620

     Selling, general and administrative

35,576

27,878

     Taxes, other than on income

6,522

6,098

     Depreciation and amortization


43,340


44,288


324,223


307,884

         Operating income


$      16,180


$      35,768

         Operating margins


4.8%


10.4%



DISTRIBUTION AND SERVICES STATEMENTS OF EARNINGS



First Quarter



2018



2017


(unaudited, $ in thousands)

Distribution and services revenues


$     401,285


$     148,053

Costs and expenses:

     Costs of sales and operating expenses

314,532

115,179

     Selling, general and administrative

37,754

15,706

     Taxes, other than on income

2,002

541

     Depreciation and amortization


10,032


2,922


364,320


134,348

         Operating income


$      36,965


$      13,705

         Operating margins


9.2%


9.3%



OTHER COSTS AND EXPENSES



First Quarter



2018



2017


(unaudited, $ in thousands)

General corporate expenses


$        4,323


$        3,528

Gain on disposition of assets


$        1,898


$             99



MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS



First Quarter



2018



2017

Inland Performance Measurements:

     Ton Miles (in millions) (2)

3,182

2,977

     Revenue/Ton Mile (cents/tm) (3)

8.0

8.0

     Towboats operated (average) (4)

262

235

     Delay Days (5)

2,528

2,267

     Average cost per gallon of fuel consumed

$          2.04

$          1.78

Barges (active):

     Inland tank barges

993

864

     Coastal tank barges

55

68

     Offshore dry-cargo barges

5

5

Barrel Capacities (in millions):

     Inland tank barges

21.9

17.6

     Coastal tank barges

5.2

6.1


(1)

Kirby has historically evaluated its operating performance using numerous measures, one of which is EBITDA, a non-GAAP financial measure.  Kirby defines EBITDA as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, and impairment of long-lived assets.  EBITDA is presented because of its wide acceptance as a financial indicator.  EBITDA is one of the performance measures used in Kirby’s incentive bonus plan.  EBITDA is also used by rating agencies in determining Kirby’s credit rating and by analysts publishing research reports on Kirby, as well as by investors and investment bankers generally in valuing companies.  EBITDA is not a calculation based on generally accepted accounting principles and should not be considered as an alternative to, but should only be considered in conjunction with, Kirby’s GAAP financial information. 


(2)

Ton miles indicate fleet productivity by measuring the distance (in miles) a loaded tank barge is moved.  Example:  A typical 30,000 barrel tank barge loaded with 3,300 tons of liquid cargo is moved 100 miles, thus generating 330,000 ton miles.


(3)

Inland marine transportation revenues divided by ton miles.  Example:  First quarter 2018 inland marine transportation revenues of $252,176,000 divided by 3,182,000,000 inland marine transportation ton miles = 8.0 cents.


(4)

Towboats operated are the average number of owned and chartered towboats operated during the period.


(5)

Delay days measures the lost time incurred by a tow (towboat and one or more tank barges) during transit.  The measure includes transit delays caused by weather, lock congestion and other navigational factors.

 

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SOURCE Kirby Corporation