Kirby Corporation (KEX)

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Kirby Corporation (KEX)

Q1 2009 Earnings Call

April 30, 2009 11:00 am ET

Executives

Steve Holcomb – Investor Relations

Charles Berdon Lawrence – Chairman of the Board

Joseph H. Pyne – President, Chief Executive Officer & Director

Norman W. Nolen – Chief Financial Officer, Executive Vice President & Treasurer

Analysts

Jonathan Chappell – JP Morgan

Natasha Boyden – Cantor Fitzgerald

Alex Brand – Stephens, Inc.

Ken Hoexter – Bank of America Merrill Lynch

[Jimmy Gibert – Rice Voelker]

[Asinial Jawani – Catapult]

Chaz Jones – Morgan Keegan & Company

John Larkin – Stifel Nicolaus

Daniel Burke – Johnson Rice & Company, LLC

David Yuschak – Sanders Morris Harris

Charles Rupinski – Maxim Group

Gregory Macosko – Lord Abbett & Co.

Presentation

Operator

Welcome to the Kirby Corporation first quarter earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. Steve Holcomb.

Steve Holcomb

With me today is Berdon Lawrence, Kirby’s Chairman; Joe Pyne, the President and Chief Executive Officer of Kirby; and Norman Nolen, our Executive Vice President and Chief Financial Officer. During this conference call we may refer to certain non-GAAP or adjusted financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is available on our website at KirbyCorp.com in the investor relations section under non-GAAP financial data.

Statements contained in this conference call with respect to the future are forward-looking statements. These statements reflect management’s reasonable judgment with respect to future events. Forward-looking statements involve risk and uncertainties. Our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby’s annual report on Form 10K for the year ended December 31, 2008 filed with the Securities & Exchange Commission.

I will now turn the call over to Joe.

Joseph H. Pyne

Over the past five years Kirby’s earnings for 20 consecutive quarters exceeded the same quarter of the prior year, a five year trend. Unfortunately, 2009 will not continue this trend. The current US and global recession and its impact on our two businesses marine transportation and diesel engine services has ended our string of increased earnings.

Yesterday, we reported net earnings for the first quarter of $0.52 per share compared to $0.68 per share reported first quarter 2008. Our results include a $0.05 per share charge for early retirements and staff reductions that was included in the guidance that we gave in January of $0.45 to $0.55 per share. During the 2009 first quarter, in our marine transportation segment we saw lower volumes in all four of our transportation markets which are petro chemicals black oil, refined products and agricultural chemicals.

As our customers continued to respond to a weakened economic environment, we did see some small improvement in up river movements of finished petrochemical products going in to the Midwest at the end of the quarter as compared to the fourth quarter of last year where significant destocking of inventories occurred. This destocking actually continued in to the early part of the first quarter this year.

Also, as anticipated the fourth quarter destocking that we saw on the upriver part of our business made its way to the Gulf inter coastal waterway markets during the quarter resulting in lower demand for petrochemical movements and some pressure in the spot market. Refined products and black oil movements were also weaker consistent with prevailing conditions that we were seeing in the economy.

With respect to agricultural chemicals, there was softness in this area principally driven by crop prices, some credit issues with respect to farmers and current high inventory levels of the product in the Midwest. Our overall utilization for the first quarter was in the low 80% range. This would be compared to mid 90% utilization first quarter of last year. With respect to weather, we saw more favorable weather conditions and operating conditions during the quarter, almost 50% less delay days compared to the same period last year.

That helped to reduce operating expenses and offset some of the impact of lower demand but it also has an effect on utilization because it serves to put more equipment in to the market. During the first quarter we maintained our current revenue mix of 80% term, 20% spot. That was consistent with the mix last year. Time charter or day rate contracts which served to reduce revenue volatility caused by weather and navigating delays and also helped with temporary market declines remained at about 55% of our total contracts.

We do expect time charters will decline as customers release some time chartered equipment back in to the market as they react to lower volumes. We expect volumes however, and I think this is an important point to be stable to slightly improving this quarter as customers begin to rebuild their inventories. Although volumes have stabilized in recent weeks, the economy will have to start expanding again before we see any significant strengthening in demand.

We should see some short improvement as I just noted as some of our customers rebuild their inventories. But, we don’t see any significant demand return certainly to the mid 2008 levels of demand this year. During the first quarter we were generally able to renew our contracts at expiring rates. In some cases we did trade some rate for increased contract terms. Spot rates did decline during the quarter and we believe they may continue to come under pressure as we see more equipment enter the spot market principally from the release of time charters.

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