Kirby Corporation (KEX)

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Kirby Corporation (KEX)

Q2 2013 Earnings Conference Call

July 25, 2013 11:00 am ET


G. Stephen Holcomb, Vice President-Investor Relations

Joseph H. Pyne – Chairman, President and Chief Executive Officer

Greg R. Binion – President-Marine Transportation Group


Jonathan B. Chappell – Evercore Partners

Gregory Lewis – Credit Suisse

Jack Atkins – Stephens Inc

Veronica Zhang – Bank of America Merrill Lynch

John Barnes – RBC Capital Markets

Michael Webber – Wells Fargo Securities LLC

Chaz Jones – Wunderlich Securities

Kevin Sterling – BB&T Capital Markets

David J. Tamberrino – Stifel, Nicolaus & Co., Inc.

David Beard – IBERIA Capital Partners

Matthew Young – Morningstar, Inc.



Welcome to the Kirby Corporation 2013 Second Quarter Earnings Conference Call. My name is Christine, and I will be the operator for today’s 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 would now like to turn the call over to Mr. Steve Holcomb. You may begin.

G. Stephen Holcomb

Good morning. Thank you for joining us. With me today are: Joe Pyne, Kirby’s Chairman, President and Chief Executive Officer; David Grzebinski, Kriby’s Executive Vice President and Chief Financial Officer; and Greg Binion, President of Kirby’s Marine Transportation Group.

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 forward-looking statements. These statements reflect management’s reasonable adjustment 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 Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.

I will now turn the call over to Joe.

Joseph H. Pyne

Thank you, Steve. Yesterday afternoon we announced second quarter earnings of $1.11 per share, which included a $0.07 per share were reversal of the earn-out liability from our April 2011 acquisition of United Holdings and in addition of $0.03 per share negative impact from a combination of high water and lock issues. During the 2013 second quarter our inland and coastal tank barge fleets continued to benefit from strong U.S. petrochemical production levels as stable refinery volumes, the export of lube oils and diesel fuel, as well as movements of crude oil and gas condensate from shale formation, both the inland and coastal fleets maintain high equipment utilization levels and higher pricing trends.

Second quarter was negatively impacted by heavier shipyard schedules in the coastal area something that we discussed during our second quarter conference call. With respect to our land based diesel engine business the market for manufacturing new pressure pumping units continues to be slow, partially offset the situation is the remanufacture of these units, which continues to progress as we expected.

It does appear that this business is on the bottom and we are seeing some signs of improvement. In our – on the marine side of diesel engine business while market conditions were generally stable across majority of our markets, the high work conditions during the quarter on the Mississippi River did lead some of our customers to differ several maintenance projects, but we expect to see these projects later this year. With respect to the oil service market in the Gulf of Mexico that stable power generation markets are also stable.

I’m going to now turn the call over to Greg who will take you through our marine transportation business and then David will take you through the financial side of the business and I’ll come back at the end of the call with some concluding remarks.

Greg R. Binion

Well thank you Joe and good morning to all. I will address the inland market first and then followup with the coastal market.

For the second quarter our inland marine transportation business continues its overall strong performance with equivalent utilization in the 90% to 95% range and as Joe said favorable terms and spot contract pricing. In the 2013, second quarter we saw high water conditions on the Mississippi and Illinois River that persisted really throughout the second quarter.

This was the result of snow melt and consistent range. The high water conditions resulted in slower transit times, additional horse power requirement and assist boats at numerous ridges and locks. Additionally, the Bayou’s lock is located on the Gulf Intracoastal Waterway near New Orleans was closed due to structural damage from late March until July 18. This created heavy congestion in multi day relays at Harvey Locks in the New Orleans area and also along the ultimate route to the Mississippi River at Bayou Sorrels and Port Allen Locks.

The high water and lock delays negatively impacted our second quarter results by an estimated $0.03 per share. Inland transportation revenues from a long-term contracts that is one year longer were 75% of the total revenue in the mix of time charter and the fragment contracts for the second quarter were 58% time charter and 42% of fragment.

Moving to inland marine transportation pricing, term contracts during the second quarter continued at mid single-digit levels when compared with the 2012 second quarter. Second quarter spot contract pricing on the average remained about 5% higher than term contract pricing.

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