KEX - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to the Kirby Corporation 2020 Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Eric Holcomb, Kirby's Vice President of Investor Relations. ahead. go Please

Eric Holcomb

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

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

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

and involve Forward-looking conditions the response anticipated on Kirby's the filings uncertainties, could the those I XX-K David. now A company's actual ended our from risk and of subsequent including statements impact year materially factors, result Form risks differ market the regional related and and various global pandemic and XX, the turn December a XXXX, results for call on as governments be and of found Form of over to factors quarterly these can business. XX-Q. the in will COVID-XX list of

David Grzebinski

we Earlier XXXX of everyone. Thank quarter and per today, announced morning, you, good Eric, share. $X.XX second earnings

products resulting in heavily results demand were the for quarter's Kirby's services. impacted and reductions by and COVID-XX This

and costs. the of per share, gas and we activity, a a In $X.XX large including of result of oil addition as to declining effects severance charges the bad bankruptcy debt of incurred customer

talk decent costs across We'll During the focused challenging about in results on moments. in cash company the cash the and few a we market quarter's strong flow dynamics. resulting the more second generation, aggressively despite earnings and quarter, reduced

pleased early resilience in Kirby's business have with which we service all pandemic safety proud uninterrupted circumstances we customer the difficult Our through March, report challenging commitment activated these I'm continuous and and it's dealing continued without continuity, I'm our that ensured of are has customer their plan, without ensuring disruption. of response to employees. that employees safety successfully operate our to the during businesses the efforts times. to sacrificing service. our dedicated of and And operations of

markets products resulting demand to and Moving segments. the were transport. In COVID-XX in our inland coastal which impacted we decline marine the of many the by transportation, and significantly for

products In highly the from impact refinery of oil With XX%. utilization the the inland June. demand became in contributed both quarter. May XX% contributing declined quarter, refined And in utilization limited of to in a of and storage XX% market. coastal, the in better on some significant our in levels for early particularly the June. on at to magnitude progressed in barge in and end in as refined movements reduced, inland, improved across the products, contract to and crude activity Chemical pricing, spot and customers' competitive range low decline from end by quarter sequential for There the delay a a the and waterways. mid-XX% in and June. of flooding consumer of lower was sharply, barge utilization for second sharply April Mississippi to at very pricing XX% requirements although the requirements with stable in our petrochemicals, materially beginning Term also coastal the quarter dropped quarter. decline May spot demand plant had dropped reduction the declining. spot gradually it In reduced the days the the XX% oil sharp range During April resulted was and before late Also weather benefited were black refined however, which to XX% recovering black market utilization reduced from a to the products, efficiencies the River,

increased As Coast. the quarter of and on availability requirements limited barges progressed, and XX,XXX barrel the the industry experienced barge West XXX,XXX

declining As a charters in change the and lower transportation costs utilization we result, lower the our XX% to both to spot of pricing in To marine was continued declined horsepower, significant XX% from April impact and minimal low term aggressive the financial reductions barge and actions during quarter, G&A in contracts. low take in including revenues, range There expenses. for the minimize barge operating costs to help range renewing utilization June. the

year-on-year As margins impacted by decline reduced and and despite declined core distribution margins commodity increased coastal and the our second operating quarter significantly inland breakeven markets about a activity, revenue. activity sequentially low in services, both orders were as and prices. In stay-at-home remained result, economic

stopped wells markets gas rig sequentially, approximately the virtually count declined shut and and crews XX% dropped were frac in of active number the U.S. oil as XX%. Our

equipment As of pressure and new evaporated a pumping customer equipment, materially. demand parts sales result, and and remanufactured for service slowed

closed. economic levels, Thermo-King repair centers gas on as major the businesses. service on-highway projects activity sharply repair Additionally, in generation, new to fleet reduced went and on-highway, for and declined in postponed. slowdown businesses. share miles destinations tourist our orders bankruptcy, were lockdown declined market and nearly per large The spots XX%, approximate the many and an experienced our refrigeration demand generation customers and were as In marine areas In major power bright significantly at In this metropolitan activity and and particularly stay-at-home one hit commercial resulting in reduced filed we industrial, earnings. $X.XX orders of oil power the

and both costs reported capital discretionary cost furloughs maintained solid the additional response market distribution steps in and In further activity to Although revenue, these these including expenditures. and took services of sequential throughout quarter. we businesses dynamics, levels the workforce reductions management structure, challenging to realign strict all reductions,

over a will results talk felt sheet. I We Bill third results. the efforts about expect that be In for to outlook balance moments, year. discuss But to our the do, I'll will balance second of and our quarter call fully these quarter the the few I turn in before our

William Harvey

coastal you, and XXXX $XX.X revenues good second revenues our improved X%, and and with everyone. margin an to barges planned significant and of income in transportation operating rebuilds, with during of even reduction are a capacity the addition as The initiatives a retirements million the quarter, to Inland and or operating first of utilization, the marine income activity $XXX reduced Savage were Thank due coastal revenue result coastal. X% of fuel quarter, inland of David, shipyard In quarter. large cost morning, XXXX the barge million Marine X lower implemented reductions XX.X%. the Compared $XXX,XXX declined the

or the those transportation business inland revenue contracts of During average the contracts, inland the segment affreightment. year the charters stable. the contributed had contributed XX% with Term of an X renewed quarter second marine of contracts from and barge or XX% utilization approximately that term longer, revenue time from contracts during quarter, range. with XX% approximately were Long-term mid-XX% of in and XX%

black the of X% year-on-year, spot in rates utilization products and oil. However, and XX% declined to across barge market lower primarily sequentially as approximately refined a result industry,

result to sequential spot were was coastal the black in products mid-XXs year-on-year market mid- yield of During utilization demand In oil stable. margin contract dynamics barge and the transportation. high-teens. inland the and of as refined second range. the reduced spot conditions business market quarter, These into the business, a Average for operating the term and in deteriorated market reductions rates

tank in was term percentage quarter, are term projections to included presentation coastal the second the contracts second under the breakeven. a second quarter posted in the of approximately the of operating our was XXXX reconciliation revenue approximately margin With our in were barge changes XX% our of Coastal's earnings quarter During fleet, of well remainder on which XX%, respect website. as as charters. for the call

for expense to and stay-at-home conditions bankruptcy and demand an gas and and In parts and the with experienced were generation in and severance. operating Moving service to businesses. of and overhaul million economic oil very $XX.X operating year-on-year down and oil activity bad an reduction income. gas, to The results low In a million $XXX.X impact major and in resulted Compared second reductions activity sequentially limited to fracking million debt with power included reduced services. The products million declined the the $XX.X $X.X our declining reductions demands revenues commercial of quarter, for services. gas-related distribution XX% and demand related sales. quarter's and orders in customer loss $X.X and quarter business counts of oil rig on-highway of of due but approximately the significant repair and marine industrial, the first was resulted equipment, million. in engine in in significant XXXX Revenues solid

approximately and and gas margin. The an XX% and industrial the segment oil of low-single-digits. XX% the operating quarter, the second represented approximately negative During margin had businesses commercial revenue revenue of represented segment had a in businesses and operating

total to balance billion $XXX.X and June was Turning cash, XX%. XX, sheet, debt was the of debt-to-cap we as million $X.XX had our of ratio

of down had is in we year remains Kirby's sheet of flow to quarter, impact of not XXXX. the room expected the regulatory our balance the on first had repayments spending available coastal. from operations to maturities And end year. expenditures we and of shipyard we strong, as balance flow of approximately $XXX debt for total the the significantly Capital we increase At $XXX acquisition During liquidity expect million, of and due million strong We on for will balance cash Savage quarters second the used and the of trend and cash Despite have under that $XXX.X quarter, fund debt We good the liquidity $XX.X our expenditures hand businesses, of for covenants. had we do cash the capital million. until of substantial million. have significant million. $XX the COVID-XX enabling debt have

which full For a XXXX. represents expenditures capital million, reduction expect $XXX of to XX% compared year, the we approximately

$XXX of Act which $XXX of as the legislation. free includes a cash result result, expect million, tax as million refunds to approximately As U.S. previously disclosed, we a million to flow CARES recent of generate $XXX

I quickly taxes. I'd like income Before close, to address

were the to a Act higher operating losses tax years we an allowed tax CARES had by as effective second prior quarter, During carried legislation. rate of result that back benefit as the rate net

will our low XX% of of have fourth remainder the outlook third less. call the a We David quarters to effective for that turn over or to rate tax I'll XXXX. back and now the expect discuss

David Grzebinski

last have trucking emerge. fleet utilization improving slowly higher, miles frac increasing, few plant moving Thank you, is encouraging and demand activity is the In chemical trends macro products modestly. Refinery weeks, rebounding for refined and is Bill. some are begun to

started have levels. slight in see to we recently result, some improvement activity a As our

high unemployment the continued the uncertainty While and positive, material a recovery. resurgence as of this government is economic to creates virus cases, positive new in restrictions timing

these improvement plant see very focused activity. discipline and decline we recent until bottom. chemical demand cash experienced intend market, control, a These capital modestly in has slight throughout was as that May sharp inland in remain utilization utilization June cost believe in stabilized in factors, have inland and In leading in levels significant the reached weeks resulted the Given to some to have and us -- increases has focused customer barge we on refinery generation in improvements the requirements, market improved.

quarter market that could and the However, to renewal the of align inland lower are the more improvement until in quarter market, our margins our barge given mid-XX% the Despite across these can In is quarter, inland meaningful revenues low end in anticipate inland expected compared approximately horsepower we remain have costs expect material market. under spot in the managing that of reduce as the will rebounds. pricing headwinds we for virus, business coastal to levels near In third is decline and mid-XX% a market at to the until second get recovered minimal lower large third not strict for to levels long-term inland to normalized XXXX. that range, we economic versus with general to revenues the the vessel. will remain the pressure with at spot we which continued fully XX% of are low contracts, exposure is income activity will demand-driven near-term expenses and average capacity capital in supply-driven, third surrounding a back meantime, this to and quarter. the operating healthy expected demand prior operating recovery barge Demand term. a path the be expenditures. with as be range downturn starting is utilization sequentially retire uncertainty on average demand under In utilization additional G&A With costs, realized. the the expected utilization one the and and well will quarter, as the in necessary, Overall, for a requirements including confident we continue management demand to market business

However, quarter's the reduced help overall shipyard maintenance results. improve will to

As and duration will the a third services, rigs revenues activity to will expect today, for challenged distribution oil only approximately of year. in the from modestly The and expected the U.S. remain XXX extremely declined duration rig operating quarter XXXX. In result, is gas of the which and the sequentially. XXX in improve has rigs we coastal market we the anticipate for quarter count, slightly first to nearly improve income

the amount activity in of across material industry the recovery spare incremental reports and will of the maintenance likely exists half, significant in construction that for future. capacity second are activities the although limit foreseeable Additionally, fracturing new any there pumping pressure expected

are the in previously of a positive although our second have generation gas for result COVID-XX, do sectors Fleet in the in generation commercial months. manufacturing weeks. for although continue trucking now, year. indicators distribution industrial, rescheduled coming experience reduced have businesses on-highway activity their the As the not and a core were a in result, businesses modestly to and lows we're which power mileage there from levels pickup in slight been activity rebounded a seeing In remainder quarter industry oil our of and recent some power rebound projects, deferred, we nation's in being and as the and significant expect

generation likely lockdowns delay the hope we restrictions seasonal increased On the we While power ongoing in business remaining activity fourth utilization these and months. marine and season. harvest virus spike higher the to trends and new but more cases the possibility normal in third due fleet quarter positive continue, including recovery. The the the during Thermo-King in could of decline a expected anticipate the refrigeration the the quarter summer cargo be will in rental note, businesses to repair is stable factors, seasonal in dry

distribution adjustments reduced continue services to necessary. actively of make and cost the are We the managing as structure, to mitigate we'll activity and impact

Although efforts these third our recent results, the cost reductions fully we in second the benefit of reflected in expect quarter's quarter. not the were to realize

operating the we but distribution As a will quarter below the margins breakeven. in result, still expect services and sequentially third improve remain

full the expect segment year, at margins For a loss. we

for D&S should However, it's important very to requires flow remember that cash the conclusion, contribute was business little consequently company capital quarter the year. challenging. In to the second and very

dropped had and some necessary make decisions costs. to reduce activity Our levels difficult very to we significantly but

expect with less. the stages and and will and appears we distribution activity slightly it up uncertainty entering initial sequentially meaningfully bottomed and third quarter, of are has recovery, losses down, the services phases coastal we Although remains. In the overall in significant lower earnings be inland

the flow deliver decent in liquidity position million is in We generation to for liquidity by a uncertain cash full debt are times. enabled reduce challenging second strong to perspective, year From us quarter $XX ensure our that and free ample Kirby backdrop. these confident the results despite

expect to full We quarters $XXX cash million third the to us this for in and $XXX strong generating with the flow continue trend of fourth year. million free

for debt this further reduce plan we to As this use previously prepared our remarks. the liquidity and enhance our concludes Operator, future. cash disclosed, to foreseeable

to now ready are We take questions.

Operator

Thank you.

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

may your with proceed question. You

Jonathan Chappell

you. Good Thank everybody. morning,

David Grzebinski

morning, Jon. Good Hi.

William Harvey

Jon. morning, Good

Jonathan Chappell

on the all detail outlook. the appreciate provided I David, you

direction and while understand So year, try some dust the of just I second quarters. to the of the me to both half off here please forgive math

$XX your say run that operating end of second $XXX we would D&A, the million. low about half and range, the million the flow of $XXX guidance cash $XX about in at was and and if rate second So say million million quarter that's

your quarter sounds the low-end how if risk ramp is at XQ? there So is down Is like sequentially you're decent to be have quarter the to a in fourth looking even XQ. third quarter, from it second still the it? about to Or thinking going closer expectation least that would sequentially

David Grzebinski

No. how about thinking Yes, that's it. we're

as I have should sequentially, definitely and is being activity we'll think down see. we've but pick up. We maybe to bottomed feel think inland down, even starting to about we level flat we like said

it You coming refinery lower with But back activity can the starting on. see a from utilization. we're average

we before, activity So GDP. that's be tax from picking GDP to even thought process. this beyond part second flow, look something the of heard follow refund, refund down which is volumes tax of that obviously, XX% say and our we or the feel the like is But it, we up. is the Act. We CARES going part when saw Look, our the at the in quarter. cash benefit a like you've us do just flash for But

is believe think we We it in a see low starting not, albeit GDP only activity the not bottoming it and or it And generation. also feel I on-highway our but power we oilfield, up. with to some even see inland level. back at the in pick it in --

we that that we're refund into forecasting point, our the big factored flow tax kind of your flow is the But year. of So for cash that to cash a part view.

Jonathan Chappell

And follow-up a on... look, Okay. just then makes That sense.

William Harvey

And Jon...

David Grzebinski

Bill something... Yes. has

William Harvey

some is in want point I year. the the of half The thing is One in receive back quarter. to of tax the second the out we refund, it did majority

was second about you the $XX in number refund, look when of talk over million at little the received the it quarter. So tax we a that in

mind do that keep amount, it the half part the in of just in calculation, your is when full year. So only you of that, back

Jonathan Chappell

inland about crisis. to And very not thinking a and was crisis, and the I supply-driven. a were -- the follow-up, my is this you last major demand-driven, for maybe financial clear the David, Bill. differences global Thanks similarities Understood.

just you talk and differences return normalized about similarities a if of you to what margins pricing that probably the importantly, and more and bit little maybe could So about the and pace tells inland. rewind the utilization in

David Grzebinski

Sure.

look back as was If you it the pretty you it bounced at Recession, mean bounced short-lived. Great back Lockdown, go Recession the Great the and back. the Great versus I economy

are optimistic. ever which hit think into the to was the say earnings you tear. it XX-plus decline just would earnings is had off, the Lockdown, XXXX I what COVID, the demand absorb XXXX heard now in Right in, oversupply. supply utilization demand that say in if took time really utilization Our all that back. maybe was broad-based. to it's really so because been it's to was really forward off. petrochemicals, a all want fell really an Prior X-month consumption about as floating supply-driven. like demand -- XXX a had was a the it in why around. we with It's demand but go for we extent. utilization If it's fuel, we in back, wasn't to a pricing it on lag grinding a Again, where back. came now, bubble took that particular, had U.S. to been it. came get refined all market huge the the all not And extra soon XXX I demand-driven. is XXX of saw a you time just lag barges. -- has was in extent downturn the And had, more was in utilization that's demand-driven. it And particularly jet it XXXX long percent. with It long sharp economy. to disruption. came lesser about weren't lot through absorb Great and we And and -- we XXXX at happened and was then we worst. took the fell from the But probably seen about highest dip barges came us we overbuilding that there a we range. specific, And And barges X% Recession that we're GDP There to products X%, less to But been at When the we've It's Great than the XXX as The -- were

on there some going industry. Now the building is in

in. You know XX to had what get so ordered placed deliveries barges canceled, about book that ordered for from and didn't were that barges, before that, out order carryover barges maybe ordered very, retirements. end, we're 'XX everybody call more delivered. it was even XXX The about, COVID, all the coming XXX all at that construction, But very or those high right? or the or it, pre of net had probably hearing trying barge are were new new which had many light barges get again, And people to pushed COVID

feels from circling rather that crude-by-barge a that all back this demand-driven. So more the It way of period Great to is long say like overbuilding. bubble Recession than

Jonathan Chappell

inside Understood. Thanks for the David.

David Grzebinski

Jon. Thanks

Operator

Thank you.

next Nolan Our comes Ben from Stifel. with question

may with question. your You proceed

Benjamin Nolan

Thanks. Hi, David. Great. Hi, Bill.

David Grzebinski

Hi.

Benjamin Nolan

a So from what sort the last and it, the this you maybe couple. of downturn I Well, quite removed obviously, that, the know, can less me in were competition about of comparing to some the maybe state right to -- the see fleet? as used downturn Obviously, compression now sort supply on well? a of the the on the think do David, where is that supply consolidate you to downturn. there lot. the state the to But talking of it you if just you let last really is order. happen you maybe aspect also maybe maybe have balance up fleet can sheet follow talk about there, ability maybe And from of But

David Grzebinski

Yes.

expect, And year. think see Even than last in than more we've traditionally at retirements years. look several this saying, don't we as when hey, to we of to now. would Kirby's spend life that plans, be the cash required we retirement you'll barges we've we've look, seen at anticipated more a retired and the I the you extend just flow that done, looking would need barge

aside. it barge that retire put or Let's

clearly, I liquidity I same don't their have pretty I strong. private going would competitor imagine analysis. stressed information think I of smaller say, players. is great But is some would is about now. liquidity the right pretty that every Kirby's through

whole these barges lead maybe I having back later. least of deferred think it's structure. of efforts difficult. took spend costs. is to or tying guess benefits think the right things We our our even that lot they're cut With we my at give But under structure a well. more to lot cost industry going fell, retirements pretty one utilization more they're because stress. most bring of Yes, cost I money and able the sure to from falloff it's But to up were any pretty horsepower them that's I And to of companies you private. horsepower hard now. that some are a Kirby obviously, information maintenance me reduce But that to a lot or in some to structure as imagine I'm for same. doing can of are is them nervous the of

Benjamin Nolan

that for if swan makes That event, of shut-in, category might black any maybe mean business is inland might Dakota might kind the nowhere then in -- have bit? more you sense. thoughts impact that of the sort just or out of And coming do of the little and crude-by-barge potential for the -- market Pipeline of Yes. you on Access a -- how help out what of sort

David Grzebinski

it if for see a positive? this because we case a Yes. -- back we ourselves might And It's is here were up, we both. funny. were a and it well, and Or amongst we wondering chuckling is could were negative? forth, come question We're going

that see. nonevent the a us. but we Maybe to it's net-net, down. as slight of discussed think wasn't I material It shutting cons So pros and we'll a negative,

Benjamin Nolan

was Okay. All on right. work I the cutting time, That impressive. And appreciate cost. guys. pretty good

David Grzebinski

appreciate Thanks, it. Ben,

Operator

you. Thank

Mike with from question Webber next Our comes Research. Webber

question. your may with You proceed

Michael Webber

Hi. you? Good morning, guys. How are

David Grzebinski

you are How doing? Good.

Michael Webber

to at roll towards wanted Would book? what specific in little a I term guys the contracting your QX, in we've of what you same dig will QX pace we on a of David, was term talked saw you lag of think terms of to falls market? are point dynamics already. the you pricing while maybe in noted at that the into a pricing you in talked a kind bit what that is and significantly. just of play QX? I know actually what more rolled Just here. you how about had elsewhere Or the curious, spot maybe actively guided price kind outside Good. those function term that economic utilization now little a pricing bit in pretty norms to pricing heard moving out with the The over kind industry. that your of through stable as spot pricing I'm you you stable kind relative were term the bit hit book. prices that to -- maybe of expect barges you color But rolls

David Grzebinski

a little XX% as pressure We question. see, second We Yes. in spot quarter. more a good No, to X% in this through here. it on you saw is as did heard July Bill's we've the comments, down gone the pricing is

ramp haven't down. -- we you back this it Our don't book will get see hasn't business pricing. on of pricing But continues as and would expect, felt we if term activity term go we the up, that

book our our maybe give a to and lot I on term a of think Yes. pricing. combination unwillingness it's

this think is back. coming market I

course, to I starting we're at of activity. but think optimistic, we seeing a on bottomed. that a we're this -- bit of average, But least and got see little We're back. activity Utilization, is we've lower, quarter. at come start the the maybe

-- longer a that's pricing. I surprise. lower the resilient oversupply demand or So think you little that would expect, utilization to think continues come if and see back, supply as doesn't we've the if mean, for hold the don't But I prices while follow and start -- to and a trying I spot line work I we bit. term pretty absolutely a will don't been

Michael Webber

No.

the around kind In guys piece widen if right could think you to it term I'm pricing? -- we barges fact high run would XXs drop XX%, if that that What's you drop term. What's still mix see to inland within of did see in levering range your term around X/X you terms as a you're that of -- material drop book, on more of kind way Could I we that to the of at -- put that expect just on to see in out could out we term there? hesitate sorry, into the see roll? we

David Grzebinski

contract gone happened and for is up has would have but actually percentage term what's Savage. up gone Actually, more our

in term, think we first I XX%. averaged -- quarter, XX% quarter said was quarter we the about second about So this

factor rolled So barges that we up. XXX% losing retained percentage essentially the went the in XX-plus spot is book And XX that of So barges, right? us was business And with term but spot. of in have then also to some Savage. Savage's term, you

for that, were of let equipment that's activity getting percentage. be downturn. back our higher clear, would portfolio But spot but -- lot have a me we during term this been So a because

Michael Webber

Right.

Okay. and the around mention seen or a just on there's second then long-term business saw follow-up I impact program have basis. guidance doesn't I'm an seem I you're And what but with approvals. guys how impact look you either short-term a the that we on we should Apollo. or D&S. headlines think much don't ventilator think and I as question, curious heard I guess could to we your It like Rice this, of about working on we've some believe it

David Grzebinski

a line Look, And impact. But a Rice, Yes. with really, were $X,XXX main a big material ventilator. But that the it -- No, is $XX,XXX. to about great ventilator it was costs there market ventilator. does We target the not probably ventilator it's they world. developing for it's I about does versus low-cost work XX% with. or what think a that's actually developed which

just is equipment. better. had, was it frac You on can -- idle imagine -- not, weren't just Kirby? we No. that to it It's working that or building believe engineers Will it some material point be price

this. built they So

oil restructured XX%, we're the our -- a by restructured to we XX% forward. and going XX% really -- business about gas think the business whole smaller D&S Now sizable -- cost. pretty we but We've amount out let second took meaningfully because second I huge to that had me our for be headcount In down I less. talk about a We completely. a expect in for reduced business business, quarter. of a loss the

think volumes oilfield starting and and some see to come So also the on-highway little as [indiscernible] see generation. to that see we stuff starting the power in I we're the starting back back activity a we're get to

bottomed impact It's any there an just won't to well. coming of activity the really So core But we base that. I your think have back. as on ventilator really question,

Michael Webber

Sure.

guys. Great. I'll turn Thanks it Okay. over.

David Grzebinski

Mike. Thanks

Operator

Our next question comes from Randy Giveans with Jefferies.

proceed question. with your may You

Randall Giveans

Hi ladies, how is going?

David Grzebinski

good Very Randall.

Randall Giveans

So the cost their for of some the when over XQ for G&A increases you and business operating offsetting reduced stick expect fee to the business, closer revenues. guess, marine quarter, reductions the more reduction obviously, specifically, starts Do in levels? you to expect the improve? these costs, quarter, expense And fourth to cost levels you do XQ or be I to third aggressively

David Grzebinski

a When of portion QX the horsepower. is they'll think to big at our cost closer our look be you a levels. I cost, of lot

boats You've do heard us charter before, shock use that a we demand. right? absorber as And for

charter back. boats up, we the off boats. as pick of back cost. charter And some we'll that's add part laid So And volumes

But This a and the just expense back. in variable. will the back. more implemented that of come see across part comes G&A us leaner to terms control, don't is I as we've cost board make the world expect machine savings that So that

William Harvey

Yes, they're they a you Randy. Well, did And they to G&A on. they're group know. on marine was continuing as XX%, focus have -- new great down working for and job the initiatives

Randall Giveans

the at range to closer for think, quarter, was low the I looking I Perfect. inland for All bottom, to, average the range right. it also at coastal. mid-XX% utilization, mid-XX% range. and maybe XX% full fell the think the mid-XX% in And But the coastal inland then for the

current kind So of X is extending was stable. contracts any that the term market? How term you duration changes XX contract also, out you maybe expiring today? utilization months? the then the levels months the in seeing pricing And to And what it term are of busy maybe or mentioned bringing into on as even contracts, are of

David Grzebinski

contracts. duration for you But the I'd multiyear term term the coastal, Yes. Well, inland is contracts say and different coastal. of have is inland more shorter.

coastal. length necessity, expensive And that's, more bigger, by I equipment. there's more think So in that's

utilization, in industry started second this, to in and the the ended restate as XX% you range for asked, So the the we quarter contracts. again whole mid-XXs. pushes longer-term But the the just quarter

basically not We've activity coastal. of spot to some luck similarly But just time it's third And here on we it a coastal, starting and starting started it to quarter that work saw a putting XX%. similar improve. recently. mid-XXs thing. see the kind improving. back in about averaged to say little it again, we're tick So gobbled But it's bit of it up but see had to a in little No, equipment we're enough to the signs We Has ring bell. X%?

William Harvey

up, it's pricing think thing past on contracts. slowly everyone Look, pricing term long-term contracts, that Randy, talked unique. we've when on relationships. up when And And in the moving value-added calls, and was the they're one term moved is you because of

big business. as provide pretty slow that value think you way So portion commodity that very relationship-driven. it it shouldn't up, a of we -- and a of and goes all unique. And it on is type the we There's add is the of

David Grzebinski

particularly should would our the of Yes. one of charters. of on mention the And instead size fleet, the we're add thing, things, one can I that contracts ones of affreightment I more that side, the offer and one because of time of inland

B So time A a a dollars contract barrels day, is affreightment move to to x thousand from But A is x a -- dollars more point of point to right? B. charter

market aren't very as -- affreightment that where those of So in a certain contracts to and customers. volumes are certain attractive

our able do Kirby I of some an being -- than that other a affreightment has that's would to benefit competitors. we're contracts So of say more of enticement

piece say environment. interest in in would lot we But as of affreightment. in you we've of affreightment. contracts So are always this I portfolio of that's our a of had contracts a know, kind a good positive of seeing But

Randall Giveans

it. Got

the on that kind market, for following spot ample there bids just leaning the of an just are toward then of charterers or And those customers of liquidity now? or for requests are still kind Okay. of seeing amount term that? you Or

David Grzebinski

everybody rolling some a customers lower I'd say price. that a wants And are always it's There's obviously, term contracts. mixture.

there's are viewing to going spot as that, are of to I there equipment customers some spot. that's hey, is fair don't chance give on. need this of a available. there a to going And to, So are look, some term weakness be because going length amount moves -- some People are that

that's think saw We normal. that in Recession Great a the well. I bit little as

dynamic, Randy. I think that's market a normal

Randall Giveans

All it. you same news everyone during right. all so the COVID, sense. stay is That save. Got Well in makes Houston

David Grzebinski

Okay. Thanks Randy. Thank you.

Operator

[Operator Instructions].

Our next question comes BTIG. from of Greg Lewis

You your may question. with proceed

Gregory Lewis

you and Yes. good Thank everybody. morning

David Grzebinski

Greg. Hi

Gregory Lewis

refer I just on you is want relative first commercial we're and Any of just I helpful. mean business I things as mean, to just thinking and basis. -- kind a however around are about Any right? kind David, up And around is it, of of that be around driving color part was? give question seen? out the trend maybe mean to super around bit I'm step called guess marine it's specifically. you've and color And that the repair you one of think, their the that between marine split you business C&I. or of it huge the how I a little mean, my maybe I C&I marine that, business, what's spending understand, is kind consumers in can a personal is would taken curious, of terms pertains to it hearing a the I that as -- it and I maybe repair the and personal size of habits. strong changing repair obviously,

David Grzebinski

No. Yes.

and There's there's wealthy marine repair yacht the which would people. the Greg, that -- the there's to piece then consumer business. piece, parts be two So industrial

strong. they -- it marine On to working would the very through wanted working. to April, U.S. and the least repair, horsepower economy, but industrial say relative through very it's the of all been side that equate strong, up strong. keep regularly at it's And been pretty I industrial was I to

as to okay. dry has the market, Even So aware, that continued okay. cargo has probably are you done business do

continues horsepower on of We But -- yacht, I deals. that dynamic. some deferments bit things, big So say did there's if I would that mind need I to doing yes, wouldn't guess, of it's be will yacht-type be it there a I that So repaired. -- quarantine, had to right? to personal see those a

kind year put even $XXX year, repair our in And million it's So the context, that on COVID. this that million to to for business, business business. for $XXX it, in of call still marine trajectory

probably of that that's as other our by as of impacted wasn't So been some the COVID stuff. pleasant one it surprises

and centers other all of buses they shutting they type changed. worst, go probably casinos, pretty are Disneyland parts buses. those truck hard. on-highway, got I mean you World that to about don't the the down, city hit has All maintain of if take right? The The to think repairs, the the that from people C&I, need to repairs bus leisure-related Disney

question. probably does there your in think don't Now I a permanent that so. root consumer come the is of And that's back? change I behavior? mean

take I to their want and Disney want think are people to are to going to World to kids gamble. going people

slower, more may So come back. back But much cautious do right, think I with I think ultimately, they comes because it COVID. are people

side, at oilfield really D&S forward. like headcount XX-plus we probably The for side. percent that going environment it not focus gas that C&I to we XX% in in down and really costs, been of oil manufacturing terms has a Our rightsize have that's lower taken but had out

Gregory Lewis

timing Historically, quick Okay. real maybe then on not Savage Great. And Kirby I the has done. is cash last of up it's lot just, you've just Bill, Savage. sheet. and mean, this quarter, issue. built And balance one quarter a a for

million given around more just bit Just position. understand still more little $XXX of You issue? in going maybe about that a have cash we're a the balance the more Is of be kind a timing cash just uncertainty of little or to that sheet. acquisitive? Is -- want to just

William Harvey

generating, lower strong point, careful the Like at cash we and generated No, in as $XX that can Even guess, risk. a is now, flow. of this we're you bit so July. being conservatism just million

more million. than anything But won't So go conservatism $XXX it's much above we else.

Gregory Lewis

great a guys. you much. time. Have Okay, Thank very

William Harvey

you. Thank

Operator

you. Thank

Atkins Our next Jack comes with from Stephens. question

You with proceed may your question.

Wade Schaller

Good morning, everybody.

got our taking morning. Thanks for on this Jack Wade question. for You've

William Harvey

Good morning, Wade.

Wade Schaller

get think wanted to Do thoughts get call and how can percent your it, that quickly XX-plus we the is from for you back of industry level. that? you kind industrial we more year here utilization back need on what U.S. of to to get and being it to that, that catalyst kind see happen? activity Or as for like consumption gasoline So last levels to

David Grzebinski

it's like will think say. interesting, though. be I you It

a is at think for I thought, a Greg's change this there going European in and to least the a vacations. driving think months I consumer that a might X fewer forward, vacations is to there behavior? more probably -- get XX and there next too, are lot lot

to sharp be We'll So to a a I work is into really economy, a the it's That's do and X bathtub, feeling. to see. our in but not it's back how It's XXs for volumes may to the products? longer utilization refined or going up good my entirely it we're believe economy-focused. in that. terms going be guess, to mix Wade. going it's V. take And area of have don't It back XXs. hopefully, say. to I a get hard does That's that months that not high that of ratable. of come U.S. prediction -- low U.S. It's

will utility volumes go grow I GDP think up. will our as our grows, and

an predicting get area good You GDP. just I'm into which not very is at,

economy, So a of products to to go right? I China. U.S. -- economy, extent, some South the to as do make as though with send back Because Latin lesser customers we and well come the our do America and believe the world we

Wade Schaller

just maybe Okay. clarification. then a And you there. Yes, sense. I definitely of follow-up, follow point That quick makes

was activity You that you bit in could seen comment on types in recent weeks what mentioned of improvement pickup commodity wondering you've seen a you've that if and in.

David Grzebinski

Yes.

where For utilization I get in seeing up to But terms up, competitive specific. it's too seeing go refinery want don't up. go right? specific I want utilization activity lanes. and trade chemical plant reasons, to don't too pick get you're of We're

Wade Schaller

Right. Thanks.

William Harvey

one please. more caller right. Wade. take Thanks All We'll

Operator

Okay. Thank you.

from comes question of Bank Sanjay Ramaswamy with last America. Our

your with question. proceed may You

Sanjay Ramaswamy

here. guys. Good my Hi. taking morning, question Thanks for

William Harvey

morning. Good

Sanjay Ramaswamy

Good morning.

the in think delay inland days of the bps obviously on clarify, quantify up XX XX% to we were Any how margins here way surprisingly in marine. decrementals the pleasantly in metrics impact down XQ just about maybe So forward? performance and here going to

David Grzebinski

do to delay Look, cost-cutting the a year-over-year B is going put make for x do that -- were We we've And No. at margins was in of from more that point as in. earlier, inland down, point of matter. barrel. contracts we Contracts when money our described our that Yes. and dollars affreightment. days affreightment, we go A sequentially up on

be the that future the leaves a trip weather, used for available move. And that equipment to the that So is. shorter better then

I environment, think a would logical. that's in in as be a that's mean high very less low it I than utilization market, you utilization valuable expect. would

a decrements Even weather on for a So impact to specific money though increments, on in hard terms less margin little as decline see real utilization ticks up, the we give normal gets make it's of and me in worse. contracts to margins. Typically, affreightment. do as with of you any year those seasonality, a we

usually So our example, for a quarter is our fourth bit margin lower than quarter third margin.

days I think from much because if adding our not just -- hard benefit contracts affreightment is delay available I'm probably the so there's getting equipment that's It much of as in saying. moves you not what We're this really say. lower up incremental follow to not moves. to environment, pick in

Sanjay Ramaswamy

that in range, does XXX 'XX, the XXX lows sequentially of potentially do count cadence to somewhere Can sense. color you've XX%. and maybe provide talk where the mean, XXX maybe Yes. rebounding maybe bit of and follow-up, makes maybe in more that? about just rig this to And here you of my in said about headcount D&S in XX%, positive just U.S. you a you an you the duration rebound That's gas environment No, that I mentioned? business by little the from And shifting oil that the handy. territory cut maybe margins see on how for to restructuring to

David Grzebinski

Yes. the you would expect. structure, as Look, we've cut

was. were spreads the there market. recognized and to and U.S. to market didn't the closed facilities. we kept into horsepower one We the fat multiple one do key have design it in the off, still the We've leg. be We leg point gas cut did just were cut We've going didn't but cut facilities. space. in We resources not continue have running business market, that once area. We obviously I -- consolidated some off We've off. the we mean it's our engineering that at some oil we in to XXX our frac

the frac down to about spreads running. I at it got think low, XX

to think I looking probably closer XXX. I'm here. we're at Eric

Eric Holcomb

XX XX. to

David Grzebinski

XX flat, that to anticipated and about running. to frac numbers XX of one some basis, pressure U.S. production oil just the he's gas keep saw an key need on spreads is from saying. both We XXX pumpers what you

spreads adding So come will there's back. a and this end these view up will back that market frac

we number I'm base. business that. replacement to and market. commodity-driven is if repair a But But change. of start had units the oil come And that half prices back at frac the a will again, before. there that lower think I out it it's really sure could with It's pop,

William Harvey

at the One course, had -- will the are also, has lot thing increase standpoint, add of And didn't these people just we've furlough as is we the we activity a that of activity to the hours. increases, people.

So we're ready when the activity increases.

David Grzebinski

Yes.

and thing, think really Sanjay, me is to one just about. Let add ESG-focused anything it's I just we since important good. going to are think We're seeing see

and even has we the the I is footprint. So that broad-based They're in is anything dynamic e-fracs. look the a lot this at Really, from turbines frac gas surviving which downturn our equipment. drive a gas think really blending, customers to world, as are good of A DGBs, carbon real want do that in our positive. is oil investing industry, to at gas on a by looking this electric good to frac, sector, focus effort footprint customers environmental talk and

ESG has positive carbon And reduces and going are that's that to more be people that attention some where anything so more the moves. money. getting is component footprint And investing

would the tell a certainly the fuel over number that unit. anybody increase We've of than gas that's I be we gas frac amount converted spreads And ours. natural probably expertise burning can a of have and an to else in burned you, e-fracs Now built dual more of to industry. frac on

good little industry challenged is in a news So that right pretty sliver one of now.

Sanjay Ramaswamy

that. That's Thanks great. Great color guys. on

David Grzebinski

Sanjay. Thanks

Eric Holcomb

everyone, in thank and And call Sanjay. for interest for participating you, Thanks your Kirby in today. our

at you a day. can Have you, everyone. you Thank or today have XXX-XXX-XXXX. great reach comments, If me questions any additional directly

Operator

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

disconnect. now may You

Kirby (KEX) 2 Aug 202020 Q2 Earnings call transcript