Kirby Corporation (KEX)

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Kirby Corp. (KEX)

Q2 2009 Earnings Call

July 30, 2009; 11:00 am ET


Charles Berdon Lawrence - Chairman of the Board

Joseph Pyne - President, Chief Executive Officer & Director

Norman Nolen - Chief Financial Officer, Executive Vice President & Treasurer

Steve Holcomb - Investor Relations


John Chappell - J.P. Morgan

Natasha Boyden - Cantor Fitzgerald

Ken Hoexter - Merill Lynch

Alex Brand - Stephens Inc.

Chaz Jones - Morgan Keegan & Co.

Mike Buttonfield - Stifel Nicolaus

Jimmy Gibert - Rice Voelker

David Yuschak - Sanders Morris Harris

Daniel Burke - Johnson Rice & Co.

Justin Myer - Lord Abbett

Charles Rupinski - Maxim Group



Good morning ladies and gentle and welcome to the Kirby Corporation second 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. Mr. Holcomb you may begin.

Steve Holcomb

Thank you for joining us this morning. Joining 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 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 10-K for the year ended December 31, 2008 filed with the Securities & Exchange Commission.

I will now turn the call over to Joe Pyne.

Joseph Pyne

Yes, good morning. Yesterday, we reported net earnings for the 2009 second quarter of $0.63 per share compared with $0.74 per share reported same period last year. Our announced earnings guidance for the second quarter was 52 to $0.62 per share. For the first six months of this year, we earned $1.15 per share compared to $1.42 per share last year for the first half of the year.

During our 2009 first quarter, in response to the lower demand in both segments of our business, we took specific steps to reduce overhead and cost by reducing shore staff, our shore staff by approximately 60% through early retirements and staff reductions taking a $4 million before tax charge or a $0.05 per share charge against earnings.

Just as a reference point, last year at this time our shore staff headcount was approximately 10% higher than it is today, that’s a 6%, reduction in shore staff number, I think I misspoke, it’s 60%.

During the 2009 second quarter, our marine transportation demand across the majority of our market stabilized, but was well below at the prior year levels. We did see some improvements in up river movements of more finished petrochemical products when compared to the 2009 first and 2008 fourth quarters, with significant destocking of inventories occurred.

Demand on the canals stabilized and it appears to be bumping along the bottom. Weekly overall barge utilization for the second quarter ranged from a low of about 80% to a high of 85% which compares to a low of 90% to a high of 95% in the second quarter 2008.

During the second quarter, we maintained our revenue mix of revenue mix of 80% term and 20% spot. consistent with the 2009 first quarter and most of 2008. Pricing for services continued to be under some pressure. During the first quarter, we were generally able to renew our contracts at the same rates or in some cases we traded summary for increased contract terms.

During the second quarter, we experienced spot rate declines on a year-over-year basis in the 10% to 15% range which included fuel. Now we had that sharply lower fuel. Fuel would have accounted for about a half or may be slightly more than the half of this spot rate decrease.

The term Contracts Renewed during the quarter or renewals during the quarter were anywhere from renewed as expiring which would be 0% to may be 8% reduction. Time charter or daily rate contracts which reduce revenue volatility caused by weather and navigating delays and temporary market declines continue to represent about 55% of our total revenues during the second quarter.

The time charter mix was unchanged as decreases and time charter revenue were consistent with the decreases that we saw in our total revenue. We do expect the number of time charters. Contracts will continue to decline as customer’s size or time charters to their actual demand. Well our Marine transportation revenues declined $64 million during the second quarter and a $106 million from the first six months when you compare revenue to corresponding 2008 periods.

Approximately $23 million of this revenue decline for 36% of the second quarter revenue decline and $39 million or again approximately 37% of the first six month revenue decline was due to lower fuel prices. As fuel growth flowed through, our contracts being escalated or deescalated, deescalated in this case. Although we were impacted by high water both the Ohio River and lower Mississippi River, rivers during the majority of the second quarter.

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