- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Kirby Corporation 2022 Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. 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 is being recorded. to conference like to now would turn over the Mr. I Relations Kirby's VP Niemietz, and of Kurt Investor Treasure. ahead. go Please

Kurt Niemietz

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

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 A December of found the results pandemic Corp’s and these the Kirby actual impact the uncertainties, David. the our as Forward-looking can factors ended risk over for various of including Form in of call XX, business. company's turn anticipated year statements XXXX. result will on I now to those XX-K involve factors, and materially list COVID-XX differ be the could a

David Grzebinski

revenue of to both and higher quarter, of revenue our segments Thank million quarter of $X.XX of earnings during compares steadily and $X.XX you, Kurt, revenue year-over-year. sequentially and operating XXXX and per improve the good share. third morning, everyone. per and Earlier Both quarter of million today, we $XXX continued income, adjusted delivering share. to announced This $XXX third earnings

of limited mid-XX% Distribution the continued chain Marine the higher into spot partially improved barges, low-XX% inflation term in marine barge year-over-year. increased cost that both our in and range. sequentially improvement supply delayed in by the as utilization contracts in prices Pricing put renewing supply pressure in ongoing as prices to high due range. period. inflationary well on results the market moved Overall, double-digit well upward continued versus challenges as with quarter's conditions up Transportation and our utilization in the range reflected demand quarter to high third overall with Distribution on sequentially revenues as well market In Services refinery pressures, cost Services, continued sales single-digits business. the contracts a low running The low-teens and as offset transportation, inland term led fundamentals and in with and steady third improved to margins up inland X% year-ago Tight

power grow e-frac. backlog generation continue activity prices increased into While market we In to equipment utilization and and with manufacturing, and we expect to pressures and In to improvement to in equipment quarter and high our to gradually gas, in commodity reset strong in with and other Overall single-digits. the spot quarter in improve cost inflationary demand operating third In in our operating improved shipments contributed cargo and of margins. and contributed and some new in with very oil incremental as high barge mid similar increased clauses conditions were year-over-year, the pressure contributed new quarter, for pricing orders revenues and headwinds gains increased segment our the pumping low fourth our face single-digit steadily improved improved in further fuel sequentially. will low-to-mid margins. contract markets with the In margins X% last XX% to addition escalation the to parts transmissions, for for revenue and across Distribution margins Services, and active environmentally-friendly services. coastal, coal range our continue up also operating revenues quarter, dry coastal sequential oilfield Better the year-over-year business the remained prices XXXX. and

issues However, as chain expected supply the quarter. new delayed significant many equipment during deliveries

We environment. our higher. across markets, from remained growth industrial our summary, despite demand and market diligently The reflected supply meaningful and power chain inflationary current quarter, businesses, generation inflecting sectors. coming nicely, market different In In are to both chain improvement challenges manage quarter is on-highway segments. marine demand the overall and supply in the commercial third work continue rates with continued solid to repair, the inland in for is and results moving our strong fundamentals

we While Demand the and rate and growing. barge Distribution is backlog our coastal market our Services utilization good challenged dynamics, and is strong improvements. supply in modest industry realized by remains is

looking While supply market future, forward, chain strong we expected foreseeable fundamentals. the persist see continued to for issues are

We discuss focus to turn to the to on efficiently incremental over quarter meet segment sheet. I'll XXXX and I'll call our but and more to results customers' working exceed and Raj and continue to responsibly the needs and into beyond. later, about the our earnings safely, outlook first, drive third balance growth expect talk

Raj Kumar

Thank $XX.X to conditions or you, by $XXX operating XX%. revenues operating Transportation In These with third operating or or million David, X% increased million second pricing. and increased XXX%. were XXXX, quarter favorable Marine of an of were million revenues increased customer income $XX income and million and Marine of strong and XX% X.X%. of the margin million everyone. Marine improved third and to quarter good operating $XX the operating the demand, or XXXX, Compared revenues morning, quarter income $XX increased increases million $XX XXXX, Compared driven was

utilization mid-XX% compared second is quarter in the was third the in the in recover range quarter for year approximately XX% reprice those conditions revenue. the and Long-term into a the of marine contracts pressures Average the escalators contributed year of of high that renewed cost the to remainder compared affreightment. and However, XXXX. throughout in barge range third sequentially in XXXX. business and we were prior inland range The XX% approximately contracts one the contributed and of utilization increasing rates which longer XXXX quarter XX% quarter, the up of to to single-digits low-teens, contributed segment the with revenue from XX% continue increases to face Term the market contracts the and seen spot or time low-XX% expect transportation in charters during inland Improved and term to of the of from in costs year. year-on-year. or as contracts with these low-XX% inflationary average on similar market to contracts

and year-over-year, cost to Inland and range in quarter higher sequentially contracts to Average increased Compared which spot of was the mid-XX% increased contract to fuel revenues the of increased to and XX%, handful low by term, quarter. a only of business double-digits remained XXXX, primarily revenues operating utilization utilization, represented in headwinds higher and mid-XX% smaller by pricing and inland the due during However, increased renewed term of improved and third both quarter we gains of the year-over-year, XX% and the pricing. low were increased segment. pricing, prices barge quarter inland The as coastal cost second saw margins average X%, barge almost the of XXXX. up compares third range, XXXX, rebills, average for coastal was the rapidly impacted utilization higher Marine the in XX% utilization pressures. market but driven in barge the Transportation fuel cost by diesel compared were offset These and rising spot fuel term revenues rebills. inflationary to

renewals of the and up XX% approximately high spot During sequentially under XX%, term were of in single-digit the quarter, the the market Average range of were contracts year-over-year. approximately time revenue contracts higher coastal in percentage which XX% charters. was were rates term

projections inland increased coastal revenues businesses, for respect had the quarter, changes is positive to single-digits. utilization, both of as the rebills. in year-over-year provided for posted call This our our coastal of quarter, X% prices XXXX. well and margin low to we the included have improved presentation barge higher the tank a barge in a With earnings higher contract the During remainder Overall, in with fuel third website. and mid coastal our reconciliation fleet on the as operating

contributed increased XXXX, $XX.X parts the to revenues. oil rig completions or year-on-year of increased operating transmissions sequential quarter by third quarter Distribution Revenue Services $X.X saw favorable by demand and the or new operating for in $XXX quarter. with revenues and $XX.X income XXXX and increased income $XX.X $XX.X of an by or for improving Now the to the performance to third We XX%. revenue activity million quarter operating I'll increase or and XX% Distribution increase throughout the a and XX% million a with million Services of the of second segment commodity market, prices compared and income XX% million, were by the XXX%. increased compared and increased the experienced X% In million segment. XXXX, and of gas review million When

headwinds, mid chain continue continued to As especially operating Overall, third manufacturing manufacturing had Despite quarter challenges, in in supply new represented supply mentioned, our David revenue chain in and single-digits. approximately gas business business. oil favorable XX% the deliveries. trend orders and we segment of and in experienced the ongoing navigate these margins the

strong by to marine parts demand in in for revenues second improved commercial and XXXX, up the increased On X% equipment, modestly service generation Compared industrial with of was commercial activity and year-over-year. repair industrial the Power on-highway our revenues contributed businesses. and quarter and side, to an increase year-on-year X%.

growth. due continued ongoing to chain business that delays Our revenue Thermo King supply to impacted experience constraints

was had during XX% business this activity approximately high headwind margin and commercial by quarter. highway. single-digits represented on-repair segment industrial offset increased revenue generation an of operating However, the power marine, the in in third and the Overall, that

balance to sheet. Now I'll the turn

had total million improved our to billion As ratio $XX of we of of with and September debt-to-cap $X.X XX, XX.X%. cash debt

sales we $XX of cash quarter, of cash CapEx. equipment -- cash and of sales million million. We used operations million flow capital the proceeds expenditures on from $XX fund hand and to $XX or we had During of generated flow marine asset from retired cash

to strengthen sheet to shareholders. approach disciplined balance our capital to and us capital allocation further return enabled Our

an quarter, the total decreased of shares and share per slightly million. During price a repurchased debt XX,XXX than for $XX at average $X.X $XX.XX we million more of by

available XX, marine $XXX we we approximately of to to million approximately continue liquidity fleet. As $XXX of to primarily $XXX full-year required on million. respect expect September CapEx, maintenance of With our for had CapEx million, total

minus from flow $XXX of expect million flow million cash of operations cash CapEx, million. to as $XXX with defined to free flow, cash from $XXX operations also $XXX million generate We to

We but expect are in to orders as continue working chain work into that this and [XXXX] year this the later constraints half capital challenging of working shipped unwind the capital (p). to through supply we near-term, first

outlook our balanced capital and acquisition of investment allocation to opportunity. continue the return to back opportunistically, call flow we'll We for to turn debt shareholders, this to will value-creating approach and I capital committed to niche the David repay and discuss are cash to long-term remainder a XXXX. use pursue now

David Grzebinski

Thank you, Raj.

discussed, should refinery part in these increases Marine, chemical we improvements inland utilization. third in quarter in rates. construction incremental had the recovery limited operating by revenues As steady and to continue expect inflationary segments. with plant demand, higher utilization, and In good barge and our large support income support Combined means, new in dynamics to high barge both further driven

is ever While landscape all changing are economic headwinds. this the and very of mindful we encouraging, potential recessionary

monitor current to on the continue water to be remains the we impact for Mississippi the conditions which record-low River seen. full Additionally,

business low protections current are low conditions real. the help dynamic and to portion and a marine magnitude, of inland headwinds the water contract the we some impact have limit water our Although only

in with Nonetheless, remaining These we encouraged as always, to levels for range availability factors plant XX% inland positive As will control. volumes. the revenues. market, contribute resulting minimal barge which low to are continue supply These the increased Barge to future. we demand drive to customer represents utilization further in can favorable near-record the and in mid-XX% activity approximately the to new there are currently expected be and manage constrained improvements is running we our is expected at dynamics refinery construction. foreseeable spot factors of petrochemical barge

coastal be we will renewing amount a expect Overall, We fourth grow expect inland XXXX XX%, also across XXXX, our single-digits, to to driven to shipments but inland up term low dry market expect Full-year and challenged core industry. the be to market, to utilization operating offset expected full-year the XX% in fundamentals liquid expected in low cargo and by digits. higher ballast are contracts quarter. exit we the In the remain the ongoing coastal are low to be be in underutilized continued by certain significant on vessels. expected are revenues some for mid-teens XXXX improvement remain our steady, also and primarily margins occur operating softness, treatment business, range. from with Hawaii. barge expected gradually Overall, company's good to to remainder and by mid-XX% in remain of barge to conditions planned installations capacity cargo expected coastal in and somewhat coal mid-single the by is continue improve flat margins the renewals in pricing revenues of Revenues to in the for the margins maintenance as to Even coastal to term the water year will shipyard in impacted low offshore near-term are operating the with Kirby's in to contract business approximately versus XXXX.

and market, equipment, a OEM the counts strong demand commodity and to yield Looking with growing we products well outlook and at in in activity business. the and and expected increased Services, In gas demand prices, and anticipated for backlog have growing rig manufacturing. parts, are Distribution favorable and distribution manufacturing strong in completions for a services high parts distribution service oil

expect this commodity average into the rig We and over which distribution. have land counts frac full-year the approximately position. approaching increases expect XXX XXXX. a with continue. steady third of growth count contribute In service count will engines, increasing expect to U.S. will Similarly, increase for remainder we the current rig XX% we We've to expected environment the manufacturing, in incremental further the in frac see price With growing quarter XXX. rigs, of grown quarter fourth to and spread this in in trend year. the is for have represents activity growth, new demand a added parts transmissions, active backlog and orders and we

times likely long markets issues we some equipment, which mentioned OEM lead are As contribute beyond shift extending demand I to in repair These In earlier, product municipal improvement challenge. are expect year in supply activity solid into an products, In a with and and of chain trucking in remain the lingering into and grows. and on-highway is supply continued increased and again work, choppiness the and industrial, power with issues power generation, parts which chain for a ridership strong electrification new increasing improved to Mexico for increased expected some service ‘XX with bus new potentially also are and installation, Thermo demand Coast. repair refrigeration by the East to demand delays. expected backup deliveries, and to remain King as XX/X could commercial XXXX. power be Marine in commercial Gulf activity forecasting on steady offset the we're for to and cases West

the we and for percent For in industrial. full-year, low-double-digit XXXX commercial expect range growth the revenue

KDS by industrial, other continue new revenues issues XXXX, to to revenues and and segment as representing of XXXX impacting For chain the expect compared continue gas XX%, supply we to product increase and approximately while half. whole, will half expected are equipment XX% deliveries, and commercial oil segment a with to representing

to To face mid to ongoing operating our and in delivering continue be will sequentially the objectives, margins of performed income our and year-over-year are results the fundamentals shareholders. quarter our the high healthy to value during operating our businesses well teams executed to conclude, Both quarter improvement the showed well very single-digits on Kirby well-positioned strategy as well third segments of and quarter, as revenue steady segment improved in and both long-term exited value. expect provide Kirby's and We long-term We our challenges. of with for XXXX. near-term delivering

financial of on the and intend closely water-related weather see in results, concludes and said well continue economic businesses strategy. Although strength long-term of businesses We our impacts business. as confident headwinds, our potential favorable fundamentals markets this and Having the our are core provide are Operator, market expect monitoring improving that, we continuing long-term capitalizing to and we short-term will our strong as shareholder creation. potential look we remarks. to as driving value prepared we

are We to now take questions. ready

Operator

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

is open. Your now line

Ken Hoexter

Dave Good and Raj. morning, Great.

David Grzebinski

Good morning, Ken.

Ken Hoexter

or and more here. contract bit a to shifting of I maybe the price of quarter off cycle. a contracts. you part take of bit is about term fewer echo you some Can moved spot little you like market seemed A bit bit of you into an talk a be going it talk little -- as the Maybe pays. fourth big really the those the for know market,

well? mean So maybe low the market as for and talk pricing in thoughts Thanks. about the of maybe what does state business and that the throw levels, water on the

David Grzebinski

Thanks Ken. Yes, the limit thanks. sure, for About seriousness No, astros? question, those -- all

Ken Hoexter

didn't see Missed it. I anything.

David Grzebinski

up as and in -- spot one the a going rolled quicker. faster market contracts had rising the like increases get revenue thing than ratio, No, revenues spot have term-to-spot into contract rate we've

ratio change I renew of quarter term here we coming think end that spot due that fourth a the contracts some you'll little the see we year. the that the in as these of big contract bit have at

on spot bit a in been has we term spot spot to We're rates it's pretty will right how So contract higher fourth we've that's have term impacted ratio. the versus But price ratio contract spot by market, really the with happy now. that exposure. little In with contract rising comment to. quarter rates fast been versus rate. are need contract a and again, good they and good to the able the here raise But where

of I that's but situation, pressures, supply we've it's another inflationary got think, a part one, because needed, great it. demand the and of

-- demand right a mean now. look next is utilization can holding a good strong, at utilization not But got maybe for I we're are dynamic refinery year. is pretty Supply you is So chemical growing, now, recession okay. we've is plants watching strong. pretty

when earnings, about Europe. it's -- the of it's look a chemical their you at lot think guys, I

feedstock you're they Europe if Particularly, in pretty got good. now, you facing is imagine, natural the that the chemical you here if it's their in plants Europe feedstock pretty have can when gas at problems prices you've manufacturing at been chemical dicey. But You dropped right and recently. have the look in position U.S., look

little But supply are next is, which pretty the side, -- about alright. we'll a watching a the and from we're news just supply if so now. where we So supply it's demand, but tight. is if even a that looking I horsepower, good get excited demand be recession we think pullback at And right of not it's barges the tight, remain of mariners the year we're and for potential in

as about we it's can So as constructive be now.

Engineers, water It's and on things low water. size the our half and of the to mentioned I've talked, keep the Coast the river of together you The You about last and and try of Coast and the restrictions. -- I tows. low The you draft lowered been a river. in dozen talked worse the gotten They've shut down working Ken. the Guard, The has so. industry since the week all we're or cut times moving has Guards Army Corps down -- Corps number customers, probably

more times. loading we're at would as instead the do, about of, at dry XX guys feet nine So cargo feet

we're everything we doing unprecedented. So can, but is this

has I XX-years think maybe and lowest river is least this low. all-time in at the XX, been an

our All was about -- in well, of me earlier it about XXX help it's on it later think think the Christian told of some XX% enough barges, XX%. X,XXX that barges, there's it's this this week. weekend, you moves so gives out. the when I Hopefully you fleet, rain roughly forecast our that system. river said, to

some little the -- tell a because thing run quarter headwind dry news of on the really to from good -- $X.XX water delays. protection But bit it's may when the they is in meaningful it's Now, really, painful, contract this kind again. XX see little profitable navigation same this I is with and be you, U.S. running. just flowing cargo actually the protection starts $X.XX would of pretty tows. for supply It's a operators, the for you -- chain real, when could anywhere this a barge as depending It's less impacting good not a contract we so well, have way.

load Our much at drafts are lower tows do. generally than they and smaller we

impactful, we base, we're southbound. working everybody everybody So it through good But protection is the together, news contract or it's and I we'll whether Corps to some our flowing, think but Again, the it. customer navigation Guard, it's is keep the industry, get both fortunate, have the is Coast northbound with trying delays.

Ken Hoexter

if my get ahead. And, go -- Great. could I

Raj Kumar

for our add, Ken, of you around is I the renewals, renewing us, have right. was quarter just in to QX contract you're referenced going QX. It term a contracts we substantial XX%

Ken Hoexter

-- is things clicked quarter. of side Yes, Dave, couple for, think, fourth a big been is it's for This business, and have now. right, all waiting for maybe on of like I it been the here. what the point we've the finally hitting the D&S, of that years seems other you've waiting kind

on think better want been I as and we Maybe question the get a start view. address of of importance things as always has business little segment. to to strategic the you the here thoughts from the your your forward point move

David Grzebinski

Yes.

roll point, strong. right particularly business. is Obviously, starting really to the electric Now gas, very to D&S Inbound and your oil orders frac up are across now. anything is

We continue same. industrial take It's to Commercial pretty is strong. and the orders.

impacted least out. by mean, supply packages being engine are are at a for sure, some year chain I We

until some ‘XX. get deliveries So we cases, won't in

value. point, is Board sure it the and chain split, Kirby your KDS open-minded to bit. The marine value. more We've supply a But should shareholder discusses to it. business. just impacting it creating So the We've committed a the is creates to kind always us shareholder to been strategic of, make on got

it year when might two to sense. trough sense, at and So last EBITDA the sense make Clearly, multiple EBITDA trough numbers didn't split businesses. make the make

the see But the we're hitting The same KDS market work good it. well. the hard business really the sense. So the on and it's right and to we'll we've the is to all got it's to team team working are direction. more cylinders. when running marine working And the is team in and Meanwhile, through make with strength, still this more getting both

So right about are we now. excited pretty we're where

Ken Hoexter

press clarification? you or just want Can Kurt, coastal. on? more you sure were mean want you understand In ballast talking were make release, Do in treatment about if levels you mean of ask to later just shipyard I to the about you understand. the I I that talking high one water did I activity said just Sorry, newbuilds? newbuilds

David Grzebinski

newbuilds. treatment. ballast fortunately, XX got water but ballast units of of so of think XX six our six we've heavy left treatment, units, on all they're our We It's our No, do shipyards so water some -- big, got have or or to bigger long, we've -- units. all XX those not it's units I and those are and

impact to in going a and that's more ‘XX. the here importantly bit So little this fourth quarter into

drawing in on coastal, terms unit not nothing. We're for board even supply it years. construction good somebody and, anything demand the now. almost right a the we're balance wanted three wouldn't if And to you build which is in pricing hearing really now, because for see Now new yes, environment, on of new

the the do and construction. to got engineering You

‘XX right at I'm would case. until build And anybody unit a deliver their now. wouldn't go sure You mind in best not new

was tell and give try now, an million prices. and $XXX to when million just it's build it benchmark, because you about we ATB, costs $XX to prices, Just our steel if barrel you XXX,XXX labor it unit built you, about I a input would

and we demand go-forward So a the standpoint supply start it's and for see very on rates coastal the moving coastal, on basis business. to should constructive in

Ken Hoexter

time, it. I the for appreciate guys. Thanks clarification. the Thanks for

David Grzebinski

Hey, Ken. thanks,

Ken Hoexter

job. Great

Operator

with Our next Jack from Stephens. question Instructions] [Operator comes Atkins

now open. is line Your

Jack Atkins

the from in solid the here. on that expect I a quarter think the outlook, you've water you made Good you quarter, guess, the David, fourth know that business financial be you're Okay, quarters. third improved perspective momentum a would provided in but issues versus comment ranges -- quarter congrats the full-year, deliver based the here able quarter? on got and but release as the in some a fourth quarter expect, guys about the line quarter-over-quarter me, I the to in in obviously, the that you issues now, high low morning, item earnings have to you great. coming or press to results improved also water fourth seeing with excuse for we

David Grzebinski

as really us year. Yes, the usually the is guidance having a you but, and for complete given the best long-time, Jack, we followed haven't third know, of quarter

third quarter, is the then the the as lighter than business to the and Weather it's that usually be lightest followed the Marine first, most be as quarter impacts starts but terms second and We and with fourth is seems it light particularly, that's moving. get the fog. because us -- impact which can certainly it's First by the not meaningful, the fog thing of -- usually of weather. to or in

I of and down through a a bit. until be But wouldn't combine, at that So it January. roll to to that but weather, big business, kind and, start those water. when river see on maybe you pricing up of we've say quarter you reprice quarter can a Marine the sequentially because bit contracts of the they guidance, talked And little of, the or haven't it's don't the both -- put it's you blow-out, river, fourth out maybe lower about see in going water, -- most the a depending little we and flattish the if up, of end quarter weather kind low term the clears

Jack Atkins

Okay, of same page on now helpful. that's kind just I everybody -- get got to of in terms it's there think the

David Grzebinski

some D&S. sequentially. be issues about shipments though, a supply issue and chain talk get mix there The is me could too. be could Let D&S, we and the whether can little better

lower be could we other that margin products. ship products Some than a

pretty nowadays, use I is know but so sounds And it's corporations -- really chain, about right it it it like is is frustrating now, an strong D&S excuse and managing which the supply real. most

Jack Atkins

telling D&S as year, next bit, momentum can, would kind to Okay sense. you I of, the bit love And takes, the differential so are where so maybe, can can gears how some I'd contract us refined through makes if economic help -- on And backdrop, for guess kind the and just well? we year? the a there where kind of get what contract as a customers kind for head with think next think a we chemical positioning that it maybe and of you rates But sense as between next be of into the we go color some your I about love I about about we you a as are maybe year but they're puts with are, what sort maybe you Marine how then we of for the when better out much shifting flattish cloudy there maybe your of maybe as telling momentum guess, of business for process? may as when love to even kind their guess, rates and kind about and quarter-over-quarter, are of Would we bit. renewal anything rates now customers maybe just product spot think into you think upward you there right are there flesh you sort but go quantify, you is

David Grzebinski

comparison on a above XX% the another spot pricing contract is Yes, look, XX% I which market. is -- differential, just would said it's is what depends sure. you contract healthy contract, exactly in way, what to spot Yes, you're or doing. pricing and have say

the worried would now, European Volumes customers, that's be of healthy more -- customers the imagine seem a that Europe Europe. and the help say refined a So $X on little very if say. goodness should headwinds anything, the side around economic more less our On gap chemical and pricing like natural I than and with are and good. that right chemical probably gas here -- gas positive, costs are in based gap side, it you we environment. but or are a got would if customers it product I in I U.S. a natural is the what can mnea refine -- lot had it's to knows you maddening a and feedstock. facility chemical as

interesting So time. it's an

kind but enough. guess I Fed, recession, of I I earlier, think think, watching as the not said the done to second they've everybody's

about soft that no I but feels think data support, the absolutely landing's with But way. that's to now.

Jack Atkins

you the Thank Okay. again for time.

David Grzebinski

Jack. Thanks,

Operator

with Stifel. Our Instructions] comes Ben question [Operator from Nolan next

now Your open. line is

Ben Nolan

different the the start I well, the GDP -- of talking sort the It just majority you decline we oil know the where normally to when we any Raj. that historically, chemical right feels you maybe production and last think chemical that that's business weakness of barges? is that, to normally, in Dave a of -- just forth. about Hey and where be for do it that think specifically, where than words, about and off you've Do linked. famous activity you. you a is inland. at a of or and side if danger you relates see as in so what would the could I left now go also the Thank environment downturn, you know doing of customer there, If and like But business how into -- that on period we're me you're pretty gas I of side in river think said David, demand

David Grzebinski

GDP Look, different is Yes. can Kind time, does right? in the this worst you hear of thing our impact volumes. investing

in Ben GDP get seen where recession grows back as volumes well. demand our a pulled and with and that we You've history

we different. very there's a cost demand. a you maybe get the do we construction, is expensive. right? it new and The get is I impact now new it's think just I recession of will not difference building that pullback just in tell no barges would If So GDP, very,

at an going check, and shipyard retirements, of, of mind layer replacing the kind numbing. you in in, especially are right, of the then you look and barge to happen, steel. if which old that's when go to kind into cost you So It's bring

difference. mariners, we pullback or dynamic dynamic And layer then tight. get in of when in picture, kind So we've where if the be demand kind a horsepower we'll we're that might new little horsepower, just think a little I had. Even newer you supply. short the be stronger than of It's a dynamic short still of the that's industry's

gas They're because Now going to refinery feedstock. it's side, products, interesting is right? short to refined dynamic the -- the oil of going and Europe, the be

this a refinery export to is products for a complex. on that's bit think maybe -- lesser -- means it's the for volumes seeing little little helpful. tailwind up we're are a I little complex it's Is what extent, less U.S. think the time? and And the that side. refined chemical different a No, I So

demand. but the limit don't a don't what I long if different running. just would of answer. equipment just the So supply. on And There's little supply that's respect to say different time cost I this think is answer, keeping a That's I a is know based long-winded older it's this new with supply. time on of of cost then, course,

right So that's different now. probably the thing X that's

Ben Nolan

that any that same could then barge is there the to And I flow on be it of equipment based fully barge can't causing your there that's guys levels was then the low challenging of able well? Or spent aren't towboats in tied basically that one of there. river any about pieces one in through for extra back it's to market. up? -- water level really price the demand here? the if -- the could to Do certainly providing that's you that that up other an And heard I we've that are power know extra X quarter causing you operate the just tag And are the things to Are follow-up, you horsepower on helpful. is you and know go warranted? the in of for thing Is presentation. tank my larger true barge causing as have dry I sort if brought your That's are -- towboats was get be on Okay. market? uplift? Or and reactivated that seeing it's

David Grzebinski

Yes.

Let me pieces. take in that

river cargo horsepower First, on yes, is dry that towboats too barges, the XX their the on the horsepower, the big draft big. horsepower push big XX,XXX side,

because our most So smaller, up, is our smaller. they're are toe tied sizes being so of horsepower

one much we bank for now, big vessel her smaller. on because that's draft horsepower think too little our the is But I right a is of most have river. the

putting as Particularly, the on look It's some said, side cargo and is, they're helping We to helping situation. It's going it kind some well. get certainly a liquid temporary That needed hopefully, the again. more rates, is point, of tightness get to rain in a little the this market. XXX%. you much river the your at up dry if tailwind market. give Now

The of second reactivation. part kind of was question your

ones and a have you older were, little would I the of, We're tied during put the put a expected pandemic, of a barges of, think up and on on handful reactivating more generally kind with kind those. lot the as ones maintenance the the bank of bank. headaches were,

that which the No, be overhang cost come make quarter to a it so than more? hear maybe high. back everybody's that steel and there's truly put don't overhang customers, -- we then to problem prices. barges on years, just can comments I you are could and of even. of it you hangover, fourth these And a it's is coming another with whole costs bringing the I real, that the of in inflation come up that not me, prices because might really days, you the for our maybe conversation these have the two of and to we just excuse ones the inflationary -- But these is to quarter, with of supply so need the some there. with is prices bringing lot tied sense off several more in a increases it's XX inflationary or big is of price really back even gating left. builds, is barges the stay pressure. in. only the in five real, We're XX us. comments good going the there's were Again, get thing. after have think back it, -- -- labor bank. but quarter And check bringing lot when part steel labor or think also cost causing hangover in I cost it your There's whole we It's are fourth think in top back a stay factor last through and But new them supply and

Ben Nolan

Well, a made I'll Yes. maybe and I answers That go sense. bump weekend over the and makes minute astros. appreciate into the you

David Grzebinski

Thanks, Ben.

Operator

Jonathan from Evercore. [Operator with next question Instructions] Our Chappell comes

now line Your open. is

Jonathan Chappell

Thank you. Good morning.

David Grzebinski

Hey, good morning.

Jonathan Chappell

to want up I left where pick you David, off. just

prepared your times some You in of the couple guys had escalators a in and mentioned remarks Q&A. cost of

the two, headwinds the we and mean more So you'll inflation pushback kind foresee prior any should given look you of does get back should cautiousness at here. economic that pricing do or similar on to be escalators you a environment, given the about uncertainty? similar customer this you a spoke the cost margins similar from cycles, think when the all the upturn all cost to that this And maybe upturns from levels you just inflation, prior two-parter given this based perspective? at One, margin cost about,

David Grzebinski

Yes.

and So I break let it to a of all. cover that couple in me pieces I'll down let if Raj in here, don't chime

on fuel, is First get we lag -- a there's fuel.

escalators So recovering that costs that we fuel work. have

are take months them through. monthly, of are are quarterly, some Some direct pass-throughs, to some four them work of of some them

some are of those we're talking escalators the So about.

over we to fuel want with we time, fuel there. we and we our either. out, those and don't on a little get escalators, can don't But on make work a lose little think money customers, money with to out they work pencil I and we fuel -- get want escalators and average

can boat. of and inflation, and categories generally boats doesn't is agree as tries, for CPI it radars I have, work double-digits, in have with our tries either on PPI, all you that. make because in So XX% customers then possible. neutral some we And on the -- with -- The we of fuel we and that line the certain up to as supplies say cases, some some buy use the in inflated or like which try keep our and to contracts things see

rate of think your our portion labor CPI, the is about index, some when escalators, talk you inflation. the cost would which what PPI tell then general of contract in PPI and escalators, our and about behind. contracts some calculate little But CPI, meant to we keep we contracts a have you of of not up talking So you use a also have. it's labor index, take is an with you I a labor we're we're which perfect and

we're more. saw we're tell you would I we're up here. we the would increases price it you these would that. this seeing leverage yes, now, of I that pop about that would and get would were -- what past where because we more some inflation need prior with part in in margins this talked price so just you recover increases, pop to we And say, think than cycles, of keeping So

prior to And So of that popping cycles. you would the said, That against increase. expecting have a increase. purely little is that's seen inflation They're really a still in about headwind margins just environment. margin not we're bit it's like --

Raj Kumar

And as approach towards of towards to we increase, could we can is And inflation. we If this taking think us. I a where saw very rate very for I comments add, I'll being fuel just rate that in this David's just because on I need are add, that if say headwind. focused increases QX, critical

right now. I think We're talked about QX, starting out see it that of in flat. fuel we fuel increase kind came that was to

of terms of that effect. kind saying what David that supports So was in whipsaw

progresses. fuel looking recovery curve if the as where to we'll fuel the forward see next we So at I'm And then year. out, see on goes, that plays into going year

Jonathan Chappell

helpful. That's Okay.

the said a to how headwinds, we I of XQ get quarter weakest you kind for Jack’s important you're all late will question take know XQ these I reasons. I David, but to think of ‘XX. it's market first conceptually if wanted to at obvious just into don't further. want higher. I term contracts the for follow-up, short be resetting look frame bit typically that little term marking to But is should much the most Just

like we the some think just market to of weather on opposed than drought upturn this winter as cost be all XQ about else equal traditional should ever, or getting the worst better through, You're ever seasonality? as these escalators worst XQ

David Grzebinski

of I got a I’d out. lot And otherwise before in remarks in to We've happening. sense. absolutely you see of that declare paper penciled saying makes that. we've was haven't about pencil prepared reprices. put could his -- one we Raj you're answers answer, can just are I think theory, repricing. how to of see what contracts got it we or but as we all the mean, But XX% I what in We contracts, mentioned But haven't said

Raj Kumar

right, hedging things Mississippi, to the we we we're Jon, the better to we situation for consequent equal should right? your if bad point, yes, need says margins. being this if history think back, with think So regards But all where typically has go weather, I see to QX, get on I renewal, and weather. get to you on XX%

Jonathan Chappell

awesome. you, Thanks, David. Raj. Okay, Thank

Operator

next Our Instructions] [Operator Lewis Greg question comes BTIG. from with

Your open. now line is

Greg Lewis

how Hey, everybody. Difficulty] And [Technical those good morning,

David Grzebinski

about How [indiscernible]? those

Greg Lewis

question is around How bad? how my low So water first fleet I the guess inland managing i.e. is to

to I there's also kind It XXX draft load. say mentioned what less upriver? guess that due in is would more or barges, expect mentioned think. you light that restrictions, barges than You now. of we're we in around you the is I environment have the Should longer we

David Grzebinski

Yes.

our I answer meaningful I with unless some shutdown get it and But is I the think will we Greg, you, about of guys, short talk I we're a rain. Christian complete know. worried tell river ops don't about the

that would be might impact, as imagine. a tremendous So you

terms already if draft. Fortunately, liquid go go though, are in lower we of with don't draft. of too you a boats We lower go some lower barges, can much the little low

is cycle that river cycle periodic up the of openings times, I thing think even the interesting the down are and times barge elongating. with a moving

time, with But doing kick with certain The from not allows usually more at like time something seeing barge free navigation before demand And delay which particularly navigation with in, get hours this. moving you're clauses clauses, delayed number navigation of you're voyage, a by if the you're is which we problem kick fast. a then freightment, call paradoxically, in. So contracts start of of have clauses we okay. you as the there's charters, but

look is of market. ecosystem much the part much, And are I'm -- the demand tell it's times, navigation would offset for whole better in I So But increases liquid shutdown. worried dry up complete a cargo, delay and It's at slower then if cycle on our some sure. say. in purpose. clauses the you versus hard which to then just it help of shape, we little fuzzing a we're bit -- the as you about large

it's maybe to hard rain. a if fourth be the and way meaningful that's headwind of fourth some saying more to a $X.XX So it the without quantify, full in $X.XX quarter quarter, long go really could we

Greg Lewis

to over Okay, pivot great. to Florida. market I coastal business. big a for then did know that's I the And Tampa want

happened you I two-parter all? just maybe of is So at Florida impacting was how the kind there. then Coast if kind West think a of hoping of coastal on what’s And

power impact lot coastal that. of things West the C&I, demand C&I? Florida Coast, of the whole I the having of this like a storm Kind On and imagine on what and curious for there's on is generation

David Grzebinski

had power. have On two C&I down Yes. branches in A one the mostly as with of minor you -- places, shut we outage. during in number couple backup of different obviously, or know, But we impacts. power the We damage the quarter own our storm. of have a our

So able we're facilities. our cover to

rental Our as care Walmart, seen. fleet interest close to well. as to like in ever We provide out C&I people got power Costco, health as Target, sold backup I've some

so busy kept very there. And we

actually surge went dock, -- And some while storm so in were because shipyards other storm. Tampa had then that's things. there, They grounded where small and some into got in the On they while into coastal higher they couple there voyages the a of actual of side, a Tampa. we've Crystal as to a and vessel just the in in paradoxically, the the when of equipment we delays with We dry not well. out we the charter essentially in go We that big units, some of way. weeks delayed north River lost in shipyard, of couple dry had were

as that our fleet So like stiff third ship the But a lot but probably have obviously, hit or of barges. hurricanes Texas meaningful some fourth that rental rental less is in us we still inland that it's hire. a of some -- Louisiana some quarter, was Most a on more lingering other have storm, that where equipment than as of meaningful in in on seen we of kind on the that's little into the time. because would there's go I all process. say you But quarter. thought

us it cents per did quarter. So out didn't but way saying impacted. it the of share, call impact bit, was not put long We for us but enough a to it, little make it

Greg Lewis

Hey the thank time. for Okay. Alright, everybody. you

David Grzebinski

Yes, alright. Greg. Thanks,

Operator

[Operator Instructions] Greg Our comes next from question Research. Webber with Wasikowski

open. now is line Your

Greg Wasikowski

here. morning. and fitting David me Thanks for Good Raj. in Hey,

David Grzebinski

Good Hey, morning. Greg.

Greg Wasikowski

So a that on seeing margins, market, And you are little constraints? with towboat what I versus wondered talk dedicated to what about -- flows translates David, currently the guys bit how ultimately doing you're rates What seen through? how could more you've labor CapEx? and you it that utilization and

David Grzebinski

echo rates Sure. really look, are side the marine the up to on that's it, again, there's mean, both comment, tell would that the businesses D&S board of go lower probably these single-digits understand helped in just mid And the Raj's Yes. inflation need inflation. wage tight. you of inflation. range. business labor right? been even and on feel the But margin labor across And to to situation. keep it. to not just definite is Well, that lesser in certainly But about with labor grocery impacting everybody, I one I high is is extent reasons you, end the store price to the increases we

competitors, was little had of I've that's shape In I we're be it that have was team the mariners last time, doing because constrained. own in where to it better probably did Christian it terms -- that tell that mariners, because we our the during foresight cost pandemic it. of headwind, towboat, ops of up our painful, and that we're before the better. to year, we was was and school that which train of But a kind about a our but in it we most would talked thing than our you school we what start would more had January was good a at a the

younger your fleets. the six over with the our We would tell some Now last of We've in years. of companies it to in bit. CapEx, question, trying bought you, capital, years, five invested our terms second minimize a part fleet I

need a about right right our lot customer have for Our we you, a is or we for in we it's a equipment and customer CapEx deliver half We best our have that build hybrid new interest we build is is the would sometime a may first being of electric guidance towboat towboat, with might retrack the which building, trying ‘XX, There something built of do specialized certainly can emissions tell would we don't be our because shape ever we're a a its some excited special the getting are only I is we're real don't retractable equipment. should that and We build in better of call now probably a Raj fleet that for CapEx to line wheelhouse. guidance. shape because but I next in specific to might we event? towboat have And say any special and But barge been. something year, now great or like which minimize we new fleet profile.

Raj Kumar

the is right maintenance-related, it And what at which it manage that most pandemic throes year. coming can last the the a see, it, catch-up add, probably and were has improved. the would this bit of look doing there's the utility it, if just referencing of we pandemic, Greg, is years, through and out you of to basically as in most I'm I we're and a But of you we two -- CapEx managing now.

in we be So a address seeing. the our to demand need position to fleet we're that

Greg Wasikowski

guys. overall to wanted Thanks, the of of the D&S finding the outside Got and the explore price. a to right then back and and it, economics strategy, split I okay. cons pros And

thinking from with about? Could you marine thinking are not might be -- be looking a tie-in simplifying chain, overall we might factors any of that, that losing sort like So or be there that repair. about maybe your other the we any Anything scale outside not or supply in? synergies

David Grzebinski

our our on distribution or services fleet revenue group That's side. works some less X% our towboats the is all the repair engine There time. and of on synergy maybe KDS

sharing corporate other synergy I would overhead are there's that some really vessel. that be and synergies the this overhead. and electric is just hybrid that could and So future corporate doing be there synergies guess there,

Stevenson, is company, at colleagues electrification, at and Kirby-owned very equipment. systems which Stewart Our are electric battery drive & good

electric diesel thing. a towboat. So kind of We're first that's almost future our building just

there's the marine So X synergies lot it, when that would business. at the other of repair you be between it's something. look But than not -- a

Greg Wasikowski

groups, to you'd those hang that and C&I about or split maybe oil two Okay. And split real quick, what a versus kind oil something is off possibility Is the question and it same C&I? a more gas? gas entertain of of to on package for and deal? Or

David Grzebinski

No.

I none -- the comments, it of both to our look of have adds now. it's pretty worked open other out to that. say this, would D&S shareholders, market If they're will value. the constructive one and it's the value definitely thus Cognizant just the far. you But that the right to in and anything and is It's -- I heard in whole, at of think or look if engaged or might shareholder can we enhance at Board is the do mindset continues anything Board

Greg Wasikowski

Yes.

fully. luck David. Thanks, Okay. again, Good

David Grzebinski

you. Thank

Raj Kumar

you. Thank

Operator

our to question-and-answer remarks. like Niemietz concludes This turn the closing conference session. over would any for to Kurt I Mr. back

Kurt Niemietz

Thank for participating you, Michelle, call today. on and the thank everyone, you,

follow-up any out have directly, Thanks. questions, you reach to me XXX-XXXXXXX. If

Operator

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

You may disconnect. now

Kirby (KEX) 24 Oct 222022 Q3 Earnings call transcript