KEX - Earnings call transcript Q3 2018

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Operator

Good morning and welcome to the Kirby Corporation 2018 Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. We ask that you limit yourself to one question and one follow-up. [Operator Instructions] Please also note this event is being recorded. turn call to to like now the over conference Mr. I'd Relations. Kirby's VP Holcomb, of Eric Investor Please ahead. go

Eric Holcomb

investors.kirbycorp.com. Good our thank Chief that earnings are and today's David can Bill morning conference me afternoon Kirby's was Chief Grzebinski, website With and Harvey, found well slide be Kirby's issued you Financial for call, Officer. yesterday President presentation Vice as release and Executive Executive at A and us. Officer; on President joining for today the as

this may reconciliation the or the “Financials”. under the During we our adjusted release is financial financial non-GAAP to earnings non-GAAP call, to certain in and GAAP also conference refer measures is Relations comparable measures. of most in available Investor section included press website measures on A directly financial our

statements contained reflect These statements. this future events. in are with with to conference statements future the respect respect a As reminder, to forward-looking management's judgment reasonable call

differ ended statements Kirby's involve those factors and our over for a XX, now ended uncertainties be December anticipated, these XX, and quarter Forward-looking results subsequent filing I risks XXXX, of XXXX. XX-K in to factors. found of A materially can as risk list from Form result various call on David. Form could the turn for the well the as will XX-Q as year in June actual

David Grzebinski

the and the my turn I'll through you, results today with over comments to Thank then summary everyone. a the and start good financials. quarter Eric, of third to segment morning, walk call Bill

compared in $X.XX share. downturn of quarter projects, lock third share. steady of for per and customers, the business turnarounds question drive our end XXXX we Yesterday guidance to range. quarter, major fourth This and from guidance to petrochemical increase earnings fleet $X.XX mid-XX% was represents full-year over to a the the compares turning and I'll the black per per announced helped earnings from before to the afternoon, our comments, utilization. barge XX% call share inland oil its answers. discuss of quarter continued quarter increase Bill's third $X.XX XXXX quarter, third tank of $X.XX range experienced In Kirby’s Following and in third and infrastructure activity, transportation the all increasing marine a refinery recovery some utilization up the At our volumes and inland updated

Furthermore, these tight rates of result the renewing increased compared conditions, X% in contracts mid-single digits term higher a market average. the quarter and third As quarter. between in spot as market to on the X% anticipated, second repriced

turnarounds, operating some well quarter. were expenses In improvement spot of market operating summer due the contracts factors All refinery with driven lower coastal on favorable renewed higher. respect boost inland levels with west and several entire to the With coast. to of activity favorable these conditions reduced rates the from operating cost disruptions, across We generally term during summer fundamentals modestly part good showed together sector, margins. conditions and network, maintenance the efficiencies weather in storm realized help to pricing, unchanged signs

the the of increased of shipments widening to oil Brent/WTI crude Gulf the the market, broader from spread Coast the East at Looking the has refineries. Coast number

downturn, tankers fleet’s the activity in trade fleet and for our future. While since in in in ATBs we activity these shipments far, working are believe in been benefit notably utilization impacting generating Provided coastwise could not our trade remain increasing their have more thus directly incremental that our crude, focus mains fleet vessels the larger the MR widened, spread the lanes our the to thereby products. that most larger refined as shift

call were decline operating highlighted the second delayed chain in and earnings reported of quarter. supply a the services income in following completion segment which pressure sequential last pumping Vendor distribution construction. units under results revenue As strong issues and anticipated, in many our the

move of up and moved third due activity to for Inland commercial pricing our at in for nearly higher; capacity again field during Marine Permian compared pressure in oil orders of Additionally, the experienced operators the renewing revenue, takeaway the meaningfully earlier higher distribution largely few inflected barge increased remanufacturing of Permian XXXX, remainder were the results the market demand call pumping the improving second of cargo life to our Bill end softening things new slight moments, the strong In reductions in business and anticipation further, drove ramping to for Coastal issues, sheet. the margins of for before third pressure challenges quarter, logistical as the although our over overall customers equipment and is second business I’ll in reduction sequential the transportation, dry unit temporary and of third transmissions are fourth in maintenance well-publicized XXXX continue most equipment, a service quarter beginning the is balance dispatched parts. quarter turn our quarter. the diesel pumping customers in has but our with In right anticipated. throughout an pumping pipeline some and engines. quarter. notably the sequentially In utilization inland discuss more equipment harvest pause to season order our signs summary, pressure expected, margins showing during transmission the than contracts service Reductions and resulted in has of to and the sales generators a pricing remains with segment to equipment oil significantly although rental In This in new some compressors talk higher we declined operating industrial including by offset season. peak compared rebound. capacity utilization boat commercial unchanged sequentially. to some I year-over-year in I’ll services increased direction. the operating Despite marine new were Results outlook results during these year, and of do, marine in hurricane the in and higher. and about improved for field and quarter, specialty insight reduced tow major the lower activity

William Harvey

and operating represents The operating coastal. second operating increase the quarter is operating $X.X In higher Thank to inland third transportation to the XX.X%. than in quarter, everyone. the demand to our in you In a attributable income and revenue XXXX, $XXX enhanced of and David good revenues XXXX pricing, profitability operating million, improvement especially the efficiencies for in demand higher XX% fleet of same in quarter, margin utilization, Compared significant costs improved of and barge Higman the increase with and and million revenues pressure increased to revenues additions the maintenance quarter this marine increased related approximately market, and income the million, $XX.X X.X%. fleet, were reduced segment third XX% increased XXXX of operating pricing. were $XX.X acquisition, and Higman morning operating inland margin our income. due million Compared to an improved the increased XX% to an a fleet

contracts higher time XX% and contracts third sequentially. of affreightment. XX% approximately XX% increased were the the rates During is during quarter with transportation of of Long-term of revenue that those one with XX% which or marine market contracts X% mid-single the Term the from sector contracts are contributed the in quarter, XX% inland term approximately year higher digits. unchanged X% longer, contributed marine and transportation inland XX% renewed charters year-on-year. attributable to were to Spot revenue, to

range. mid-to-high the revenues which During at to of improved the the third to marine reduced These In declined XXXX, quarter, third the were coastal year-over-year, volumes margin in operating the transported. to total market, teens. X% primarily inland due the improving utilization the reductions by partially the barge approximately offset retirements completed end business barge quarter XX%

geographic pricing vessel is the vessel such size, contingent transported, spot being factors average on Although compared third market unchanged as were the XXXX to products quarter. and in various rates general, capabilities location,

higher. see However, contract of quarter, did repriced during number the renewals we a term

the improved under sector nine remained breakeven respect our term approximately the contracts of During the the barge were fleet XX% at of of total XXX margin representing barges At we tank million of coastal quarter. quarter, time The With percentage approximately which the to operating approximately to third capacity. fleet, quarter, the XX% business charters. coastal the retired capacity XXX,XXX during end barges in XX.X with of a barrels. during barrels XXXX inland inland third quarter, revenues

XX,XXX XX,XXX During delivery retire one barrels specially expect to of coastal acquisition, through the XXX of barges XX.X barge was to one additional barge capacity capacity. barrels plan with with representing during a net basis, marine to of and quarter. we returned In of total capacity. we that the quarter, expect XX,XXX with approximately On million the also three Higman acquired the barrels XXXX additional market, a currently of fourth inland charter barrels barges we we a take

As older currently an a in ATB mentioned of vessel quarter, barrel with we quarter, to retire XXX,XXX the to operating fleet. last barrel delivery in a new we take however, expect intend similar capacity fourth our

the return total On of basis, intend also barrels barges, X XX with charter fourth barrels to capacity. We we expect one net a a quarter. coastal currently capacity XXXX additional to with of XX,XXX with in million barge

million quarter, engine $XX.X million primarily commercial, pressure distribution quarter, gas million, the million. $XXX.X increased or in revenues improved $XXX.X our revenues and repair oil declined XXXX revenues income for from million to business. units XXXX due operating business. and the declined $XXX.X third towards were with to reduced in on services the to and the to diesel Moving incremental operating income quarter deliveries the XX% conditions XXXX and segment, of second S&S $XX.X of marine, pumping the due contribution Compared primarily third market an Compared

oil XXXX segment’s third market, due income operating year-on-year X.X%. quarter, in the quarter. up our the In of operating occurring late revenues to third the are S&S gas and was the margin and During acquisition

new this the were transmissions overhaul income in which and and chain quarter. the demand the demand contributed due as some as timing of activity of increased to transmissions. Compared were key pumping orders for operating deliveries, a and equipment remanufacturing of also year reduced as by of quarter, gas supply the and result to delayed well impacted as reduced well new unit pumping deliveries pressure which as oil pressure the was lower during to transmission ongoing offset new pumping of overhauls parts, Recent and for issues. activity in Additionally, field, new pressure vendor reduction oil customers revenue our softening second

S&S. In distribution For to quarter, operating primarily mid-to-high the and single and acquisition XXXX revenues the margin service increased of and and compared in commercial third oil represented business due digits. the revenue third XX% income the and approximately industrial of gas quarter, to our had the an market, operating

for in demands packages towboat increases offshore marine diesel in in quarter, in increases season to several in was due dry by market but the standby the related year-over-year rental and the particularly the power second generators overhauls sale the and the harvest with inland experienced was year-on-year inland generation and commercial the Northeast. the Compared second along markets new engine service Gulf to also the Coast. compressors. quarter unchanged power due We being market to of our stable, marine on diesel the business higher engines, in high-speed cargo seasonal revenues large compared offset service Activity to to reduced market

digits. the businesses single revenue, and an operating approximately XX% quarter, third the For and services the of industrial margin distribution had represented and mid-to-high commercial

total the million. the debt balance the to was to quarter, told sheet, $XX second $X.X September declined XX Turning of of billion as end debt compared

debt-to-cap at Our the the third of quarter XX.X%. end ratio was

During are delayed units that pumping deliveries expect the meaningful of months in down sequential the I will resulted delivered as the in pressure increase we capital, in draw working coming capital. the these working units quarter, benefit

back the this turn debt As the our billion. further our discuss to and remainder the $X.XX of had fourth now call reduced over year. to I’ll of quarter to guidance David for week, balances the

David Grzebinski

of severance, per second $X.XX per and Thank implies quarters in full-year an XXXX share. Kirby’s $X.XX and for guidance first one-time $X.XX This for for for to range to yesterday GAAP expenses several employee and you, related share $X.XX Higman to to acquisition Executive stock contained fourth-quarter afternoon, range disclosed Bill. including In our $X.XX items fees to per share release we per an XXXX $X.XX of our share. $X.XX and Marine amendment a announced $X.XX share expenses retirement. the share press What’s per plan, related Chairman’s expenses, per guidance

continued will for range at of segments, weather lock and marine the we Looking closures expect be impacts. in will barge XX% mid quarter be our transportation low and inland to the because utilization demand, strong in fourth seasonal

compared and we flat we the deficiencies expect overall third that revenue to continue utilization move the as delay operating will As remainder benefits a Overall, to higher the expect days. contracts by weather higher. add up In offset year. we inland expect higher result slightly the of pricing deteriorating will income inland on pricing market, reduced with pricing be and coastal of to the quarter freight seasonal around this the of XX% for stable to conditions

fourth During our large we and operating which scheduled for negative will have quarter, shipyards have impact several of revenue capacity a the vessels, income. on

be we to expect the mid in for result, a fourth low to the single-digit As negative operating coastal margins quarter. range

to driven therefore of distribution is quarter. adverse an customers quarter and peak. key of be current the in other modestly remanufacturing recently by many manufacturing schedule our we pumping under be of the will however some anticipated equipment, deliver more and to to we units of supply delivered late as new units gas fourth and into to following and deliveries, of distribution anticipate increased field oil in reflects in the current overhauls. that and expect be through With ready respect chain impact OEM revenue third revenue sales ordered down Together quarter. and as specialty XXXX, some similar fleets construction, The activity our fourth summer seasonal of transmission and is be activity vendor our business, in for we quarter In gas that the the the the could equipment standby profit oil pressure expect and segment, it we as fourth the expected to the their on our rentals In demand services issues. the quarter delayed industrial with primarily first declines XXXX. customers the have sales quarter. possible units the the the to commercial In pumping in persist and our robust timing reduction for result the income expect in quarter generation quarter by units during and our markets, For have many operating build activity refrigeration pressure and lower completion well for our delayed third fourth fourth sequentially, Thermo-King the slowdown will been power currently remain of which the business, oil for

delivered were wrap Now segment in strong The things up, expectations definitely exceeded our margin short-term improvement. our quarter services despite some distribution challenges results to third operating segment. and and transportation new solid marine the

positive plants well at and look we are are potential. The contract utilization margins we tank This and coastal continue increasing, barge acquisitions marine barge long-term and we high, inland rates our return showing As of and Higman signs from are are gaining and remain infrastructure improving. lock business repriced quarter. positive petrochemical are issues; prices fully is breakeven recent during contracts new ongoing yielding expect momentum, expected to pressure operating third acquisition inland forward, and pipelines, near-term will off being business fleet. that operating current crew very integrated The on construction incremental volumes to rates. to is our as rolling improve. levels XXXX the Kirby’s With and in as initial returns market margins recovery low

negatively vessels, on plans significant These retirements -- activity. and maintenance year. the six be are operating making issues and barrel our market XXX,XXX next to and investments, combined new strong anticipated for confident a I Distribution this XXXX better well state-of-the-art new has improving quarter recently and fleet yield customers point ATB. expected to margins efficiency should our conditions, activities, all the fourth requirement impacted in a we near-term year some investments the it, pipeline infrastructure are of Permian more of seeing some that signs in made increased as We our of services are improve challenging While business. in tugboats significant improvement with ahead to larger is industry by feel scheduled do including runway resolved

for our in received we’ve are and equipment be new As orders pressure a pumping delivered customers result, XXXX. to planning new

remanufacturing and remain our economic to remanufacture operational fleets is facility services market business, Permian very in opportunities working today. Our to including expected fully seek busy as leading the the customers in currently field

should any however, is of some power Beyond the to our demand inland generation XXXX. deliver expansion and sheet commercial in prepared operating improvements, shareholders. in core for balance the realization remains of has returns offshore this opportunities to margin and priority signs grow acquisition our will generate increasing for advantage Operator, seeing life. our is oilfield synergies marine reduction incremental take we These remains of top with continued finally, businesses our near-term, recovered remarks. our attractive And marine opportunities Debt to continue the in strong. concludes combined

We questions. are now take ready to

Operator

you. Thank

We will now comes Chappell Evercore. Jon And Instructions] [Operator with the begin the question first and from answer question session.

Jon Chappell

Good you. morning, Thank guys.

David Grzebinski

good Jon. Hey, morning,

Jon Chappell

on I but David, last start actually couple your interesting. of to D&S comments pretty with inland, were going was

and on So more the you somewhere XXXX market optimistic now. the right narrative maybe in

timing headwinds? the can as in So about your cushion returning start your “normal” and kind -- the just of know potential the when right to in to you near-term I you ramp of give it for yet, you mind? backlog budgeted any things bit sits color on little kind a that but what's meantime, XXXX and of now start

David Grzebinski

Yes, sure.

Let with think backlog start the actually I because interesting. me it’s

to about then now, back the to what If is same. and the our call backlog it you last the is compare go you backlog

same words, that about shipped – quarter. second third the the another book the in we we in So amount

delivery we’re for that's orders So backlog XXXX, now why staying are more excited. doing we getting into high. is receiving What so

XXX trying for out Joe the right now. who business there hire XX the us is to fact to Rainier techs In runs

is of front-end maintenance, happening busy. it some try equipment for the prepare. and in Lot we’re of on its as So part very deliveries are people Others XXXX. the first looking

in anticipation think recovery a recovery. next It's of a of resumption say year. recovery a I I it's growth. really not it’s

up can simple simply this, If producing there, replaced, fracking up some Permian, you to stuff new and and hard of how the as know of bit conditions tears quite the so operating stuff used the look being you run still be they still needs you it it maintenance. at just older a a or the they’re and the some remanufactured of if and lot there’s be equipment some equipment

look it listen growing customers, XXXX a our this as being anticipating we it's of as had let’s to and come equipment. operated. but it not as much track these It's pipelines at some Permian. in lose So, they’re And still good not operating that they’re as pretty still the been, on

industry. to So actually there's well. and us in are component that then the play keeps replacement said a things as All moving happening maintenance a that are that Technology huge because other forward. there component there's

you kind land go If our think OPEC customers make. the advances of the I five resiliency back market that of underestimated years and U.S. and the technology

that’s long increasing. technology And that of a way saying keeps so

doing units, frac on looking they’re make electric to adding a They’re fuel and options, adding now at enclosures sound We’re sound engines dual stuff, frac. more bigger friendly. environmentally more

keeps So improving as well. technology

improves. So pump technology

fleets forward customers fleet and moving all repair and life. ones of the out have So in good our bring some keep the think or new they ball that old take

and what reflect that's seeing. try look that comments, to when we comments my at because we’re the XXXX So, prepared we

Jon Chappell

reason seeing back for I than Okay. Whether than really That’s right to new be that Marine, Are think slow? speculative kind it shown I better anything that you anyone macro that and or the you recontract Any especially switch clearly faster moving can from the that’s expected. into now shouldn’t sustainably believe then pricing of it’s or momentum to reason may meaningful as equipment? follow-up XXXX XXXX pause whether that’s movement if gives ordering for of kind very margin more you my direction, pricing? useful. And

David Grzebinski

will is continue. a Short answer. answer That’s it short think we

you I color across some which utilization. Utilization at know to XX% XX% that. essentially around you the give range Right full think me quite that's now XX% is pretty much as is the Let industry in utilization industry robust.

We’re of cash me, last cost. pricing where coming times year of bad excuse three off pricing years -- was below spot cash

about of From gets So at brink And but their it’s year of got depending competitors and and kind P&L there pricing debt the it set spot on it is to and breakeven to where the and the higher. a pricing bankruptcy there’s interest price up a utilization interest increases. of needed costs, XX%, close their so that recover. up get to need our is to the needs just continue levels last debts recovery. of Many carry to still meaningfully everything back or go with up

new well, new on say new think about are XX, I terms this Now builds in builds. XXs would XXXX of in We mid equipment.

in that the course Of XXXX. retirements outstrip

XX, barges retired this we’ve think year. I XX

the So of was we and this retired built pretty retired. others year much bulk what

a books now Next is market. the plus year in replacement. majority for for XXX them adds Right so here book, we’re order are think mean that know that fact we little, retirements will about XXX net that new or of in vast probably heard the the or very so we I a order We've on minus little, barges. be around

the be crew premium on, with So the together the expansions, out of put for come plants, all the petrochemical demand. new coming when new Gulf going all the the be pipelines Permian hitting you Coast demand that increasing that's these should good from refinery that when

So supply tight demand and now. are

so going pretends that flattish, demand bit, to Supply all think up continuation for continue It's and to I of maybe grow. pricing seen what probably on tiny utilization. growing. is to we've is not

Jon Chappell

you, Thank David. helpful. Very Great.

David Grzebinski

Jon. Thank,

Operator

Thank Company. question the Gabelli next you. Justin comes with from & And Bergner

Justin Bergner

you morning. good and Thank

David Grzebinski

Justin. Good morning,

Justin Bergner

see persisting XXXX? you stand be in that curious things to in was XXXX about third has think quarter, business that those into the I a do potential you The in And where coastal the helped today? factors the market. improvement profitable do

David Grzebinski

is yes. Short answer

that we've shipyards, to impact for We the quarters average – going so be year. this our third got five know out of happen. because quarter. regulations treatment units quarter. X% business of But have to to behind the minus demand, going signs probably both the retirement down are water given older cost taken demand, to of that’s some that in the year it once slight that increased for accelerate know of the of new and we the fourth life to we the that's scheduled We going the broke us equipment, larger we've is retirements margin of back increase in ballast We’re in four even

when we supply at So going that tighter. look in it's get demand and business to

think definitely next I year breakeven. or The see profitability helping. we also between spread So could WTI and is Brent

display persists long Coast They East crude as to in move As will come those trade tightening be spread occasionally out Gulf that lanes. trade oil the the lanes to that that's of our all MR out I also Coast used out of of West the larger but because equipment, of don't Texas. the that's crew keeps dip up of and see down our positive. to some going tankers our which units that

profitable year think The will. answer. definitely answer is get things we now to way they seeing continue next or long we’re the maybe which them we believe again can that's if So breakeven we short the

Justin Bergner

sort And the share question The one retirement. amended Higman $X.XX plan, the your think fees of called out You’re in anticipated $X.XX there? clarification the just executive $X.XX also guidance; per for quick $X.XX Okay, magnitude quarter the were last great. employee clarifying severance, and I stock just those for you'd for the then on guide, acquisition correct? earlier for chairman's

David Grzebinski

to – out you just We did. the your job all – We to a one our what items guidance. know place, in put compared wanted wanted guys that’s have make year so just Yes. for we I to special put to the to

Justin Bergner

Okay.

repeat those year hopefully So those next none okay, the $X.XX? of so would – including

David Grzebinski

repeat would those of none year. Definitely, next

Justin Bergner

Okay. you. Thank

Operator

question the from Michael And Wells you. comes next with Webber Fargo. Thank

Michael Webber

Hey, good guys. are you? How morning,

David Grzebinski

you? Hey, are Michael, how

Michael Webber

term Good. to on starting mentioned David, and trough just XX% about talk move. on And spot permit guys quarter the guess X% pricing next this inland levels. to finally to you the X% quarter market, you I also

as see pricing we’re slightly something single-digits. I that or indication we than those if move you far? is think look equip it think just that accelerated that to if right bit its cases curious starting a way improve at spot. kind getting term further so different you how a that market and mentioned And mid of trended at to QX of so, have into healthy healthy Is is

David Grzebinski

quicker contract, Yes. but kind Spot pricing is that's of than moved normal.

pricing see that's which contract start you gains. expect contract quarter started third You to accelerate to to greater and higher. to first need quarters rolling pushes We This than as the happening. gets that contracts we or tight, above that barge about order I happen of worrying spot XX higher should equipment kind get to will get higher. where pricings start our contract needed that's been continue. spot contract XX% say to as availability, contract, to five towards the maybe Equipments and contracts renewing is the expect I pricing trend would and start pricing customers move pricing tighter, so might in good. that above so even to more him

Michael Webber

kind that term early acceleration where and pricing since to point the spot moves? of where That’s outpace start that should

David Grzebinski

both to the continue those just puts march being contract spot like if Yes. higher they because Hopefully spot little don’t a know up I and emphasis than outpaced prices I contract moves. the will that on it higher. securing then

Michael Webber

It’s Okay. some we’re dynamic trying of of Then seeing D&S. helpful. in of follow-up, with the the inland just market together, to just tie kind kind a

the next that we what looks your the couple mile about that you Just like what haul longer more cannibalize you Bakken fast-forward of the we Would Gulf? as in Permian, Can also mix can mile think the -- you that and talk or crude the of business talk from some years to try Does scenario get of looks? we perspective mile that ton got an XXXX and some mix inland like debottleneck if about of in kind elsewhere? just we hitting mix that ton segments? ton for [ph]

David Grzebinski

would to discounted persist. say I big most that's from predict, hard a are Canada that It’s but would and I long are had moves coming WTI. would crude think Canadian, of very down steep the

Corpus We to I crude loop the VLCCs, and direct another it facility know and go offshore Houston, going some loading you so it the if either group Permian will for think build out go of direct for coming there's a export. to of will or to will some export. of trying

will heard pipelines major the of think and the an it. old rumors Houston buying building refineries. We at area one in in one maybe the customers into another upgrading or I our go Houston some of of least refinery the

processed see volumes So gets from think that crude as I Gulf some increase. we'll do the Coast

less for you of sometimes cross with standpoint profitable see the moves we you the Coast, moves miles short barge the in paid the Huston supplying of still get more shorter, get that a may are lot So mile customer. paid stays be Short Gulf ton that you moves but using our but from will and moves miles ton and the can if you. most for because channel

it's just up refineries heavy -- the the Canadian crude. the a two, the because I like down heavy mile bit that big think disappear or crude your Coast maybe ton ton makes don't the miles but a it's gauge, moves point, a crack U.S. one refineries the -- of So general little but to in to Gulf us crude. discount. They hard come And set little

refiners So pretty move there's it. to for the good a arbitrage use

Michael Webber

you. Got

Okay. Appreciate guys. That’s Thank you. helpful. your time

David Grzebinski

Mike. Thanks

Operator

you. Thank from with Giveans And comes Randy next the Jefferies. question

Randy Giveans

thanks How guys. you Hey, all?

David Grzebinski

Very good.

Randy Giveans

questions. quick Good, good,

down operating cost more from even your and Marine slightly were it maintenance XQ up significantly like looks were kind level. transportation So of your

further expect drove side? reductions kind levels? you do on to XQ the Marine And XQ cost of XXXX this what back decrease those go cost or So, exactly

David Grzebinski

catch-up lot that Higman February and was the maintenance. fleet Well, got there of XQ late of a was fleet. elevated mid-February, we because Higman [ph] Remember,

QX fourth fleet that in the level maintenance it’s maintenance. So from in depends maintenance we on on to we would elevated. be planned the bit around to saw knew yes, and like coastal forward, go what But done. quarter. probably it because for shipyards But quarter. QX, and quarter. integrated third closer obviously the elevated have up catch-up the in the the going I range say it's a shipyard should some Maybe was Higman about caught will up third QX, business of maintenance little out be that there be But yes, bulk that in we we called where that is and was that going the we in probably the it

Randy Giveans

one for commented And is power Roy increasing. helpful. Sure. you then demand question That’s [ph], generation more that

growing. business business is So how focused on And then is to does something that that? you do you’re of contribute? annual EBITDA kind that much expect so, And an do if how

William Harvey

Yes.

institutions these companies, So around know, corporates the States are we as the data hurricanes power and get not even growing financial lot Coast United what have and you along backup to by Gulf there occasionally. particularly centers of they’re generation and and what power hammered where generation

and store they're lot up areas back backup do out our and a acquisition it we desperate which store plug and we gets essentially service example, running to the customers of -- trailer the semi power goes particularly the we on a retailer powered large for of able side, into rental too. generation are on provide Stewart that backup the & supplies So that's through hurricane to impacted basically Stevenson power for you get and trailers and the generation in that

you a add for when hurricane and growth retail us. area So it's becoming backup power data centers

excited We’re it. about

But top terms but Day In income the We would can kind but the – say my not of prepared Eric probably, I EBITDA, revenue, similar operating Randy, percent for that frankly growth it's area. in I’m different it has our on outline because volume kind part don't cycle to answer are a the a and average and than a is in data. group, that. little we you about, access I have, of can of world computers to we different use And now we could the head, instant feel for and of margins a it probably diversification Analyst to that frankly that of that. way give little it's do I believe uses and because needs talked help, the growing

market. that growing pretty we’re about So optimistic

Randy Giveans

Thanks Makes again. it. Got sense.

David Grzebinski

Randy. Thanks,

Operator

Thank question Global. then next comes And with Kevin you. Sterling from Seaport

Kevin Sterling

Thank morning, you. gentlemen. Good

David Grzebinski

Hey, good morning.

Kevin Sterling

the in to guys we reprice? be How of XXXX rolling you that rolling Sorry off Higman some fleet think that have over you mentioned business the XXXX. could that about [Indiscernible]. about you of David, opportunity much contracts in do

David Grzebinski

they see our reprice contracted – multiyear. probably XX% other Higman up the me contracted, quantify, average let XX% into bit. contracts them reprice fully When were On about to hard bought Its we've we Yes. now, say on it back we’re average that’s integrated into these I'd XX% let’s because of little that two-thirds spot, a fleet. probably year, are in

big financially take had just it where could of happening to reprice Because paying they would the get keep now. flow were XXXX, say was I to and they jobs So their still impacts through crews. that cash but

some terms of they were of at not were if loss. contracts a margins their -- paperthin So in

It’s I kind so And the by will back got ways still now. but see him mid-XX of kind bulk we’re repriced. be a to to think them to of of the repricing market happy go,

Kevin Sterling

you a to of the equation. the how tell Okay, some there regarding inland if that will, actors in if better in attributed thing found markets rational much this awesome. you And and to seeing past sense? Does bad pricing years kind now religion pricing way demand/supply are were regular more better keeping of of kind to make their will could obviously is of the just on acting you and demand/supply But there, have narrative, couple you dynamics? part pricing addition any who be pricing

David Grzebinski

Yes. I actors. call it if bad don't know I’d

bring we point pricing. years as I to people think, look, was it painful they got unsustainable was just had a up the about. talked it and long the – where three It to

now guys profitability. seeing booked busy I incremental the their to have lower Some the tier to call don’t because implies end back and of lower them of the something fleet pricing at that up were but pricing – they're different, the want that kind that can it and much get the of are of lower

some more And So lower coming prices that’s certainly religion of know it some are it. about if call yet, but it up, I you'd that not is constructive bottom don't positive. they’re where of happening those are

Kevin Sterling

same doing you you're with where guys, you're thing obviously the Higman But Yes. repricing business? that of book

David Grzebinski

right. exactly right, Exactly

Kevin Sterling

Okay. morning. Thanks that’s time this I for Well, had. all your

David Grzebinski

Thanks, Kevin. All right.

Operator

you. Jack Thank next comes from question with Stephens. Atkins And the

Jack Atkins

good my Hey, guys. for question. Thanks morning, talking

David Grzebinski

Jack. Hey,

Jack Atkins

Hey, David, hey, Bill.

services like thinking is about guess, a the is for let what and sort revenue of there. with me the pushing of we’re third level? guess revenue new from sort off of out, there I I out mean, go-forward seems some run fourth the So there of right question I my moment. quarter because distribution a it vendor into orders rate start quarter certainly bottleneck issues, but still

business think generating kind I’m as it million this the understand to is forward guess, trying quarter? in go of of I about the in the through $XXX in the is to trajectory million this perspective? Just figure $XXX look more out So as we what we to million $XXX first business a we XXXX you revenue is of revenue to million quarter this from a trying $XXX the saw half year? that Or as revenue into of

William Harvey

at and in was million in look to we working that thing for. about were talked sites inventory active quarter-to-quarter, that’s a talked One about activity, at progress, release the And work and going we an as XX that’s very David up. on is of the about just lot press

the in deferred with know profit And you don't any and revenue in revenue payments. that’s XX go progress doesn't some this quarter-to-quarter any and not because good But a And been just so get deliver. our you profit and the as that's buildup statement we’re getting by we million. it to recognition that's of offset income

than second and frankly have actually the closer the quarter to level it seen base in revenues activity I numbers. was year the mean would to see then you was third quarter what second So which to the you quarter

Jack Atkins

Okay.

through XXXX, that is should guess Is So that interpret that will expectation back level. these million the early we that? something that when in all we return to would get bottleneck I closer XXX the issues way

David Grzebinski

of quarter quarter. Yes. there with second very the quarter XXX was good lot revenue good for a the a mean, business, million I second was

the So you're seeing activity third right is don't right is what and point that there quarter activity is away, right the the to numbers now the on back but getting what's really revenues. message not in going

Jack Atkins

Okay.

David Grzebinski

in will these And the is inventory over some are that spill -- work the to the progress are the going fourth quarter, is quarter, in may first in that be that revenues them this these of but -- third you see shift.

Jack Atkins

on as about follow-up you’re talk a more already on Got as sort for question All IMO Maritime I'm of it and distillates what regulation side. the right. doesn't could side impact of distillates I’m side by the about coastal that showing to paying David, that curious, that. have if the what for is you. Obviously, business, you maybe you because Would when fuel should think and Marine XXXX we barge up? the that implemented. asking about an could or impact any on the does so either And demand it do business? compliant. you have then participate not expect and you’re the And on product that may inland flows moves guys on be they

David Grzebinski

their right? help watch the blending grades a I slightly profitability say if sulfur customers We it’s to Yes. ultra the and in blending. and going bunker to for heavy some cases now. our think you an better. it more bunker position customers fuel refineries be reposition, see out and shifts which Maybe we we We’ll It's now, to as things different to locally change lot materially is, the to of clearly little because But really see could our us are might lead blend ships be of say to diesel now, might but to profitable We bunker I what with I to because that positive low happens be don't to coming and barge that we've we’ll business. well. oil want more hard that right our We’ll There would that increase on. it'll They predict to blending moves as figure out there's one volume see. the here probably hard a mean, here. neutral got different. the for of going it's more it's materially it. us, bunker may

Jack Atkins

Okay, great. the Thank for time. again you

David Grzebinski

Hey, thanks Jack.

Operator

the next from question And David Palmer. Thank you. with comes Beard Coker

David Beard

gentlemen. Hey, good morning,

David Grzebinski

Hey, good morning, David.

David Beard

a justify Thanks. but to you question would see justify breakeven. build? would Or pricing on you I on new orders they And it's pricing, moved further about think prices? P&L contract the to move need a to mentioned How to new it My inland higher industry new prices based want much still think up put build? do build moving spot a XX%,

David Grzebinski

to David. say, P&L to economics question, spot you'd pricing be being prices I start would XX% at great would need to good higher start, to builds. That’s where consider the get new is but breakeven for

Now disciplined looking at that people about as some returns capital. said, aren't on

I'm so sure we’re spec. maybe is you're needed little still for lot steel the And price spec, XX people justify be or as There to the barge XXX a because so that of that's not might barges or to Some build we’re seeing by new are going of way, maybe like aware, that maybe pricing but on a order are part well from up that. build. a more ways prices on XXXX, up. on in

they they mean they’re industry, going So consolidated a away okay a imagine. the to robustly like you open new the huge to you a recall barge shipyard with but may as if we’re because builds pricing Jeffboat. bought speculative needed to justifying But justify Jeffboat is but that to are of build, some also long low line, is more you from might up But think higher their open that not that, barge we build barges going was cycles. having as we’re have going doesn’t expensive in still get pricing, as Louisiana new a Jeffboat, now capacity understand, of which to pricing. steel And don’t there maybe Trinity have didn’t helpful I it’s building past knows barges way players. built aren’t up,

David Beard

first you the And does quantify guidance give color much to be would headroom. range of to helpful? expected of D&S, XXXX be or Thanks. would you shifting able a revenue your to into lot slip some how or just that in quarter there you a over Now

William Harvey

for much of sort a and scenario fourth reflected will it fourth quarter, in guidance our and for quarter. how down put scenario through We an the it up a the flow

slippage. there be some So could

that the it’s slip. – Our -- The guidance. degree because tough and it’s that, to everything, that’s really and quantify us really reflects we degree could but, guidance for of

David Beard

with [Indiscernible] little still our there that the slippage some is or of high assumption? end none still is in

David Grzebinski

most the we low in the would we end not – – of end, are a did far all have shipments. we Well versus means end along slip the because it, not of assume high and lot that we did include it of low these

we low end did significant the portion but assume So, slipped. that at a

David Beard

Okay. gentlemen, it. Good, that’s helpful. Thanks time appreciate for the

David Grzebinski

David Thanks, [ph]

Operator

comes question next from Ken Lynch. Hoexter the And Merrill you. with Thank

David Grzebinski

morning. Hey good

Ken Hoexter

Good morning Inland XXs. everyone. And Bill your operating in margin mid-to-upper for be the to used

up, comes are back the to in get possible it’s teens, to. just pricing where your I you Now thoughts picture to as upper want big get on

understand, go even even has acquisition, to cutting, cost anything guess the or mix, want higher. on your Just the changed, I structurally side, given product other either given could it the

William Harvey

the Yes, I point I peak our would say get fully margins us expect at some back cycle. to able to in to be

peak in fleet probably of normalized We margins. expect I is this – cycle our got the we XXs. the you our that’s mid given fully would XXs, would the to say, get the could almost in back go to low and higher. in through a were say there. margin composition, obviously, I We terms way XX% off, but recall, they As will long high I

margins. able in of that could of were I know level synergies terms integration that we the given size, You think we achieve and get fleet to higher our

Ken Hoexter

kind that And presume, really get the just this of point, just by that’s is led to pricing – at you…

David Grzebinski

pricing the that Ken this kind know line. you of right bottom as to rolls the Yes,

right. margins, incremental high very So

Ken Hoexter

of about the and question you opportunities. crude Okay. wave a and talked be, already bunch that thoughts, all And other up the your petrochemical then of follow you were mentioned plants would opening

way international – thoughts you maybe know kind you are seeing go like any flows are closer are your a couple still move some don’t know those – of just update shifting of about that to of to that or stay towards the operating your of we others, going domestic, now any away? have to started that going what’s if of growth we it’s having that you on start to is or or what Now thoughts terms in and opened to before

David Grzebinski

get seeing those and like I of things specific and shifting. to Yes, our we’ve cargoes and would are pressure here, some methanol chemicals are say ways, we things one seen shifting of but the too the increasing

think I they the will going east all up refineries forward, crude or that coast. the to think are I export using most crude for so want, the of

of even going that’s part as ethylene why pressure go cargoes of and of ethylene lot of There know and a will pressure poly the I we an that we cargoes. some in because Ken, come really I’m plants. it’s type know to there GDP it. really you definitely in these increase you plant. to are apologize. out poly of export, way precise, still it’s And seeing -- that growth is about we’re to not come ultimately It’s feedstock in of seeing for of byproducts ethylene seeing are be I But lighter petrochemical know quantify out that an So, of flame hard the terms definitely that’s so also expansions, very thinking count, barge X% kind are it. X% plus as some but but

Ken Hoexter

to you guess to if some to I plus there’s any short get there what leading not more big kind of just there on pricing? the the of system intimated rebound just X X you trying to [ph] of demand and ramped up what in I was going is get that’s your two flex years terms Yes, GDP overtime, but at thought gave in because from me one, the what’s that coming it’s online next kind of gradual or if of kind pricing quick

David Grzebinski

don’t on are just all come will coming things time and think it’s starting on XX% environment fairly now, It’s so the it tight. that I too all shock. where at is are plants in utility it’s gradual. we at an ratably, the where a rate up Yes, be I same is think industry not this running the

Ken Hoexter

guys. the sounds it thoughts. great. Yes, Appreciate the time Thanks for

David Grzebinski

Thanks again.

Eric Holcomb

take we’ll Keith, please. one question Okay, more

Operator

Baldwin comes from Securities. Anthony that from And Okay. Bill

David Grzebinski

Hey Bill.

Bill Baldwin

doing Hope everybody well. is

pretty concerned third D&S side, in the as the did your expectations on the come side? much On revenue as quarter in performance revenue with the in the line far was

David Grzebinski

I quarter year-over-year in still you the services. The year-over-year look for year so last third the so remember When surprise and we revenue but operating was as your weeks three point It got we and Stevenson expected, did. to only the as a and & it much pretty and Stewart income increase, when look or had expected. you distribution Yes, for you & big exactly at was was upside as essentially the performing was to you revenue it expected pretty quarter better between little but all a inland better. – quarter & from Stewart margin last for quarter year mix. & about third Stevenson performing year-over-year a D&S, When will, the third that’s and marine a really so see and about all look at coastal distribution marine surprise, and difference lower little at year if margin. Distribution quarter more this you on that’s has Services

in from mix added down all still So Stevenson when contribution are operating there brought that we Stewart are essentially revenue But the margin. & average huge margin there.

William Harvey

progress $X quite because had you know you the actual buildup when in Bill, of absorption actually deferred, mention had inventory in their same how the revenues quarter, mentioned cost sales roughly works should have I their at margins the and quarter. D&S, would thing work that I One being been million. when their SG&A nicely are when down the And cost look to second would the compared lowered fixed have of the second they as if they

a question So of timing. really it’s

Bill Baldwin

over job there. good a done Joe’s But

David Grzebinski

but job. Yes, good so. Not I doing he’s a enough, think

Bill Baldwin

a Doing job.

better I On quarter third second that on quarter… D&S, fairly for the demand that steady know basis, in business up reman know a third you a overall the remanufacturing relative was reman then specifics, side can’t than but mean versus the hold get the lot we I

David Grzebinski

is again right sweet Yes, I know was. our it and in spot. that’s Reman

Bill Baldwin

And then two quick questions.

environment, I for it would is mean competitive is the your in Kirby competitive or choice – first that leader going there? to base a environment reman in the you reman your [Indiscernible] that the be customer Kirby how out area? describe such On is business

David Grzebinski

Yes, believe we to certainly Bill. so like

these like a a so they got think We’ve reman. – new. I units, reputation, on when high quality operate reputation reman we

market. But and some any by the people the pressure certainly got that We other the good reman about you’ve and market then quality XX% say certainly to you and competitors. in to the that work thirds kind and tier, cheaper are are top as best and a two of market, probably in got very there’s by we people preferred the share done care would we pumping would high believe, it’s niche high-end share I quality do at we’re want think know and top reman, I of price-sensitive, get the can space. it, we’ve we of have market like say but we You market

Bill Baldwin

mean superb. got that opportunity when That’s go, business or… basins, and should that there you you goal to, that in that then, overtime you Is think into was capacity I grow think market in years different business expand going to or you the ago. do expand can is

David Grzebinski

Well we have.

Bill Baldwin

guess different basins, comes to you you Do basins over go you can think business from it’s I -- all or.. or the

David Grzebinski

in but on Midland, I people units that, have essentially trailers hired that area. these Midland facility does. hour, trying there. an in we add miles hire can just I’ve travel that it, Odessa, we lot people a expanded of XX We’ve think Odessa. frac lot a It capability in are a so have I still in and expanded at remember of said, to

Bill Baldwin

are little situation question, clear get And to in my the to vendor have up bit. in you a the some alleviation supply begin bottleneck or you last seeing on

David Grzebinski

supply tier to look, bottlenecks tier tier the but from are standpoint. part the clearing technologies this X a mission There’s engines of up, to engines went X X X so engines is tier and from look we or chain issues. Yes, new a

new technologies. all that pumps new There’s that’s so So technology. new being developed,

and they are that are do And there’s with you new the issues and dealing of standards of is these that coming just dealing have impact. tier but delivery engines, new transmissions they are out, with. issues but bottleneck kind are the design our say With know there designs new them it’s issues supply would the up so and I aren’t every bigger OEMs an always this, with some chain problems new new ramp

Bill Baldwin

And see you that continuing XXXX. into

David Grzebinski

end You hopeful resolved. of of by will bulk be the I’m quarter this know the them

Bill Baldwin

Okay, well Good thank job. you very much.

David Grzebinski

Bill. thanks, Hey right. All

David Grzebinski

All thank for today. our and Bill in right. everyone call participating you you Thank

great can If any Thanks or directly you reach XXX-XXX-XXXX. everyone to a questions day. have you have feel free at and comments, me

Operator

presentation. Thank for not you. The you concluded. conference attending Thank has today’s

You may now lines. disconnect your

Kirby (KEX) 26 Oct 182018 Q3 Earnings call transcript