Fitch Affirms Kirby Corporation's IDR at 'BBB'; Outlook Stable

  Fitch Affirms Kirby Corporation's IDR at 'BBB'; Outlook Stable

Business Wire

CHICAGO -- November 22, 2013

Fitch Ratings has affirmed the Issuer Default Rating (IDR) for Kirby
Corporation (KEX) at 'BBB'. In addition, Fitch has affirmed the senior
unsecured credit facility, and senior unsecured notes ratings at 'BBB'. The
Rating Outlook is Stable. Approximately $860 million of outstanding debt is
covered by these ratings. A full ratings list follows at the end of this
release.

KEY RATING DRIVERS

Rating strengths include the company's strong free cash flow generation, low
leverage for the rating category, adequate financial flexibility, and strong
market share in the marine transportation segment. Ratings also incorporate
Fitch's expectation that Kirby will use free cash flow for capital deployment
actions including acquisitions, capital expenditures, and share repurchases.

Kirby's acquisitive nature places the most significant pressure on the ratings
and outlook. No acquisitions have occurred in 2013, as the company focused on
integrating the $1.2 billion of acquisitions that occurred in 2011 and 2012.
These acquisitions have largely been integrated. Going forward Fitch expects
acquisitions will continue to be a key part of growing the marine
transportation and diesel engine service segments. Kirby remains in a better
position to absorb future acquisitions without materially increasing the risk
profile of the company due to its size. Upwards rating movement may be limited
if future acquisitions continuously increase leverage above historic levels.

Increased capital expenditures and working capital requirements affected free
cash flows in 2012, however Fitch expects full year 2013 to generate
approximately $250 - 275 million due to lower capital expenditures as KEX's
fleet renewal plan winds down. Meaningful free cash flows in the coming years
should allow Kirby to maintain its adequate financial flexibility.

Fitch expects the company to focus cash deployment on barge and tugboat
replacement, acquisitions, debt reduction, and share repurchases. KEX
emphasized debt reduction and improving the balance sheet in 2013. Through the
first nine months of 2013, KEX repaid approximately $500 million of debt,
offset by the issuance of $225 million of notes to help repay the $200 million
maturity in February. Debt reduction has exceeded Fitch's previous
expectations leading to improved credit metrics. Leverage decreased to 1.48x
as of Sept. 30, 2013 compared to 2.20x at year end 2012. With no prepayment
penalties on the term loan and notes, further debt reduction in 2014 is
expected, given no sizeable acquisitions or change in financial strategy.

Kirby's land-based diesel engine services business continues to struggle from
a sharp downturn in orders for new hydraulic fracturing equipment created
partially by overcapacity in the industry. Persistently low natural gas prices
experienced through the past few years have caused new drilling activity in
North American shale gas formations to fall off more quickly than anticipated.
Total revenues for the first nine months of 2013 were down 31% vs. the same
period in 2012. Fitch believes the diesel engine service segment is near a
bottom in 2013; however, Fitch does not expect a quick reversal in the
near-to-medium term. Fitch still deems the long term prospects of the diesel
engine service business favorable as the number of fracturing rigs ages and
servicing needs increase.

The acquisition of K-Sea in 2011 introduced the company to the coastal tank
barge market, a business which has performed well in 2013. Pricing and volumes
continue to improve from increased demand in petrochemical and crude oil. Such
demand has aided the recent utilization rate improvement to 90% from 75%-80%
in 2011. Fitch continues to expect this business to perform well and expand
the breadth of Kirby's marine transportation market.

Kirby's legacy inland marine business continues to perform well. Barge
utilization rates on the inland waterways remain high, and the pricing
environment has proven resilient throughout the first nine months of the year
with revenue per ton mile sustaining strong levels above 9.3 cents/ton in
2013. The positive operating environment is somewhat offset by high water
conditions on the Mississippi and Illinois Rivers in the second quarter,
caused by snowmelt and consistent rain. High water forced slower transit
times, leading to a drop in total ton miles. Fitch believes Kirby's
conservative operational strategy continues to allow strong performance
through tough weather.

Financial flexibility remains adequate at KEX. The company had a cash balance
of $6.5 million and revolver availability of $281 million ($325 million less
$49 million outstanding and $3.8 million in letters of credit) as of Sept. 30,
2013. Fitch expects the revolver to be completely undrawn by year end 2013
given expected fourth quarter cash flows. There are no major maturities until
KEX's term loan expires in 2016.

Joseph Pyne, current Chairman, President, and CEO of Kirby, will retire as
President and CEO in early 2014. Dave Grzebinski, current CFO, will become the
President and CEO following Mr. Pyne's departure. Fitch does not expect any
material strategy changes following the transition.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to
a positive rating action include:

--Leverage being maintained in the 1.0x-1.5x range for an extended period;

--Continued focus on debt reduction;

--Maintain stronger cash balances.

Negative: Future developments that may, individually or collectively, lead to
a positive rating action include:

--Sizeable debt funded acquisition;

--A shift in cash distribution priorities away from deleveraging the balance
sheet.

Fitch affirms KEX's ratings as follows:

Kirby Corporation

--IDR at 'BBB';

--Senior unsecured credit facility at 'BBB';

--Senior unsecured notes at 'BBB'

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=809211

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Contact:

Fitch Ratings, Inc.
Primary Analyst
Chad Walker, +1-312-368-2056
Associate Director
70 W Madison
Chicago, IL 60602
or
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Senior Director
or
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Managing Director
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