KEX - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to the Kirby Corporation 2019 Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. We ask that you limit your questions to one question and one follow-up. [Operator Instructions] Please note, this event is being recorded.

to conference like to now would turn over the Mr. I Relations. Kirby's VP Holcomb, of Eric Investor Please ahead. go

Eric Holcomb

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

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

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

risks from Form these XXXX. results can and the list actual of found uncertainties risk our as Forward-looking December ended year various for A of Kirby's in anticipated statements result be those involve factors. and materially XX-K factors differ XX, could a

now to over I the David. turn will call

David Grzebinski

good of revenue $X.XX Thank compares per share. earnings earnings morning, today, Eric, third XXXX Earlier third quarter the to and you, $X.XX per announced $XXX of of and million we and million This $XXX everyone. of share. quarter revenue

driven revenue largely Although, revenues significant XX% were marine down by increased earnings X% earnings share growth year-on-year, and per in transportation.

during favorable operating River the continued distribution significantly the contributing services. delay waters sequential of offset receding oil and reduction reduced a XX% and weather improved and with Mississippi in Cenac August days. than beginning the flood the marine field inland of improvement and to at in quarter addition more summer marine on The In activity conditions

drove on operating contracts of significant particularly improvement efficiencies our quarter conditions affreightment. in much the for of These

much elevated that of a result operating we with of to Additionally, the reduce conditions. been high flood able as were had to water for expenses water subsiding year

higher to term with single pricing inland modest industry better during contracts market, a digits. the lower renewed but Overall, quarter. saw mid the spot was barge on the in momentum stable, temporary weather, increased led and pause in upward low weather Pricing In availability. This to with quarter, overall we expiring customer the in of demand however the costs in touched margins in quarter. third improved the pricing XX% inland increases

a margins reported we Coastal, significant with XX%. In profitability approaching in operating improvement

continued capacity were pricing the market renew quarter vessels. to and supply for improving XX% utilization in continued range demand was During third Overall, large contracts expiring conditions term our customer tight mid on barge and favorable higher. with the

oil third services was the In distribution decline the spending results, negative and significant. impact that a quarter slowdown field have although the would on we anticipated our of magnitude and in

gas and income oil many sequential further equipment Our with and and and maintenance their businesses related of spending. operating reported parts reductions activities scaling in customers revenue back our

of pumping In our activities new lower declined. In transmission were were anticipated. with while new volumes remanufacturing and expectations, of also than pressure distribution, deliveries manufacturing performed sold overhauls equipment in-line

there believe a limited as recovery unclear. of growing is we Although the spending, pent-up result timing of this remains demand

reductions we during third schedules. reduction result, as additional the quarter as further a implemented cost well As work initiatives including and reduced enforced

conditions the spending coastal. field operating gas impact in and inland in very margins for sequential to had businesses. of transportation a operating marine good oil distribution Steady and strong and led reduced summary, felt gains across oil our costs was reduced quarter. services, and In demand, favorable In the both

Bill call quarter I balance segment do, and our discuss about turn I’ll moments few to over the results sheet. a outlook, third In details to before the I’ll our provide but

Bill Harvey

is were revenues everyone. in marine due acquisitions XXXX, In the Compared morning XX%. third quarter revenues XX% X% in Compared million efficiencies quarter income. increases X% an pricing inland operating in of same or The and attributable million improved lower $X.X delay million $XX.X and and income to inland and the $XXX.X and an reduced increase in days a this are higher revenue and you, Cenac Thank to the the overall an operating CGBM. XX.X%. operating margin of by good largely increase increased to operating million marine in increased operating quarter, segment, of with represented and David $XX.X and costs. These second primarily income or to our increase transportation revenue

year-on-year contribution of from XX% delay quarter, slightly increased higher in and reduced to barge pricing the pricing primarily revenues acquisitions. the Compared demand, lower barge customer business, than X% offsetting inland utilization, days, inland increased increased the the revenues conditions recent increases operating impact due to improved due improved contract more the term In to and utilization. second

spot attributable average barge XX% year-on-year. Long time contributed affreightment. utilization XXs. contracts rates low the mid the renewed digits were that contributed low terms XX% quarter marine of in revenue was XX% the during transportation one market inland higher XX% and During contracts with longer third single charters to higher to were marine Term quarter, contracts term revenue of or approximately the rate on the average from year in contracts XX% business and approximately transportation or and those the with of inland of

approximately quarter third the operating the margin in the inland During XX%. business was

Overall the mid products coastal higher barge driven quarter pricing. utilization X% second quarter. increased year-over-year during XXs higher primarily quarter the Coastal's as third by revenues utilization range also the the result primarily barge In in business, coastal and increased a X% improved to refined Compared demand. was revenues of

capabilities renewed such the are single approximately vessel pricing to general average regards and market location, on rates and although term improved as various geographic XX% With vessel size, digits in contingent higher factors mid being the products transported, rates in spot year-on-year. the contracts

was approximately single digits. XX% the were time in which coastal quarter of percentage contracts of During in third margin high the operating XX% under was charters. the term quarter Coastal's the third revenue approximately

With X,XXX million XX.X fleet, respect barge the barrels the unchanged fleet third of at capacity. quarter our representing inland end of barges the tank and was largely to had

expect to representing count In barge X.X capacity. barge barges We of the of do during XXXX. unchanged billion expect the barges further fleet XX.X the million coastal year barrels capacity. not at barrels to with the coastal We with was marine XX of X,XXX remainder market, the changes end

service partially million our at third XX% and the of Services Compared $XXX.X primarily Looking oil business. quarter repair down operating Distribution declined gas lower for due system XXXX limited and revenues and in repair was power income with gas increased lower backup power in a and by levels oil higher new demand sales in services. the businesses. marine XX% related revenues million. engines $XX and third as declined marine were revenues the on installations activity sector, activity and to of generation million to and XXXX the our for segment, result quarter $X.X Sequentially, with offset income approximately operating reduced This

approximately quarter low single transmissions engines of as Services In and and an low remanufactured quarter operating the units, XX% gas revenue our in new represented had of X.X%. down third oil revenue in well resulted and softening related digits. pressure of third new levels negative businesses In overhaul segment's the operating oil was market, and margin activity pumping which the Distribution for parts. During the operative were and demand and due income gas and as to margin

business. systems XXXX at to In generation to third was offset Compared declined in and due Operating a the installations growth second income our single-digit higher as increased backup low margins. operating commercial reduced result the by costs. however repair was this revenue as stable service large quarter, quarter of market power operating well and industrial primarily lower as power revenues of reduction our in compared XXXX as marine to income levels the business

the third water In single business, results commercial conditions marine services in lower disruption following marine high and the as due an quarter operating approximately of we industrial months benefited and our margin and the new very as costs. had digits businesses lower to declined revenue distribution XX% engine represented as the as sales. from customers well many of repair In were busy high

to the Turning balance sheet.

September XX, of billion and was debt total $X.XX our XX.X%. –cap As debt-to was

debt than the million on paid we down in focused remain quarter we the of During more debt. and repayment a $XXX

week debt was balance billion. $X.XX our As of this

I'll to our David about over details provide back call outlook. turn additional to the now

David Grzebinski

to you, narrowed $X Bill. has Thank will share. I which $X.XX now discuss been to updated XXXX our guidance, per

new at transportation, from Gulf the online. Looking potential as marine during plants Coast we in be segments our in expect demand stable come some customer fourth moves continued petrochemical growth with will upside quarter

tight with Overall, the the low Operating conditions closures of winter onset barge fourth on in XX% the the inland utilization and lock River. are disruptions range. in Illinois deteriorate quarter Gulf temporary with to anticipate Intracoastal Waterway remain and from will weather market the we along some the seasonally our expected

higher teens. scheduled for revenues be barges With margins number third Overall, operating operating are quarter expenses respect the expect a maintenance the relatively we fourth quarter acquired sequentially with to to quarter. the cost, fourth as during inland stable significant as we the will acquisitions compared and during anticipate recent of in high

coastal and barge expect the In in we utilization fourth market, the stable the demand quarter. mid-XXs for

the XX% the significant As activity, is negative seasonal expected shipyard sequentially on revenue during capacity major activity vessels. low Alaska and X% Together income are which in of a amount with to range. have revenue seven to quarter. will of This quarter, operating fourth with impact highlighted six margins operating we with scheduled will in vessels decline negative the have a the single-digit fourth last large quarter reduction coastal in

expected expect gas fourth expect orders end will we new to on pressure limiting we remanufactured pumping and Distribution For the our With minimal in remain that year. Services market, challenging. mind, the is the our through and spending new the new focused In and for intensely of equipment. quarter oil manufactured segment, remain customers

work to of which in orders half on the back expected deliver quarter. continue we the However, to are existing

distribution delay the as sequentially. some is oil units parts could of there to equipment delayed potential is XXXX be impact end engines, In of transmissions quarter. continue timeline this guidance including and first service low overhauls Given and The well range. related be and into a risk our into of sales our that we of will factored expect new down gas soft and as these

In the our in storm as primarily markets, stable. to season due fourth to quarter expected Gulf The to Coast power fleet in is revenues marine along commercial our summer decline expect repair utilization relatively the industrial the be ends. and business generation rental sequentially low we

the to Services, be single fourth slightly digit modestly to are revenue drivers. of positive range. to total expected to power quarter rental being and a down compared to utilization generation be challenging equipment for margins In flat low and Operating breakeven Distribution the reduced expect third field quarter with we in the major oil

utilization businesses. This full-year in the some delays the Overall, end minimal related assumes parts. orders for conditions oil and into additional assumes equipment operating very oil demand high engines potential and range, for and transmission gas barge Distribution end delivery and our and improvement gas marine contribution includes pumping the weakness in inland pressure guidance XXXX, Service’s and the mid assumes high possible and into from new XX% good distribution also range. remanufacturing services of The limited A and continued some for businesses. lower-end

quarter a here earnings. that Distribution increased as and Inland challenges improvement marine well field we third maintenance in quarter, Now good fourth Services. In significant have executed Services as in will on something's well delivering continued weakness segment. and our coastal in and oil had in and transportation Distribution up. the Overall, both we year sequential despite

Kirby's about positive very outlook earnings main we term potential. long and However,

during be positioned inland made last a construction, With and significant we years the to barrel marine a successfully continue the more is capacity adding fleet. to petrochemical XX% under key for result the years. demand as contribution acquisitions our and the completed marine of to In expect well strong. coming improved integrated new These inland several market over two we've have capacity inland

upward. increased retire contracts desire continued a industry the see in In coastal, and a equipment and coming the customers With to witnessed equipment limited off. this in extend right-size set up years In invest the to we ours confidence is capacity of a believe is market number business begun the structure new modern reduce at years term XXXX coastal or that of improved to to to under us strategy few by recent multiple giving fleet improvement. growing in vessels pay cost rates including spot expected trending construction, has we've our our of months

we oil believe existing gas activities field the on in about future, and outlook In unsustainable Services Distribution near remain although the of and our challenges long-term this rebound. for is equipment optimistic related The in the maintenance current oil presents activity businesses. lack we investment and will

which not pumping need although environmental industry replacement there for reduce horsepower need a footprints. efficiencies pressure is Additionally, and improve currently operating the does will new capacity,

the for expect key steep continue we online, future. companies completion curves world a With in in the will coming to Shale, major to activities up. role from With foreseeable pipelines and play new oil integrated Shale invest decline the energy supply cycle back Permian

positioned make with have in well to opportunities solid we adjustments our provided as align Services on have the In margin market Distribution a and the to the continue to conditions. will they is industrial for field non oil Kirby operations arise. these and and segment. Elsewhere when contribution capitalize meantime the businesses commercial grown significantly needed

distribution and power continue equipment businesses look are as to expected generation growth demand our industrial some marine with we these forward grow as for As to well businesses. backup increasing in

our we the that our since in balance in liquidity equivalent paying we and Earlier is years in less March. new coming for place finally, than months. This improve debt we've sheet. $XXX million more six put bank steps taken than acquisition the lines to year the paid down Cenac for And in the significant enhanced of

in year positioning of acquisition giving flow and the flexibility to debt free improvement well us we additional for to significant opportunities in cash additional advantage take that With in expect coastal, and arise. financial continued may strength coming reduction more inland any us generate

our concludes prepared this Operator remarks.

now are take We to questions. ready

Operator

begin first from question-and-answer Hoexter Instructions] We comes question with the [Operator will now session. of Our America. Bank Ken

open. Your line is now

Ken Hoexter

and Now as talk scale you Are and take on a fourth job you you've about just back of of the facilities ramp step timing timing the but additional into Bill in there end a inland? maybe the quarter. you the in building carriers of good maybe see the the just, that as quarter coming step detail coming the of of new Great, the the mentioned you're Dave, Dave seeing new assets about a peers XXXX, maybe the seeing of the Gulf and XXXX on look quarter started morning. marine, great bit little that, a nice out structure into you downturn of new look to back fourth online talk maybe couple kind again? maybe consolidated and market are for the kind about after you at to talk mentioned here just that we Hi just at Eric. the

David Grzebinski

Yes, sure.

Let me word, demand supply not it's Essentially and on. quick outlook. it coming start in supply good. to real look a continues with a There's lot of new

were delivery XXXX, we For there XXX XXXX. we for quarter I think expected in said last about

that's The XXX. it and have the equipment current type a in had weather number's that of actually shipyards There's rain because delays delivering pushed winter lot out. been

deliver half XXXX. we So, when expected will we moved to hit that XXXX then, will at this year look you And barges replacement. XX in to at out retirements, think least the are for those of be XXX of

the supply. growing pretty supply demands So standpoint, faster and a because positive we're yes, from demand than

you And new got that, looking of your to along. are next recession, pretty a the even chemical are you've risk if things course year but all recession good. plans exclude coming these the with Of point

the big in SAS by I be Oil expected Charles think the their is up quarter seven of starting of now. unit to XXXX units Lake with first three completed

excited pretty about we're So, that.

others six come half second probably XXXX. second cracker of that's first has a there the up the in about the that And there's half. here online to going part starting here Foremost, are or

demand. So, loads that for well

the X% plus So, about is plus the to maybe X%. think way something demand, GDP we it that

feel a we with good. even little supply pretty So, growth,

at this for pretty supply growth thing they new prices heavy about are other The building equipment barges. is I'd say

justify barge that rates of to equipment. higher rates cost the to need they new justify higher So,

we that and look have first. pull and XX% We quarters pretty winter we'll it weather I put margins together, winter hit XXXX think just when we should be all in fourth at So, a both good. in weather the back hit quarter, months, here little this

for year track on in and the But side for marine we're sure. inland continued on next improvements

Ken Hoexter

as Are your thing talked kind past then out it are thoughts to the maybe you oil great. just gas timing do rebound, discussions panned guess customers. Got it, of of main your maybe they're of And on their part the contracts, D&S sounds terms how over a and beyond I in on of they that's the of same timing?

David Grzebinski

question. good a no Yes,

old I I'm saw and think of you the this are sure here. up pressure thoughts announcements our capacity. couple of pumping Many bunch pairing a customers in up cutting of week. lining

X.X alone, announced I in think week just about horsepower being this that's they're our cut estimate and up million impaired.

news expected that pumping to it in couple That pressure they up. back the the for brings major the quarter tick demand great companies largest of That's supply activity and balance industry. first said

of I a in in think think lot nobody's the will fact quarter and activity really and we client. expecting the it fourth

That But demands look, demand. not shrinking. pent up pent there's growing, up

at As for our down. back. remanned's down saw come cut activities, that's maintenance quarter absolutely unsustainable, only they'll next you be to hearing maintenance can We we we're But go quarter from look this back on them it what and way so has long.

And the said majors week. said oil integrated invest that it's growth fact They they more hearing efficient. And them. the new in shale saw to this the great want we're to that to decades thing big about of continuing and company one equipment, major of in

it been go goes first don’t the far and that quarter back sure. fourth it's to a up. quarter that activity the we our couple said of talk but predict come look customers, I you'll year. and know it's will in going the to when at rebound third up quarter customers It's the for rebound level will quarter but the hard see I So, how to better next activity think which be

Ken Hoexter

Thanks, Great, the appreciate I David. comment inside.

David Grzebinski

Thanks, Ken.

Operator

you. Thank

from with comes Atkins question Stephens. next Jack Our

now open. line is Your

Jack Atkins

thank morning, Bill. Good you guys. morning. good you Great, David, Thank

David Grzebinski

Jack. morning, Good

Bill Harvey

morning. Good

Jack Atkins

quarter D&S your see talked and timing for sort of release reduction sort helping out David, start what's of of a the moment. the of in comments benefit that if fully do press there. I in guess the prepared some workforce the with expect fourth there. the not if terms profitability So, of of that or about in a a we could you you

cost And support D&S run level. some a above then, structure reduction maybe sort pull the are you fourth in can there workforce cost brought at that to to as the help look other there, outside find of opportunities profitability quarter you're XXXX just the of rate leverage

David Grzebinski

But reductions reduced oil tough. year-to-date. workforce as probably we've when workforce. we've gas business and In look what know to are look, no. done of Yes, XX% you at the we XX% the

schedules also work added weeks. We from XX-hour this reduced quarter cutting back the

That's talked said look we third when and XX%. helping, was would we get about but Well, talked at quarter. quarter We we the about thought about didn’t would about had quarterly guidance sequentially revenue but we what actuality we looked down in be XX%. third in gave thought happen down and guidance it

know So, activity's it less when at third the be other in to quarter, exhaustion budget we going we the quarter, look and than fourth was things.

You've heard those phrases.

happening, that’s fourth know that's discussion. our part of we so quarter of kind So, our

into really cost got start taken year, measures. pay right when the in should problem going of we've you off. The activity. is lower we've But But to structures next a just not start these fourth quarter lot the

of on some system. putting us think on, other stuff one talk working systems we're you've all there heard I are our ERP about

be lot on lot We're there's savings. be Think because between system. well a able share that. that, all inventory of going our with That it we'll mid next of this complete of cost be way, underway a to on to about year one kind they'll locations should savings and

stuff; available inventory, you're cost to out kind that got we'll of shifting able on take be when capacity. So, around manufacturing just more

this we're and up demand that So, pent excited back. to about as activity starts pretty come particularly

Jack Atkins

you. Got

cost and upcycle. you. the it to the sounds side more like add the maybe on there come that operating got That’s, okay on will leverage So, to is

David Grzebinski

no. Yes,

Jack Atkins

there, you Shifting up my now. coming very gears it's looking to from follow-up coastal term market dynamics moment are Can interesting. business talk the to to question. for you supply Customers a think demand about I

wait give As to you know look in I going out January. to to XXXX, guidance you're

coastal realistic in high third are terms quarter. level of sort of a the digit, for quarter obviously of recovering think margin already digit quickly for things in at operating at very and But in strokes there. about terms broad What's we're high third operating XXXX the single single a

David Grzebinski

that's you've That, starting was for we've us fourth heard, going back in well good the take But quarter third a coastal. to shipyards got for sure. as coaster to in quarter major some loss a the quarter

the Some shipyards into of those quarter. first carry will

But then, they'll be over.

some negative, and retirements So, positive, hurt demand. negative retire standpoint next to short-term I that's I from that's year help it'll or side positive, a think going right. in three vessels that'll next have said of year income but and a supply kind but the revenue of the long-term it's we operating a We're and little bit a do terms

out that, And right we tight Because competitors supply other is do pull equipment. others we're seeing now. of those some and demand and there retiring as units our

get As that happens, the to markets tighter. going

to we're stuff. have it's the we'll market but revenue up terming predict, from we not guidance little So, getting a retirements yet hard tighter we're lose and but structures prepared to give the

So, to we what it's it's too see. constructive; but we year looking call a little next like early pretty

Jack Atkins

Okay, again That's hear, the for to great. great that's time. that's

David Grzebinski

Thanks, Jack.

Operator

you. Thank

Chappell Our comes from next with question Evercore. Jon

line now Your open. is

Jon Chappell

morning. Good you. Thank

David Grzebinski

Good morning.

Jon Chappell

last we of much of own if I'm conference can David, a sense maintenance the or hopeful trying your it next margin about kind year, inland. earlier issues for than than these locks. the expected maybe are, call I of the third higher think of fourth XX% was flee Hitting in here, get start temporary whether in talked second quarter on maintenance half on I how quarter so the expected. some the to be with

of kind those? are early both on is down next or continued as and moving expected over having XXXX should the recovery these of but Sequentially, give in events there some somewhat is we for kind positioned carry primed one-time of and year these fleet things into

David Grzebinski

are and and the it the well when seasonality. I the Maintenance -- excuse shipyards shipyards. cycles over, not latter temporary. carry more annual on think it's based it's Most built of regulatory was where me, the is Yes, when this

bit pretty of over we've here acquisitions the in the a when the big carrying equipment. that of quarter first hit just this little the quarter timing built the companies with fourth because into done And acquired

is thing weather really of high we the the passed the starts after first quarter's got good the in cost water, the rough a we cost lot quarter, third seasonality. at other extra worst our was took and Fourth getting the weather. The we then horsepower When you if quarter, usually weather of terms out will. look

but helps that I some And really the next year continue And that for margin. will say seasonality. would

think that I what shipyards. normal more it's it it's So, you said a mostly timing bit of of early little in is and the question is temporary just your regulatory seasonality

of So, right is the structure the very inland markets good now.

third Our the -- bit bit and utilization's mid-XXs, third maybe it in range weather. dropped me, the XX% fourth now. drop of quarter but a We a the excuse XXs of the were down because little the will quarter the in that's in in the in down then right end quarter little

the up, weather utilization. up Fourth some quarter of the back as probably choose go it'll

Jon Chappell

out than is. the to obviously clear, of no not if the I that seasonality So, of quarter. impact seasonality then and first The it better the just it be 'XX reason wouldn’t look in similar taking XQ to think of 'XX? There is mean, XQ I all peak to tends

David Grzebinski

expect be look should in it quarter third pricing Third say is market next year better I quarter when it's than given But everything next best the quarter the you we're this the if third year quarter's quarter, always I and third would quarter. would the third this seeing year, and best. would I at be weather

year-over-year gotten a to year are next way and the just year carry should increase. market, in increases will tightness into So, throughout this things pricing progressing, price full And the that continue year. the we've the

looks now. right pretty So, it it we're where from is, sitting favorable

Jon Chappell

then second question which Jack's first And a question maybe think different is way very ask to Great. important. I

cost your that you're message that eventually when that think primed improving in well comes. the question that was the are really D&S recovery to so structure you I

horizon. the maybe there way, about doesn't some a not come six filter let's But more that months? to what to other term the profitability demand least the done near to does doesn't if or up Is on think far, Is pick take path to you've say even at to in so time in cost eventually in. there XX it next

trying narrative to the keep Just some very if be to margin think continues ability positive to about the poor?

David Grzebinski

No, Yes. I absolutely. think

commercial related. put and kind services in oilfield of About industrial distribution which in revenue a here. is and of non me XX% our is context Let little

related, we've XX% Services customers generated pressure Distribution capital-intensive. pumping year-to-date, flow. So than is but free EMP when our $XXX This is business and you million business. different take oilfield of and Their over business very customers cash

isn't. repair equipment gas. oil supply and business We're the in the Ours and equipment and

So when you is the Distribution our in CapEx million. what was look at Services structure that of and it year-to-date means $XX

cash $XXX cash you that flow. of almost when over So free get generate flows that bottom hundred, a flow operating million all to the line we and

remember but requirements of So pretty on our capital in small. going are oilfield, it's what's noisy the because

So oil year. into base we with year and this the free side, in generate were should be to positive and we market of the earning continue we even To think commercial flow. do earnings industrial, cash next gas it if next and

Unidentified Analyst

David. lot perspectives. That's a very Thanks helpful

Operator

you. Thank

question Our Webber research. Webber from comes with next Michael

now. line Your is

Michael Webber

guys. are morning Good How you?

David Grzebinski

you? How Mike. are Hello

Michael Webber

setting them on zero up the in of on It's the follow of there's guide, you're weakness beginning QX guide. it's other color David that QX inland the Good. just inland baked trended one a go of spot year. in we to [Indiscernible]. give lot momentum going impact that if is the already. that where know seasonal begin going into pricing spots it how when of on I during to to and I the pricing. on look guide guess then would kind that questions the But, reflective quarter bunch of first seasonal factors at a some have the be There guidance and and on of in weakness the are probably

curious been that's seasonal you little up of cutting just in HX? back how basis are that's of QX competitive a into the on right throughout the see the quarter now of set trend sloppy market? I'm spot the the terms mean on to kind dynamics weakness kind market inland I pricing contributed weather how capacity the then a of following Whether patterns from kind bit and

Grzebinskibe A - David

Yes. Year-over-year third But it we contract mean flattish good a the quarter, prices up. in pricing pricing like was in weather When was quarter but spot of spot was that's pretty frankly the kind in normal XX%. No, third I I quarter. were flat. say had renewing up sequentially

say is industry usually utilization lose Mike, weather X% this an really as to us X% heard the You've before good what when happened. that's we about and

was XXs utilization mid to the low in fell our the heard You XXs.

weather. about all That's

So little push it's price quarter get trying you availability. weather barge more when tough increases you've a to got good because you're and a

So the tighten price tailwind but will will on increases continue believe we impetus get slow to down and here. spot as the pricing utilization comes up or weather that those

trend I was kind coming question. all on. had more It's just that was think better of that's availability. year a weather there But don't long. things There This its capacity moving little was we've good better. new barge a

momentum kind So upward the and multiple slowed spot of flattened out. on price

get the come it will back as think fourth tighter and in quarter. here we I first

Michael Webber

we to are you utilized have over quarters. a and degrees one kind or you guess I utilization capacity of and or might couple whether the today have some the kind coming of one got then and chunks of be not of large think How should along they're a fully of And the of follow-up particular not know. those those that helpful. head those in what in next varying about That's that those -- competitors distress lines

How you restructuring or the of sort leaving whether think the that those of restructuring? be event that's a sort driver the dynamics bigger either or entering say would market markets a entities. one or to capacity were within capacity primary if of sort It there about some do market of context competitor some exiting some some major entering with

David Grzebinski

depends Lot restructuring out what Yes. they time If the a the everything actually most of keep want could and liquidation, come but to the capacity running. on happens. reorganization it's it

is I utilization equipment So have. the that of we equipment at same their or think industry's as the most roughly

So to really be I changing that don't see honest.

bankruptcy are usually to reorganization business think any keep of the going. kind I courts trying your

and bad if don't change any there forced think was that mean but a So it there. really might I I would liquidation don't really that happen. I got help actually see

to an to and and I'm everybody's good I better our the talk change what and up who don't keep it'll acquisitions, for at but $XXX do It's when little possibilities There revolvers go given think their that it's specifics, we look scene they available come utilization are of the us. talking a across million a a lot paid we've to got markets revolver knows as up, undrawn. broadly going to happens. told that's expectations our you price Bill can is if debt best But tend competitors. for still entities but happens not totally the It's right now down trying you short-answer, pricing

up. expectations do out not some makes if and there So better acquisition for now when we'd is know predicting for sense we the price there's goes If it at Kirby much see typically acquisitions better it, possibilities but market you all market the right I'm us. one a because

Michael Webber

very I that. That's helpful. Thanks. appreciate

David Grzebinski

Thanks Mike.

Operator

Thank you.

from Giveans Randy Our comes with question Jefferies. next

open. Your is now line

Randy Giveans

Howdy gentlemen. going? How's it

David Grzebinski

good. Very are Randy? How Randy. you Hi

Randy Giveans

I'd Good. five utilization but Is the backlog cost-cutting, building three oil reduction, following consolidation manufacturing what and years? for backlog current much headcount last? how year, there the the months, new sounds equipment it that remaining contract service is six gas your for facility and like a does say the then isn't years,

David Grzebinski

Yes.

maintenance expect. we spending. that run had lower on maintenance probably guys I that as that XX% tell But in pretty keeping is even when are I'll in we've you and their XX:XX working What put utilization got look a it. than more We XX% take quarter gas to doors those It's XXs then we anticipated third than pieces. oil was would if old in remand of quarter. working lot it's its on activity in the at the on to number we're greater Look But than now probably low. a me you XXs. about back much through, expected it They've maybe typically still the how like busy. and maintenance the higher to we you XX% Let remand some is to and cut

I pent lot being as of demand There's about acute sustainable. don't to cash but I pressure think think there's we them built free a up on that's now. right show flow talked an

Bill Harvey

our the trying highly up industries. business work other we variable the a And do is we of Randy is have. force And different much me activity Don't of From costs. variable line than view, to we're manufacturing reduction get what to cost. should there that cost utilization have fixed wrong XX% but that some think point it's less you important. in The in little lines

Randy Giveans

kind the of terms extend and in some service of then of and beyond? do into contracts Sure XXXX those

David Grzebinski

service know there's service contracts if into always they in We XXXX have go contracts don't I place. but

Randy Giveans

you And second coastal possible Are or following question solely or a acquisitions. there on my DNS even any maybe then, appetite on is for focused bolt-on acquisition? inland I guess up

David Grzebinski

is answer short always get everything they're terms The most we from We is look obviously. of because liked ones at to that them yes. acquisitions. We're the it's pretty synergies good integrate. We at in inland first inland very Yes. easy the

easy. very think I

work and of quality operations crewing equipment. from guys Our very hard integrate standpoint a them to in

deal prefer tend look oil said an anywhere. and in it's we're But incredible say happy acquisition is. oil we would anything our We but like unless and any inland to our wouldn't we to We that it I way the just gas space. gas. always we'll platform don't go on side the on add need wouldn't, with at

paying little said, it's type along love debt, in not commercial now but comes frankly focused platform on look see of and likely might gas recession one. to one one, Certainly for and We're You an Bill a if in potential industrial priority ready that or but it down we'd an we've go commercial at happy inland bit industrial now and with maybe to terms getting acquisition an at anyway. been on ugly oil right business look pretty that and and one. a a coastal as

acquisitions up sizable always we is stay got I know tell and All as do. can to as you we'll price capability difficult. is disciplined the you to a But acquisition we've do, Randy financial predicting

Randy Giveans

the Like good. Sounds the marine nights. rebound next few hopefully Astros of these the quarters last rebound few

Operator

you. Thank

from question Ben Nolan Our next with Stifel. comes

open. is line Your now

Ben Nolan

Hi Thanks. guys. Yes.

David Grzebinski

Hi.

Ben Nolan

you've about to sort pretty What a bit will Hi. S&S but last little does the me that loss I something back first of the time challenged, talked of don't other about little Well, cadence. acquisition. if some pre relative or I'm DNS operating that a understand business margins and was try is start it looking on X% know was bit the then to question dip I and want questions cost-cutting with let to to relates and my of it to

watermark? that you water those is now positive that high way forward, keep think going low a there the the Is business Do come operating margins can you with currently? structured

David Grzebinski

they're and so. loss go Yes. those would rig XXX. years, counts I to now you count When and Right operating the equipment. the got below back think the XXX I rig still

are So maintenance and getting below rig stops replacement. some that count now. XXX we're got we getting still and everything kind some When of

So drove back But industrial that have and commercial was this the there. then big what didn't we losses business.

Bill We're margins single profile and nine, to XX% single-digit said that nice commercial excuse quarter that seeing his continues in to and was third is high high of that the there usually we think the in grow. well I and in margin digits. think that had I growth and had revenue prepared mid our quarter remarks, me, industrial

back felt to again very we the big come activity said would pressure up kind quarter see gas market in we're the and pumping very a if at from when will ugly DNS the cost-cutting of they market you growth and company I but not keeps we going gas the be standing comments, still take oil that you're oil ones biggest actions And profile, more commercial even margin look that the now. first some two activity see and profitable. with think and So industrial worse course, levels gets think of of

next overly year we'll about we're positive. So do think and stay we not negative

Bill Harvey

Now operating put out industrial of million of year-to-date better got anything perspective a commercial business it's not, the side it's in if about it's recently. generated and $XX little the of actually income

be speak a expect with we that so to So on the business. will -- good

Ben Nolan

forward in business are exclusively like on of And look any is it trend that of there coastal out second seeing rate and demand going I rationalization kind supply for the better guidance in of solely to you Thanks. question getting my sounds that growth the you're rates the those you the and XQ, continue back side of or back level that expect side Is of to business on improve higher. or business? then, for profitability the as obviously but understand

David Grzebinski

of say supply Yes I is most would it rationalization.

number. I GDP what's demand. call seeing look terms in it's are now not it huge of We a X% mean, type growth GDP

retired. been really water foreshadowing it's Ballast older treatment we've contraction So this again back supply it's this with the of on as equipment which and

or old, that's I think XX of offshore years Bluewater so XX there's still old. to pieces what XX equipment XX years

out out XX treatment and we I got continues talked we've implemented, that of So next about we Ballast know year [Mores] coming retired. as water three coming and be as expect units more to

two-year the supply it's contract build to if process. somebody we going is even as at to now new continue wanted look a So unit it, a to

would there X% So recession, per kind it demand of a a to tends to build year. thing and I in is to take for back which a come long to good think time apps that supply continues X%

Ben Nolan

Bill it David. appreciate I and Thanks.

David Grzebinski

Thank you.

Operator

you. Thank

comes Lewis BTIG. question next with Greg from Our

open. now is line Your

Greg Lewis

good around any a any of year-over-year terms mean what I could I in way put thank you inland -- would you. we are around there some in limited of mean of David, have of for in I while. clearly, that Yes, a disclose context pricing be mean around morning. for much Knowing in afternoon I that were can kind guys versus been or is context good and we in how you could maybe has you see more getting think upside cycle kind you're pricing helpful? pricing we where sequentially last where terms question everybody. I pricing better you don't

David Grzebinski

just ways of given it just of cycle given the of to five use kind a to what of pricing seven Yes. cycle we're is the in going I particularly might years. cost a cost to to would seen higher still longer last in go. new pricing say Long probably to context in baseball I that cycles the cycle way compliance, needs be peak general get terms be a and the take to analogy. it'll go, inning a we've a third rates the It's while equipment, while -- have take mean. in But be years

we discipline and don't as I would I getting heading if more think into don't the I see, know the because is it's discipline, be a we're could even around a just but probably market be it not question -- I needs continued recession that less if got pricing going it look and what's into think just see I what on. short-lived derail structure we the at recession recession. corollary would market a

Greg Lewis

Great.

in the been markets? chain thinking of how of slowly versus lessons in to DNS like on. looks last united more of to how positioning of they're when, this about more then, And the just what learned So I a down seeing cycle? mean in mean going as had have what you seen kind -- down with pre one or conversations customers difference across kind is switching DNS. over there market companies Realizing down I'm now gears back previous have it? is you we're themselves just lot terms between value just a going there any kind in we've are it S&S

David Grzebinski

capital, return I more invested think on on believe healthy. are No, focused that's customers, to in they I honestly capital talking return really a and lot on

I those I is those mean are there is but time it it run from words, a does feel different So always words. like this horrible difference.

Now return they're this on focused very capital. on

think the and now. is requiring or frankly the a gone is away it's because there I easy financing And required money return is

some tougher. different pressure gotten what's of these E&P the the pumping companies of have independent So, financing and is is gotten smaller companies of probably I also think financing the for that's some tougher

and more more newer frankly seeing happen into strength. happen is driving of think got and that a they that. which on we're Kirby's I horsepower, speak So, higher the We to plays like focus, whistles discipline positive. is Because return that's technical very what'll what debt capital bells that's efficient, and want intense so more equipment is seeing

we well. where really That's can play

going little articulated. cycle it's think as forward So, what just isn’t I different but time. about just this don’t violent new this of that's And of I as sure to it'll discipline Yes, a bit I happening. think because because continue be it'll

Greg Lewis

Perfect.

Okay for hey time. much thank guys, the very you

David Grzebinski

you. Thank

Operator

Thank you.

comes with next G. from Justin Our Research. Bergner question

line Your is open. now

Justin Bergner

Good Bill. good morning, David, morning

David Grzebinski

Good morning.

Bill Harvey

morning. Good

Justin Bergner

term referring you you there, higher, contract pricing actually when about were to are talking gain off, First year-on-year sequentially?

Bill Harvey

Year-on-year.

Justin Bergner

to Okay, that's side on is talked you GDP sort I plus the inland so, having think X% If of Maybe I then, that And correctly. thought. even XXXX about half grow it's year X%. sort I demand the what with you to potential if the because the a stall of only market seemed deliveries in to of of post terms this in more about second year. clearly XXX supply grew of this a X% tightening heard in

there be clarity any would helpful. Just

David Grzebinski

No, yes. The all growth that is on. going coming from are new refinery in expansions the petrochemical plants

spot wouldn’t with had and of more stalled the pricing us talk new there was here all. of seen a we pause is happened What at sequentially $XXX say better you've think weather. barge because better demand I But because weather availability plants. million just about I is

weather get we in. X% it's drop happened up. better X% to drop little you whenever in that's in harder prices Usually to push in get utility, and utility a what

as kind quarter the coming fourth cold the here tighten we to going in the of utilities fronts think I get weather on.

is So, would there wouldn’t would a is a I I I wouldn’t say pause. a slowdown, pause, say there say just Justin. it's I -- say

Justin Bergner

current your side, or competitor part D&S I the its gain that distress Okay, competitors see of the exit mean share present in great. are And then the financial just an operation to gas on on all side week conditions a and have of to, business? oil opportunity lastly or to any

David Grzebinski

bit a seeing you're that. think I of Yes, little

consolidation, wanting there has we've the get see people one think out but up the a think of pumping We the is group business. has that'll players bunch end not heard consolidated. know I is that there don’t of and did smaller being to anecdotes I I in of pressure bit seen some

the to area. pumping So, you're think going see consolidation I in pressure

market dynamic. healthy bigger properly will longer more for and the be that's invest and and able to The better lead players I to think will term sustainability.

invested think with getting again capital. is here focus structure So, market on this return on the better we

Justin Bergner

Thank you.

David Grzebinski

Thanks.

question. Alright take call, more Daniel, we one more one have time we'll

Operator

you. Thank

Kevin Our from Global. Seaport final with question comes Sterling

Your line is now open.

Kevin Sterling

for Good me morning, squeezing thanks in.

David Grzebinski

Kevin. Hey,

Bill Harvey

Kevin. Hi,

Kevin Sterling

take not to take in -- going not I'm a your living on saying. going to not pity Virginia, So, I'm astro's,

the talked supply about bit little David, I So the there. dive I rationalization in a coastal can you know more,

we're is you that demand IMO pickup increase demand. a But draw that an Is coastal? like activity, related seem bunkering in in in the you of little a bit XXXX, potential seeing could that a are seeing of to any

David Grzebinski

probably look it as you'll but that types it Yes, bunker you in our at fuel we because little us more XXXX, bit help could of bunkering have business IMO with. a

use the up to barges and end So, barges do we'll more more bunkering. to they as industry have use having will

we're coastal, to worried But out prices, sure in what and our happen it's going kind of trying to to still diesel will prices talking to kind business of Yes, not about impact dislocations what's of much. with happen. I'm terms and customers happen. what'll happen going will fuel Everybody's coastal figure with heavy what

and customers, their interesting to on temporary. say and I'm Right be turnaround refinery if spending it's big lot change, be money It it'll turnarounds. I is try now, a is sure watch, to there as not season now a going is would Our are my be much they IMO. view of how change for prepare right it'll

will is my more in a rather incentives scrubbers realignment price quicker that'll install slower. and becomes bring be that Because work guess will really the back if price line. well. there the dislocation, And the Economic of than people

IMO coastal much will business. we a think we about as standpoint, to think have our So, effect don’t it from

Kevin Sterling

equipment and us, I so, continues on have your well. coastal as you that some if equipment's and to untie tied equipment remind And tied of up some you thanks. improve. of Okay, can up believe their market in you still still coastal, do lastly coastal may have some competitors the Would

David Grzebinski

do lot. that's competitors do tied some true we our a That not up, Yes. believe on have And too. I

Kevin Sterling

Yes.

David Grzebinski

side, that impediment a think equipment to it's for come off an it tied don’t could the bank back be that back. older that it's equipment's might up in you cost my service. more tied brought bringing some is meaningful that amount. is and most so there likely I view up Look, the be and a because that back to And in on to retired of imagine of But

Kevin Sterling

Okay. me you -- put in so a day. have Thank much, me here really I appreciate putting then. Thanks, you good

Bill Harvey

Thanks.

David Grzebinski

Thanks, Kevin.

Operator

to would session. to question turn the answer our Mr. any over This you. concludes now closing for Thank and Holcomb I conference like Eric back remarks.

Eric Holcomb

thank today. us you joining you thank Daniel and everyone Alright, for

you good feel have reach XXX If questions to a at free any comments, XXX everyone, me day. additional have XXXX. Thank you or

Operator

now has conference concluded. The you today's Thank presentation. for attending

You may now disconnect.

Kirby (KEX) 25 Oct 192019 Q3 Earnings call transcript