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KEX Kirby

Participants
Eric Holcomb Kirby Corp.
David W. Grzebinski Kirby Corp.
William G. Harvey Kirby Corp.
Company Representative
Jonathan Chappell Evercore Group LLC
Benjamin Joel Nolan Stifel, Nicolaus & Co., Inc.
Jack Atkins Stephens, Inc.
Randy Giveans Jefferies LLC
Michael Webber Wells Fargo Securities LLC
Kevin Sterling Seaport Global Securities
David Earl Beard Coker & Palmer, Inc.
Ken Hoexter Bank of America Merrill Lynch
Call transcript
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Operator

Good day and welcome to the Kirby Corporation 2018 Second Quarter Earnings Conference Call and Webcast. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions.

As a courtesy, we please ask that you limit yourself to one question and a single follow-up. Please also note this event is being recorded. turn call to to like now the over conference Mr. I'd Investor Kirby's Vice Holcomb, Relations. President Eric of Mr. Holcomb, the yours, floor is sir.

Eric Holcomb

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

During non-GAAP conference refer directly under Financial certain to the this is is we call, to and available The Highlights. most release measures also non-GAAP may in measures. Investor financial on included Relations reconciliation or earnings website in comparable the financial section adjusted GAAP financial to our the measures our

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

the risks the Form ended uncertainties A I results statements December list the Forward-looking factors. year for as be XX, actual, XXXX, as risk March anticipated, materially of various from found actual differ these could factors and a of Kirby's those can involve as subsequent result call turn in and over for filing to Form will XX-Q XX, now the XXXX. on XX-K well ended quarter David. our

David W. Grzebinski

turn and through I'll start more I'll walk a Thank in then the call Bill everyone. quarter and my comments detail. with you, results morning, financials good Eric, summary of over the second to the to

we earnings one-time share a then to related per share. and Pyne. on of of comments, Chairman quarter quarter our I'll retirement full-year Joe third the $X.XX charge Q&A. announced turn non-tax included guidance Executive These GAAP second call Bill's of a an earnings the announced update over $X.XX to XXXX previously deductible our Following provide Yesterday afternoon, and

transportation and second in to this operating in our and a Excluding strong of our In $X.XX acquisitions. to the downturn benefits we share, the $X.XX business business, compares marine XXXX this prolonged second charge, of the which recent its guidance $X.XX realized improvement share. quarter we as started quarter $X.XX from recovery range inland and delivered profit per were earnings revenue the

this kept barges the towboats completed and been Higman capture to May. year. in total, dedication XX fleet quickly Targa high. the added the During XXX team experience our the effectively and purchased our also was pressure nearly quarter, moved of of utilization acquisitions rates through fleet, and integration to benefits which to barge the has assets have these Kirby of team these The deploy In

thoughtful swift dividends. cut equipment, action Additionally, paid and has realize and costs synergies maintain to

water report expectations Operationally, a exceeding As overall operations the hindered high and months of pleased efficiencies our quarter both result, on that I'm contributed these although operating second our month River conditions earnings. as Mississippi summer the the approached. in are quarter, first to the favorably improved sequentially to businesses of and

the a to compared seasonal little our believe quarter. hovering around the first across the with This overall well, spot in industry decline result, and rates the as quarter. throughout Kirby, softening utilization in check industry levels with modest XX% experienced As change utilization rates slight market of we kept the

should this average trend XX% However, improving challenging market pricing market in fundamentals during second is sometime that the remain talked year-on-year, on low-single-digit with the positive mid-single-digit inflection that but coastal sector, of compared the to about half anticipated continue rates range quarter. to spot the the stable quarter. we're XXXX. to a first lead In happening we've the during and contracts up XX% term believe renewed I

contracts renew that this belief market has did we the During few higher, bottomed. our quarter, modestly spot a supporting

profit operating mid-XX% utilization range into mid-single-digit and fleet margin improved low- range. improved negative coastal to low- the the the rate to Our our during to quarter

we manufacturing While new unit afford turned in has our by rates Inland is The recently expected power did remains to In some discount began experienced a market forward. we which right to to The and units we is back-up million. final their another power construction during many summer be year-on-year as was advantage and strong or months a and could stable being to our operating it sequential later market rental higher the of an marine business Despite to in and well cost for our major ATB our no our anticipation fleets. Coastal increased for in ATB equipment stable manufacturing for results in quarter, defer has demand new both quarter. for businesses. strategic new levels is of business, generation was maintenance storms specialty continue delayed on expect engines continue experienced sequential favorable improve for and expectations. things delivering second significant the new market, in competitor. $XX going continued of delivered chain that managed year-on-year have pumping constructed this a this XX and is quarter. XXX,XXX to international expect marine barrel as The record our with million to to nuclear teams shoots currently retire dry longer to were quarter rebalance, significant contracts vendor particularly In corner of experience had segment cargo, units another services few summary, see teams our our equipment although but and to this at in I'll the including we take customers Once distribution growth year, as income, on In expected a a move so $XX.X the operating over and remainder recovery the the the on high approximately take before pressure outperformed systems. this direction. to of deliver utilization oil outlook to more volumes give higher quarter slightly minutes, opportunity the continue service the for to to to vessel we our to do, bottlenecks, fleet. contributed quarter. units services, a older and and call our results. delivered and domestic a green first conditions pumping distribution renewing In that spot third the inland the pressure revenue continue overhauls during and utilization in delays in liquids Improving market, some commercial quarter improved to customers, and gas new second details we In I'll delivery supply sector, volume of to you transmissions, continued and service few more in the and and industrial I the the about quarter. of and talk for throughout Bill purchase the turn engine

William G. Harvey

us. contract inland stock revenues our and the million $XX.X higher second million XXXX year-over-year XX% you, operating and the to operating market. plan with in results. acquired the Thank second $XXX.X partially barge quarter, The Compared reduced million of and margins. Higman revenues offset non-recurring due primarily pricing to fleet, an segment by in lower lower $XX than transportation pressure second however, quarter severance In XX% was our costs term that barges, portfolio. income pricing one-time of the roughly income the improved the Operating amendment assets, pricing and due million the Higman first efficiencies of operating joining increased to margin Compared quarter were the XXXX $X.X operating our inland acquisition, everyone, a an quarter, higher sequentially barge lower revenue, additions $X.X Higman, the increased million the full-year XXXX to related of sector, the from increased pressure or overall due inland to to quarter markets operating and of contribution to first recently average increase, contract also as primarily impacted David. for marine revenues the our revenues to but XX% income the average Good the of you improved In and and million and XX.X%. utilization. quarter, thank morning, were increased full to $XX.X of impact coastal Higman due

to renewed Spot transportation the XX% the up approximately and contracts XXXX of charters first where marine contributed unchanged in up marine that compared quarter. approximately time XX% the sector XX% the XX% those are one digits sequentially, approximately from of year-on-year. Term of term during XX% affreightment. quarter, contracts revenue compared went to contracts were second the the quarter were inland average to on transportation but our XX% attributable the XX% inland to During contributed Long-term low year largely rates market quarter. of with single revenue over contracts second in

volumes declined second and due mid-XXs. pricing XXXX to completed of the inland in coastal quarter, a During as to utilization barge the XX% approximately operating In retirements low- were result contract the compared by improving at market, to end to the partially improved the margin revenues our primarily reductions XXXX. of quarter, lower offset marine mid-teens. These the in reduction second the business to a quarter barge transported second

capabilities Regarding pricing, products second average while down it XXX,XXX to an quarter. barge XX,XXX being XX% including and compared geographic clean was contract various the approximately transported, vessel size, to service to XX% the location, for factors, barrel pricing is vessel contingent on XXXX

first. in the were second contract term pricing both the quarter as However, and spot to unchanged compared market generally

construction the had quarter, sector, percentage coastal retired with barge of barrels. the operating at contracts took XX,XXX XXX,XXX capacity a low The approximately our we which time of business approximately inland under the barge the to coastal second barrel the negative under that digits remained barges during of in approximately charters. approximately total capacity revenue respect the Higman specialty barrels. we XX%, improved been delivery one were XX% During capacity to of with during term a of single With quarter. quarter, margin And by XX

and we fleet Targa capacity barges net barrels. inland capacity. XXX XX.X The barges, At of announced, previously three capacity of XXXX a reduction with was also quarter, barrels. representing the the XXX,XXX total of decrease barges pressure XXX,XXX result had a end second acquired barrels from million tank of approximately the XX a of As

net count capacity. of acquired On representing there and to coastal expect with During XX,XXX market, capacity barge plan barrels our to we with during expect basis, barge take barges, were acquisition, that XXXX approximately through Higman In capacity. end XX.X the a of second XXX XX,XXX to one no of XXXX, of barrel the quarter. also total retire barrel we to was a barges million changes of additional we remainder delivery barrels or specialty six currently marine additional the inland the

delivery quarter. to third the ATB take previously a we As mentioned, XXX,XXX in of barrel expect new

to operating intend in with we an fleet. vessel retire However, currently older capacity barrel our similar a

a with of a expect before capacity charters We to with X of net the we coastal of basis, XXX,XXX end total with year. barrels XX capacity. also XXXX barrels return end million On intend to two barges the barges currently to

for operating gas our in diesel income products Compared marine up commercial improving distribution services, to were activity market. million and for incremental quarter, or to with income X% to XXXX an increased and and primarily services revenues and the oil and market segment, XXXX primarily business. engine due manufacturing increased income S&S, oil quarter, XXXX the and our revenues gas the $XXX.X in operating contribution to $X.X revenues first million, and of second strong increased second the million repair Moving $XX.X Compared due $XX.X the from the demand to million. conditions operating were sharply, quarter

fundamentals second significant basis XXXX gas pumping new margin our with down operating points year-on-year. oil a During units, sequentially from and and up operating market, sequentially, the in XX.X% which of the manufacturing income XX quarter. increase pressure is about resulted the the but X.X%, both second in and oilfield revenues In was in favorable quarter, segment's associated

number manufacturing units record the pressure units of from pumping to business the constraints. chain vendor supply included delayed which quarter that During quarter delivered were due the first a

gas oil We also business. experienced continued and strong in our transmissions and distribution demand overhauled for new

to dry nuclear marine mixed double industrial the operating margin to cargo power the the markets was commercial of experienced and the and activity and towboats timing first activity particularly and market, revenue the oil offset the the due year-on-year, customers XXXX and demand our business seasonal related marine in represented recovered. businesses but In standby partially was engines, to as by quarter service generation major low had in inland and stable, tank commercial overhauls compared increases second the on quarter, in generators power XXXX of commercial service to for for were increased market and our to digits. second lower Compared rentals unchanged levels in quarter, an services XX% compared of first barge projects. approximately the gas quarter, service diesel as For we distribution

and the quarter, and had For digits. high revenue second to margin represented XX% industrial businesses single commercial distribution the approximately and operating services of the in mid an

$XXX Turning of June total which included $XXX cash the strong $XX.X cash end to first spending, million for new Targa increased million was the balance which Compared of XXX,XXX XXXX. a acquire of to sheet, debt used represented increase and to slightly of XX used billion the CapEx of fleet. million barrel pressure as $XX.X ATB end debt costal versus total was $X.XX flow million the for quarter, the as of the the the

the XX.X%. of Our second debt-to-cap quarter the at was ratio end

discuss the during call the remainder third to Looking remainder the forward, our guidance intend for back and I'll with of the over of year. turn year. flow cash to David prioritize we our the the to quarter now deleveraging free

David W. Grzebinski

Chairman as of stock guidance first per mid-point well In employee guidance $X.XX the compared you, third one-time to we per our to $X.XX we share $X.XX yesterday $X.XX we Executive to a that $X.XX of per Joe amendment Bill. our provided to and updated release previous XXXX a afternoon, and range a share of charges XXXX share to share. the per Thank press our related share the our $X.XX Overall, $X from announced guidance $X.XX our of to lowered Pyne's have excludes as as of full-year quarter retirement by $X.XX range plan. impact quarter

has customer transportation the third anticipate We to to fourth in range increasing Within the range our utilization market, the into we or progress for and quarter, mid-XX% for the and out the be the retirements demand inland expect low- at utilization XXXX low-XX% XXXX. keep tank duration build XX% with in we barge that will continued as barge quarter. petrochemical new industry and with the construction, combined tank industry above of minimal

expect to improvement on continue contracts term of we result, half that the XXXX. a As in renew mid-single-digit pricing second

implemented for our mid-XX% expenses, minimal adverse $X.XX to in staff the prior market. is in approximately will improvement our second employees. it end have of of in increases stated in guidance. our term to has guidance the As the range utilization XXXX. the tightening of for end this and inland half assumes a recently second half the quarters, remainder mariners and shore year. high included XXXX in But wage of of mid- improvement coastal high-single-digit expect This the Therefore, of the low In updated the to the low- labor a impact range have per share to In there market, we contract pricing year. pricing assumes been regards we

marine term Our the in of year range lower contract increases. wage the Higman guidance environment full-year the range full-year with and a This change of mid-point impact our impact contracts will assumes the no in guidance that compared XXXX stabilized XXXX. from the the inland pricing material of inherited fundamentals near-term. income be to market flat up transportation pricing Overall, slightly to operating reflects last assumes

by mostly coastal However, as than in pricing we costs the more operation Targa, improvement both and second operation. – offset be expect half, operational anticipated plus lower contributions our well and as term these Higman from in favorable some to offset spot

during under reduced units many expect supply to and revenue engines third will expected services and in out that quarters, gas fourth and For our segment, chain we transmissions our the deliveries income oil construction. pressure and new issues distribution be pumping vendor of businesses for push are operating and

are quarter into these or revenues XXXX. recognized to result, until not completed new fourth expected be a early of the and As units many

sand well of chain customers shortage are our them. constraints availability labor of own, a of supply logistical created facing some oilfield Additionally, and have their as as challenges for resources

manufacturing impact of result some felt remainder We equipment a some that new pumping the have the for this we on As have unit year. temporary pressure softening our could dynamics, orders. these of believe in businesses

strong and In business and is our a our engine XXXX. quarter positives growing. those the in should in very be power includes commercial digits offset season. expect and and will distribution quarter. line the industrial commercial capacity for term in units, maintenance new $X.XX overhaul, revenues in longer in pressure segment I and range remain to by about pumping stand-by increased expect others in the demand single Overall, the with with marine the be strong and to billion $X.XX are activities timing throughout vendor takeaway related remanufacturing we the Seasonal be services high and some generators for despite and hurricane minute. we to softening major of that between the outlook billion third second during margins operating we talk and experiencing, However, currently favorable challenges markets, declines orders Permian

pay need are struggle to ahead of their we through our manage am efficiency big that to have recent but challenges quarter, solid. second acquisitions strong I are very on it of generating half inflection has our appears with and to our to sum market And Coastal our pricing pumping on to up, overall, in timely had investments improve shoots a equipment are customers the year. that move still in Now services, remains before started we higher a units pricing starting things confident And recent this were profitability trying second infrastructure complete contract of our short-term average. although distribution positive be to has vendors will dividends Green quarter contributions issues. long-term. results sometime and pressure it In improved. us, balanced, recently stable the Term likely fleet deliveries earning. reaches momentum is appear the that the and will to as inland of and marine schedule, and

favorable of this pressure for a completed a and over but Drilled result slowing well and XXXX inventories maintain quarters we create in and more to only beyond, couple this pause Ultimately, business. pace allow this While the time of cycle the very catch ratability continue pumping could we the will into will new think market. uncompleted a units rise, supply underlying the to in and up. chain near-term the extend outlook

recently the industry in long-term strong world the and oil equipment new over not for it years, projects, field, going pipelines the pumping international will will in changed this oil, has few expenditures, This relatively both fund the U.S. growing E&P strong we And subsea under while generating to per Operator, couple are underinvestment with new announced barrel the from frac operation barge is day shale used create cash forward. have for marine numerous landscape pipeline coupled Additionally, of business. that and proposed, demand liquid world a into also or from Permian is oil our in sheet million construction demand the prepared we unchanged for finally, Exxon sequentially. U.S. in with by last concludes higher to ultimately debt remains only incremental our including more volumes that evidence Plains. transportation role will balance meaningful supply a of translate pressure a mounting X keeping industry-leading Coast our remarks. play for but debt levels Gulf and The flow our shale the acquisitions, sizable and

are ready now take We to questions.

Operator

sir. Thank you,

session. begin We will the now question-and-answer

will go Evercore. ahead. have The Please of from we Jon come Chappell first question

Jonathan Chappell

morning, guys. Thank you. Good

David W. Grzebinski

Jon. morning, Good Hey.

Jonathan Chappell

be think given I a if – of you issues, thought, going can I some lost later maybe orders, maybe infrastructure mean, vendor mean the maybe permanent just the quantification deceleration whereas get with and we revenue the the you're delays bit change potentially D&S to can. than David, little start revenue. new if the backlog could doesn't I just

ordering kind way quantify any has So temporary guidance do issues how much there that to a of range, outlook new to the concerned? new change with near-term maybe as and as timing these is of versus far is

David W. Grzebinski

were actually, vendor temporary the But look, is this in at a it's changes and at all recognition. backlog say – I as that nature we where would to a revenue because actually Yeah. the above of end little our delays first of of almost of little due is bit current quarter. guidance today

– quite So good. It's isn't you it's know business actually bad. isn't –

maintenance I But pause pressure the think we're say new orders. orders activity. are in will we just I seeing pumping this and remanufacturing increase seeing in an a little

with now positive – us if we've bit. I slide think are new all customers this piece let and cycle. delays the it is can But with think temporary maybe recognition little revenue – capital back pumping me pressure being longevity you... had add that's recognition their significant and with go to of to Bill, here, accounting a you our very positive, very, I things the for the right the disciplined out color makes this, vendor little bring a the some of revenue nature

William G. Harvey

Sure. Sure.

are when revenue under if just aspects percentage that's means and the the of be that don't completion. that of front depends would have revenue they're the the it's as is of every hands, at the be quarter, impact new normally shouldn't rules Normally Normally here actually that assume quarter, end don't we of just the one and right. of volatile until creates. on every I – that or the not. that under ship, We our sold. units Jon, a units Now, changes and not shipped there recognition this the people this want it center would There's at are just results completed control marginal end things get of instead afterwards as

We so that out point. aren't it does end as we the what some may quarter. revenue into that until spill that the really of and there's Here, the the business, to realize we any into play, up moves into build that come or a units won't in up conservative. won't over that, that resolved In and spilling until vendor first fourth revenue. we few of being And resolved, quite shipped. are above revenue a is will absorbed costs the wording. that we're recognize quarter have until think be be better And that start delays Again, that September, fixed they're will because be

occur it completion. almost from the shift would So not what be is normally that non-issue accounting. shift in And would a with normally, a percentage

David W. Grzebinski

the But a in come Permian that getting orders, would slowdown again, let new back, and to that's the outlook larger takeaway, which is some blamed I XXXX. but, that's the on some our and And Jon, Look, of me fact, major up including essentially, of in disciplined. said very say customers, one pressure our being are booking customers big of now. customers, they're XXXX pumping that,

I more of a think a as is So good a that well, bullish. pause and probably XXXX very some – still good well. of most of for it And this we're it's temporary in we're and think XXXX and I

Jonathan Chappell

All right. much follow-up That's and And my incredibly helpful. quicker. be David Bill. Thanks, just will

from rectify Just coastal, of section, some or press challenging, year page the the the commentary next release, expected rebound challenging. the in trying outlook the so. a of In but to on

single-digit say a of negative as or When lot pricing, the with next business now more business the margin. low seen rebound are and importantly, the had get to you this profitability So market, business in XX you foreseeable for written just you've within so breakeven I what months? given people back of but the future, think off to a removals this the XX a losing can even the money and capacity or

David W. Grzebinski

retirement coming the of very older pieces of few Absolutely. in. We're seeing inevitable equipment and new equipment

our in contracts we prepared welcome first said As we for a the time, renewed got and higher couple spot change. that's remarks,

XX% start But business we more XX% the really that. towards needs a the to tighten so marching to everything's to get in it to can is before back utilization positive still range, up results. Our little probably

that I tighten is There about retirements out million of going ballast equipment. number and capacity. at X% some But it. look And of you are that million million X there treatment up X%, If the knowledge our happen, some industries at market. barrels probably that of coming, barrels with or in about needs come about looking is to water retiring some to say the X.X the some X.X market is capacity the at to of by should think to that's XX We're or least out years competitors announcements that they're older. seeing capacity

inexorably to And we got at whole towards able spot been lot not these mid-XXs low- in to were. shoots are we get of a off little as we've as So, higher. terms couple going balance. a to of We're contracts green We're marching not utilization. the more. It's take that far have kind a

in the should absolutely, next this is, answer short XX XX months, profitable. to be business the So

Jonathan Chappell

Great. Thanks so David. much,

David W. Grzebinski

Jon. Thanks

Operator

next Stifel. Ben of Nolan And we have

Benjamin Joel Nolan

Hey Thanks. Yeah. guys.

David W. Grzebinski

Good morning.

Benjamin Joel Nolan

Good morning.

following little a to So on bit question. Jon's

of delivered. how you And But now? that kind or is much one of acquisition new You something ATB did of the of that. over of curious cost little I acquisition distressed those you felt business? I it's spent this that guys was $XX or guess, would just maybe in order to million sort quarter. another it can $XX this Is million, of part frame maybe a you a to course as – normal if after fully

David W. Grzebinski

first of It's prices a took vessel up a This just delivery have to a to were pick XXXs in building million to higher of a Look, of steel about year. $XX would us, bottom because to or bottom buy we sister it at the discount. that the the a go order know great we in this two it, It we the the the have invest piece And other at our market you able up. is, market. fits in fleet. new last tend perfectly of opportunity. if now competitor Well, Yeah. were answer vessel probably been the was gone was and this even we

And capacity We ourselves. great excited fleet fits and to about this. into replace so some think we're our it older it'll actually allow us

capital sometimes. it. kind is falls into just place It's about great excited one pretty to of opportunities actually going of we're be this that we So, discipline, with think a those And our at of acquisition. of game of bottom we kind the the normal our It's from the emerge kind before small, but of just of fits bottom. kind buying market relatively it with plan

Benjamin Joel Nolan

trade and And issues tariffs be what helpful. you specifically barge materializes? have it mean – what through in the and movements and David, the is around beaten something maybe you're event a for That's a Okay. of petrochemical then your positioning for business but, little follow-up, might of the thought path, those my maybe maybe implications and the off like that kind company things, how might that this

David W. Grzebinski

to Yeah, a sure. think their petrochemicals prohibits that make of because prices positive it steel some of cost war really would higher of But the or a the us about our little customer's actually is we building for on steel what but expensive, from slows new movement higher. tariffs, kind more clearly the you answer worry Well, the makes barges standpoint, that short much that's the plants down – trade being pipelines load, export the a from lot there market there's essentially the polyethylene, built And the been then of offshore will coming crude. facility put export an particularly Permian and a allow petrochemicals, to loop announcement you crude VLCCs that is and for also the the to see also six Coast recent of petrochemicals, the Gulf export new markets. with that's for are

So if not But terms I'm it's would not of just export the lot the a in sure of that it and and escalated in export chemicals steel ugly we're negotiations. trade not war yet, got or in if bantering a trade kind of war got clearly, of worse, actually pretty be disappointed somehow that. a positive, of we're the but in impinged crude in to

thing a know a we want expensive more don't certainly You to were, build barges but good us. having war is for we actually trade

Benjamin Joel Nolan

thanks. good, right, All

Operator

of Stephens. have Next we Jack Atkins

Jack Atkins

taking question. my for morning, Hi, guys. good Thanks

David W. Grzebinski

Jack. morning. Good Hey

Jack Atkins

And segment sounds back thinking sort better takes side. when a are and these So, businesses of than the of of three we like there ago. the about the were months think marine and I you we D&S going are on about obviously of issues puts guidance, moment it your know consolidated for the vendor what D&S David, kind guess sort to

we to those due bottlenecked? think resolved be XXXX if correctly, when So changes that September, those guidance, like is you earnings you us of vendor much about help it to sounds could of kind I out you the of And, the that of how sort of you Bill, expect heard correct? out in guidance, the if pushed to are XXXX, will, quantify would

William G. Harvey

those quarter, to associated up so the to quarter, that be going that in Remember, XXXX. begin say through that will be resolved those units, I the end completed, we won't When resolved. the partially and Jack. to fourth of push will it's when have some Yeah, so sales with completed fourth that's revenues that units

not won't there a reflects expect again, this of be art spill is some be than – the we quite into XXXX. more we expect. change bit but a And are guidance science And units that So that will reflect that that over related of and of to you the is – it it's very very change things. and It's just reflects that, it's various some as a but know. it change a to increases modest wage strictly modest it is

Jack Atkins

like of Okay. because how That's I seems it issue see right, was them. that is much if one related a to there sort trying get should way quantify that to earnings to to those was expect just specifically back that you at

William G. Harvey

as lost already get far job guys but in is ready, No, what's some of – almost don't – the can't things they earnings, as finish the working we've tremendous to essence aren't did those a sale. happened we we as Yeah. and could done work

Jack Atkins

Yeah.

William G. Harvey

but in sales words the recognize can't other sale is done, we Where wording. better the

Jack Atkins

market, margins just we of incremental of are Okay. as on think all on we impact prices us with you with It about follow-up sort should the makes margin inland market? in sense. incremental labor thinking that the then how help just tight any particularly crews. business, sort some in there given how marine just of my Could inflation recovery excluding anyone that marine surprise wage move sort there's your about be from marine acquisition? side, forward obviously side, it And shouldn't the about you But thinking

David W. Grzebinski

inflation margins had when incremental mariners of little fair, bit you very high. a but raises. a been since the price get as be Jack, are We increases, know labor our we here, years Yeah. couple it's had to

margins So, give raises. those pricing are the on percent. it's good XX-plus But them to incremental

I positive. through So, would as rolls it say, here, pricing be should very

is which in low now inland's as mid-teens, they've ever kind quarter. of much pretty in as been margins the Our business are

going as margin range to been were the mid-XX% the the lower get margin. so would coming to a to say and not business you'll we're that, XX%. recall, I there's of we kind be we've prior for of should peaks normalized no had than in but our So, bottom low- out in reason almost we're high-XXs, back normalized

time I ask margins. pricing will you towards progresses that happen, higher as give will like date as those answer me and march what can't Now, that – you but if we

Jack Atkins

Okay, great. Thank you again, for the time.

David W. Grzebinski

Thanks Jack.

Operator

we Next, Jefferies. of Randy have Giveans

Randy Giveans

Hey, again. guys, thanks

David W. Grzebinski

Hey.

Randy Giveans

Congrats on completing the integration of the Higman and Targa acquisitions there.

we this acquisitions inland the in of those should now year? half behind tank you barge additional back So, expect

David W. Grzebinski

game tell together, then it's our we'll deals you delever. on see were look, something But about inland You we'll But difficult bid love we were game, some is delever away. cash of has flow to I would always happens. the tough times kind thought predicting use there to a predicting and comes cash until many to fell they we just always which another our acquisitions spread. acquisition, can – until we and offer happens, is plan. it know we'll what But been We do something use flow

Randy Giveans

Okay.

So not in extended negotiations currently?

David W. Grzebinski

Yeah. that. more don't Probably I than comment best

Randy Giveans

for so That's guidance looking XQ XXXX to fair. $X.XX question, at your $X.XX The share. per follow-up

two I guess questions. So

what First, on lower on end to the $X.XX then like the will it the XXXX high $X.XX. range, than then the of range? EPS sounds of cause second, XQ it XXXX be And XQ and range be even obviously at EPS $X.XX would

is XQ XXXX XQ the and beyond? do and you why before XXXX in bottom So that kind see is of EPS increases that

David W. Grzebinski

Bill of with talked better the sequential and delivery until to a drop get versus the completion Yeah. about QX. marine's unit we we QX driver that's and Look, accounting of the QX shipped the anything – revenue recognize if QX delivery percentage the units, as units, is and biggest to frac respect from factor in the from can't in was that big – QX

E&P, that's So the would below, I the the subsea, this that is is and feel focused happening with takeaway, positive. it. long-term of should underinvestment it that shale plays, and positive would be international very, very I seeing And it And you be guidance gave, QX build-out in QX again what's I've here. say we're way excited. shale everything is play. very very we hearing just we're ramp-up doesn't positive leading capacity going look, to what's the long-term in this QX. in pipeline quarter This think actually that to I on but for be the know know, But a above

customers their being disciplined capital. are with Our very

are that's the think the the I extending But cycle and right trends making ratable. more headed right, direction. in all it

Randy Giveans

a Okay. the And deliveries the clarify, or XQ just of XQ on would of driver equipment? biggest $X.XX then a to be $X.XX the

William G. Harvey

Yeah.

David W. Grzebinski

to that. anything Yeah, can add you

William G. Harvey

we do to Yeah. if was good can't And then. that, units of one, realize trying that the a tremendous and a It's that it very forget did QX we're and anything, we getting smooth get out. can guys not that just out in QX quarter job not we they it we're

Randy Giveans

make so thanks much. All right, Yeah, well, sense.

David W. Grzebinski

Randy. Thanks

Operator

Next of is Mike Webber Wells Fargo.

Michael Webber

are Good you? Hey. morning, guys. How

David W. Grzebinski

Hey. Mike. Good morning,

William G. Harvey

Very good, Mike.

Michael Webber

it think how and recognition jump of could EBIT, both business rolling I will, move if trying is you basis. roughly you XXXX? the of I moved know is QX on of there one, is end most is income $X.XX And continual from like, the since you down to for that, you guidance kind I'm that of and go through to But cascading extends the line. that engines perpetuate And just average tax-effect into about issue QX then... back curious, D&S I that and know – it's seems kind of you wages $X.XX that if kind but like the implies long annual if into out something I'm and and Bill, it $X.XX it obviously, that but D&S, you transmissions? the mean of think on by guidance operating delay that of it. a you if the mean, the question was XXXX, back from basically earlier a is revenue XX% of that quantify and bottleneck guess to of kind top I you and

William G. Harvey

No.

Michael Webber

you but... how into of ...along your you it we recourse that that is should you you? backlog Do context? would integrity those if does to baked there's think what lot questions, about then days on a How And rolls think those contracts? risk those that flexibility much kind missed of in lines, have delivery the suppliers? of So, delays up those

William G. Harvey

– to process, I a in position when possible. through months, try very of but in answer supply guys believe that they – I together we degree. firm for These orders no we months. the to have complete start – actual we'll And could start being side some in resolution. to numbers if complete hang to think I'll The to done is this of perpetuate Yeah. couple it's had we job was the would I once good delay had the a a going say, is not think work away. September, them orders. do see risk And six are is falling we the there your

in way, perpetuate volatility, guidance be conservative, won't due It things some would is and it unless be not there we realistic lot. the overnight. one build through. about but to some So, will also we're big since wanted to Revenue a – quarter change either but of to We're order. some be and typical don't there's first of supplier million, it – through that one quarter recognition the just delays. with units the And not about not talking this $XX Remember, – have work be things these going We're units. talking about XXXX, fourth a be recognition until it the cents We're to being $XX to will could we're some few adds a but probably frac again, some shipped talking and normally million units here. of shipped. thing revenue

Michael Webber

Right.

Okay.

supplier constraints. indemnification from So you're due not delivery to late your concerned with

William G. Harvey

No.

Michael Webber

Okay. That's helpful.

William G. Harvey

with We no. customers. our hidden very here. closely No, There's work nothing

Michael Webber

some at inflation, to sense a get come I about versus on stacks this annually. is inflation on up. you're think you helpful. cycle, guess, of to a where nominal are think it? as would ahead are context $X.XX It's for cycle? or it I I recovery do wages – last of Like, there's that makes Okay. up, be adjusted sense move last $X.XX, which looking more helpful. to is, us tightening where give segment that we I That's sense you that today of me work through around this if guess, market wages for that just of wage guess the – something the even that or David, hard kind force getting Just your can is

David W. Grzebinski

this. we've isn't necessarily increases say, ahead we little in bad a our our to thing, We're more? to one our a it in wage we little as is I Look, earlier which bit mariners. I but probably these and are been forward, of the increases would would it there pre-emptive. which got before going was pressure probably of on GDP keep we puts ones And competitors, of through Actually, a industry. raises I too, give first Yeah, be cycles just it, and following think more Will normal. pre-empted be think others normal increases. this wages, say is I want kind it'd like the type

Michael Webber

Thanks That's the Okay. guys. All for helpful, right. time.

David W. Grzebinski

Yeah, Mike. thanks. Thanks

Operator

ahead. go from come The of Sterling Kevin next have Securities. Seaport will question we Global Please

Kevin Sterling

you. Thank Good Bill. and David morning,

David W. Grzebinski

morning. good Hey,

William G. Harvey

Kevin. morning, Good

Kevin Sterling

Would you you business still in get challenge coastal into want heading a David, se, to bigger becomes So, business opportunistic, it's be the kind going ATB distressed that per and on to competitor you a guys an know were you side, downward available and this indicated if, of bought a larger if now I in want market? to could possibly continued if fleet became but fleet would you buy in inland, like or you are your grow bigger content this a to trend? larger coastal with size get right coastal the XXXX.

David W. Grzebinski

disciplined deployment. We us. this for would along now pretty We're right inland coastal right would happy just another right perfectly very acquisition, dropped kind do would opportunity our but of if came this. and the asset it. lines, in business in in the capital we're tell I lines right we coastal Well, prefer now you

bid us shore and be deliver little an when when a wouldn't narrows. the in take they sheet our our preference would got of So for say little of come frankly, the and look, offer be But And more. to in spread balance of up the opportunities to higher inland kind preference, kind a business, take I acquisition you terms here it bad longer would a coastal. than

a You've preference coastal acquisition. I would got to our take the acquisition an deals when they now inland would be come. right say But over

Kevin Sterling

you. Got

Switching had we there business. irrational inland Okay. term were what we pricing been Are is else we pricing, we the seeing put of more some become that were in some of guess the term, past, a their that? of a keep pricing. the seeing some of competitor rational the day, inland obviously, the sloppy bit on strong are improve an end demand, at and irrational with year versus to practices Outside equipment pricing little out I other markets? of main little ago? seeing seeing both rationale the spot and in pricing. just spot And brought In gears a driving more competitor even

David W. Grzebinski

get we there's XX-plus discipline. Look, the people and happens in delays little that Yeah. are little going The we happening into now drop a seeing they'll all they like right as months. the every look some even then persistent short We're more get But for fall, answer a busier. utilization, be and also, little And time. summer, is, lock yes. tighter head we're a to

we're and pretty already where So, from utilization only going we're that at tight. get is would tighter I say to

coming had to is Supply and to move as make long up. had be been rates where as we market long not with to as it. utilization retirements. the we with our the look, growth demand becoming And to had have are board continue got tighten. on continue the to downturn. to needs it cycle painful is of and our We've needed. we kind can't a an they've liquids to it's online There more we It's low And we that competitors and seeing of disciplined So the happen. a for this which, got companies disciplined There lot is industry as across very new some we've need builds. is plants as more about and of up demand a be just of Look, then, system. more the continued all these competitors, lot and and

had hoped, as So better. we everything little a moving is and if not,

Kevin Sterling

for Take okay. you, Thanks thoughts today. care. Got your

David W. Grzebinski

right. All Kevin. Thanks,

William G. Harvey

Thanks, Kevin.

Operator

Coker Palmer. & with David we Next, have Beard

David Earl Beard

Hi, good morning, gentlemen.

David W. Grzebinski

Hi David.

David Earl Beard

on now up thought times, to earnings argue of bigger have we're guys plus base. then, XXXX, you picture you per about but If in minus of but three-fold. plus of variability your up been jumped I'll know asked, just ask just $X.XX kind a have jumped were I it $X.XX back the in look couple earnings. sales And or guidance I seems kind variability. it on Obviously I'll you lot relative a could examples. share questions of X.X $X.XX XQ call And $X.XX minus carry back a question or Obviously

guess from really one-time You you think it you the really got a we Do recognition there I or sort in items think couple know, a in visibility, again of variability this the just kind a – in increase an as been grown bigger picture impact. thoughts – is do cents has of decrease increase company that? variability, revenue of on a or couple the is has

David W. Grzebinski

say, you're Stevenson look, give when Stewart integrating like and Yeah. more I little cushion. & company would a Higman, you yourself a

there get the but we and will predictability us with – integrated is revenue go and As recognition. further some up variability for

got impacts that that – said, you. to ship but October, if you are moved several if supposed to they in ship units Bill you've September, a As

is of too percentage to got a little try it and yourself integrations a to what that. businesses but our part So it you revenue accountants predict have But give we do is. added the recognition to ability, the this equation unfortunately in it variability completion more by removing is hard, big room what make and

of So size we out that inherently bumped we the give. range to

David Earl Beard

acquisition we trend sense. looking the at didn't that's integration And makes helpful. variability variability. guidance just That appreciate probably No, just then that and

So appreciate it.

David W. Grzebinski

Dave. right. Thanks All

Operator

this at Yeah, time...

Unknown Speaker

for Hey Mike. more we have time one caller. Mike,

Operator

caller that question the And Lynch. come Merrill from of sir. problem, Ken or No will Hoexter

Ken Hoexter

for Hey, squeezing me in. great. Thanks

following Just the new of up pricing contracts. on Kevin's one on pace a questions, just quick just

flat that Dave? positive rates smoothing of there, But You year-over-year just out noted spot any of were digits. kind sequentially indication double commentary up something still your is given

David W. Grzebinski

pretty spot healthily first a I part in contract pause a mean, they utilization in forward jumped had No, up and you little moving think with months, rates going breather. quick move year the will had the the took with we summer of pretty think in here little up then see a we market I so spot rates. rates the I that

had these going we as of come again. the delays, of months lock heading to you're yeah, see say summer I up would could think these spot with out easier pricing it's all I some of in leads the moving term And and higher in from important and we this bit renewing anticipated it very right little our as that's direction a we quarter that saw what's contracts to is and perspective. positive and

Ken Hoexter

your, for just impacts it And so that comps us don't or last go I you or lock the David. the you Bill, hurricanes August-September the period? a Thanks Did as year. of a through our tougher but it more you follow-up. cause for Okay. just was tightening easier shutdowns quick of remind know can and that

David W. Grzebinski

but tightening the tightness. when on hurricane, changed verge were up and the the hurricane the a market little got the kind where such the demand of started of process everybody kind anyway and was it bit, there post-hurricane, a that hurricane, short equipment recognizing Well, market the without a mindset catch-up just was little pent-up happen, of we of lot the that in terms because but of was of and of

Ken Hoexter

Helpful. Thanks guys. time. Appreciate the

David W. Grzebinski

Thanks Ken.

Operator

Holcomb Yeah. for Again, conference would now to remarks, any closing this turn back question-and-answer Mr. concludes like sir. I over call to Eric the session. our

Eric Holcomb

thank in right, thank your the Mike in you, for participating today. call you for and interest and every All one Kirby

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

David W. Grzebinski

Thank you.

Company Representative

Thank you, Bill.

Operator

gentlemen everyone. for great now Thank your At have and call you conference day. this morning. is a disconnect this you may concluded. you, All thank time, right. lines. And time also your Take we Again, care the