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Kirby Corporation Announces 2016 First Quarter Results

today announced net earnings attributable to Kirby for the first quarter ended March 31, 2016 of $38.1 million, or $0.71 per share, compared with $61.1 million, or $1.09 per share, for the 2015 first quarter. Consolidated revenues for the 2016 first quarter were $458.7 million compared with $587.7 million reported for the 2015 first quarter. A reduction in force executed in February 2016 resulted in pre-tax expenses of $5.6 million, or approximately $0.06 per share, which impacted both of Kirby's reportable business segments.

David Grzebinski, Kirby's President and Chief Executive Officer, commented, "Trends in both the inland and coastal marine transportation markets during the quarter were largely unchanged from the fourth quarter of 2015. For our inland marine transportation market, utilization was in the 90% to 95% range throughout the quarter. There were also some signs of improvement in the inland spot market in April. In the coastal marine transportation market, utilization during the quarter was in the high-80% to low-90% range. Overall, coastal market supply and demand remained roughly in balance throughout the quarter, although we continue to have more spot exposure."

Mr. Grzebinski continued, "Within our diesel engine services segment, market conditions deteriorated further from 2015 levels in the land-based market where we received no inbound orders for new or remanufactured pressure pumping units. Additionally, the expected demand for engines, transmissions and parts used by our major land-based customers to service their own equipment declined sharply. In our marine diesel engine service markets, weakness persisted in the Gulf of Mexico offshore oilfield services market. In addition, we experienced customer deferrals of major maintenance and engine overhauls across marine markets in most of the regions where we operate, which was largely due to a depressed dry cargo barge market."

Mr. Grzebinski further added, "In February, we implemented a reduction in force across our businesses in order to reduce costs in light of challenging market conditions. While this reduction was the most visible cost-cutting action during the quarter, we have been actively reducing costs across all facets of the company. As conditions across our markets improve, our organization will be better positioned for improved profitability."

Segment Results – Marine Transportation Marine transportation revenues for the 2016 first quarter were $378.3 million compared with $419.9 million for the 2015 first quarter. Operating income for the 2016 first quarter was $69.8 million compared with $96.3 million for the 2015 first quarter.

Demand for inland barge transportation of petrochemicals and refined petroleum products was stable, while demand for black oil was weaker on both a year over year and sequential basis. Kirby's inland tank barge utilization remained in the 90% to 95% range, but pricing pressure persisted on both contract renewals and in the spot market. However, there were signs of an improvement in the spot market in April. Operating conditions during the quarter were challenging due to periodic high wind and heavy fog along the Gulf Coast. Additionally, high water on the Mississippi River System led to tow size restrictions and added horsepower requirements, as well as slower transit times for most of the quarter.

On April 15, 2016 Kirby closed the previously announced acquisition of the inland tank barge fleet of SEACOR Holdings Inc. for $88 million in cash and transfer to SEACOR of a Florida-based ship docking tugboat. The asset purchase consisted of 27 inland 30,000 barrel tank barges and 13 inland towboats, plus one 30,000 barrel tank barge and one towboat currently under construction. The cost of the vessels under construction is included in the purchase price and the vessels are expected to be delivered prior to the end of the 2016 second quarter.

In the coastal marine transportation market, demand for the transportation of refined petroleum products, black oil, and petrochemicals was stable, although distillate demand in the Northeast was relatively weak due to warmer than average winter temperatures. Also contributing to the year over year decline in revenues and operating income was an increase in the amount of equipment trading in the spot market which led to increased idle time and voyage costs. Utilization for the coastal tank barge fleet remained in the high-80% to low-90% range and pricing on contract renewals improved on a year over year basis. Operating conditions in the coastal markets were seasonally normal during the first quarter.

The marine transportation segment's 2016 first quarter operating margin was 18.4% compared with 22.9% for the first quarter of 2015.

Segment Results – Diesel Engine Services Diesel engine services revenues for the 2016 first quarter were $80.4 million with a $0.8 million operating loss, compared with 2015 first quarter revenues of $167.8 million and operating income of $8.8 million.

The lower revenues and operating loss as compared to the first quarter of 2015 were primarily due to a lack of pressure pumping unit manufacturing, service and remanufacturing, as well as weaker than anticipated sales of engines, transmissions and parts in the land-based diesel engine services market. In addition, customer deferrals of major maintenance projects in the marine diesel engine services market and a continued weak Gulf of Mexico oilfield services market contributed to the year over year decline in revenues and operating income. Demand in the power generation market was relatively stable during the quarter.

The diesel engine services operating margin was (1.0)% for the 2016 first quarter compared with 5.3% for the 2015 first quarter.

Cash Generation EBITDA of $113.8 million for the 2016 first quarter...