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KEX Kirby

Participants
Eric Holcomb Vice President-Investor Relations
David Grzebinski President and Chief Executive Officer
Bill Harvey Executive Vice President and Chief Financial Officer
Jack Atkins Stephens
Michael Webber Webber Research
Randy Giveans Jefferies
Jon Chappell Evercore ISI
Greg Lewis BTIG
Sanjay Ramaswamy Bank of America
Call transcript
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Operator

Good morning, and welcome to the Kirby Corporation 2020 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Eric Holcomb, Kirby's Vice President of Investor Relations. Please go ahead.

Eric Holcomb

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

in the financial of the included non-GAAP this we refer earnings may measures Reconciliations During our comparable to certain financial measures Relations and measures. available to most under release conference call, non-GAAP directly GAAP or in Financials. are adjusted our on press financial section the are also Investor website

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

and company's and XX, risks the actual found December in now call David. of related from conditions and of involve differ XX-K materially a XX-Q. uncertainties, pandemic anticipated be factors quarterly on including ended governments various global factors, regional Form year Form statements COVID-XX over businesses. could the and those the market results risk these as the the filings result and the response on I'll of for our impact and Kirby's can subsequent XXXX turn of list to Forward-looking A

David Grzebinski

COVID-XX $X.XX and and related morning, the products of quarter's Eric, share. per announced for impacted and earnings everyone. demand good quarter The by you, were XXXX Thank Earlier today reductions third we services. Kirby's results in significantly

aggressively a helped marine and and the which and inland company, revenue. barge margins profitability also reduce by utilization decline to in season, record sequential operations. affected and the kept solid Across negatively disrupted Our business continue has services significantly despite year-on-year improve which costs, was material Marine Transportation distribution hurricane we our

a earnings minutes. discuss benefited rate, Bill favorable from tax a Our in which few overall also will

products, volumes of demand at Looking coastal for markets Marine reduced and refined Transportation, crude oil remain segments. inland depressed. and experienced as In our black transportation the

as economy XX% challenged crack quarter, weak Although third high recover Petrochemicals improved modestly chemical below previous demand, remained moves. requirements pricing, compared refiners spot were during These and levels of XX%. only contributed only improved in slightly utilization of limited lower market low the average to the the inland year by five products, averaged plant and to black quarter including utilization to sequentially, oil for began spreads. but XX% and Refinery refinery particularly crude utilization and XXXX. experienced challenging refined conditions across factors coastal, and inventories XXXX

marine affected financial by results across also were weather, Gulf Our and and severe barge which Coast. the impacted utilization Coast our East operations

the or severe people In the emerged. to XX% started low Distribution our in our and there results and the certain of across storms including These quarter, COVID-XX and in activity and as hurricanes major there impact delays Thankfully, through employees, in were closures Louisiana. little oilfield Lockdowns in and economy coastal one of docks. third operations well plants, as our our weather fleet storms, tropical recover. mid-XX% made range our or the in equipment in facilities. business quarter expertise U.S. improved landfall the quarter. some the range prolonged the our utilization our XX at professionalism barge across to effort damage Texas storm, the inland the as and and average including in of During the three third Overall, all in our of customers' and no disruptions, heart named key to resulted some was Services, and of significant which eased resulted waterways the

and and In total, increased for on-highway, fleet cost XX% returned sequentially, power the truck slightly increased and sequentially operating above generation experienced from Importantly, reduction breakeven. on-highway businesses also as In initiatives. demand to reopen. the and economy to municipal income started and however, revenue benefited at as depressed Distribution In backup continued we repairs In on we Services and improved facilities industrial, Repair our at people tourist generation, installations limit new to power of ordered customers major as requested service. travel and major U.S. improved buses, activity improved destinations approximately and miles systems, remain resumed as public parts fleet X%. transportation. power activity major for commercial equipment

in the started came also frac Gulf recover year. second revenues of utilization sequentially, to power engine generation but last in of during bottom lower the and Active by the marine gas to improvement activity which believed business. to end crews, activity they repair, XX in which to hurricanes quarter remanufacturing major from to over quarter, fleet the resulted in frac bounced are increased U.S. oil levels remained bottomed off shut the oil solid still and quarter. wells from the declined In back service were Coast. as primarily have parts We benefited This third market, due our due the the and second some In the down increased throughout sales, activity and XXX the significantly gas online. XXX during higher but demand quarter, activity around approximately are the along

turn sheet. Harvey moments, quarter. outlook. to pressure the balance few some the But I'll new delivered the over units before results Additionally, environmentally-friendly quarter to segment I In do, talk our pumping and I'll Bill call our a we discuss about during third

Bill Harvey

XX.X%. the David, XXXX morning, third $XXX.X everyone. Compared an quarter, income In Thank $XX.X operating were Marine $XX the second with the an Transportation Marine due to quarter. margin and barge operating fuel reduced lower XXXX inland primarily million revenues utilization, good revenues million. million of income to quarter, you, and operating and impact rebuilds or and are $XX.X declined during hurricanes and reductions coastal the XX% The of of million declined

reductions helped impact limit cost operating on aggressive the margin. However, to

term quarter during and XXs XX% in or year down single crude products, Long-term time approximately marine longer refined quarter, charters business year-on-year segment a in those were revenue approximately revenue range. low of with XX% oil contracts of During barge inland XX% an one the and the Spot inland contributed the sequentially XX% with average or approximately the contributed of third and of pricing XX% that affreightment. contracts most with had rates, pressure. Term experiencing from from declined low market black contracts contracts however, the the digits. utilization renewed

During but the in tropical market the range, utilization contracts from down reduced the result as in during operating rates efficiencies. sequentially, black mid-XXs spot the in business reduced mid-XXs but and lower limited that demand in was term market in the Gulf were inland slightly barge quarter spot coastal of third Atlantic in for lower be Mexico the of business, and mid-teens. delays considerable refined In the quarter, a Hurricanes storms in mid-single continue in resulted the the the to range margin and the opportunities renewed products transportation. stable were oil was and Average Overall, digits. generally quarter, XXXX.

During barge the posted the website. term under are call the as third charters. XX%, projections third XX% our were of Coastal's the reconciliation With approximately of fleet, mid-single quarter, was quarter was operating which well quarter on revenues contracts our term included the tank XXXX of presentation in in to for percentage remainder coastal changes as chart digits. our of respect margin negative the a in approximately third earnings in the

quarter. primarily with operating the improvement for Revenues of Compared measures million. well reduction $XX.X quarter, XXXX the to power third generation cost second and the an activity quarter million lockdowns Distribution second of to is $XXX XX% due levels that as to charges the were and industrial, income economy as recover Moving eased. some income. commercial operating revenues sectors the in with income improved $X.X improvement in on-highway in sequential sequentially In onetime and occurred Services. as improved the operating million in a absence started to The and

lows utilization increased power due down hurricanes result modest well, repair oil generation engine as and Coast. business gas, was increased reduced and earnings in the from experience rental but as improved experienced to fleet a As solid along quarter businesses our of U.S. the demand In parts frac increases marine sequentially demand. and in revenues sales. the activity the business The and Gulf continued service to second sequentially experienced

business manufacturing and customers. major pumping environmentally-friendly oilfield pressure remanufacturing for units benefited sale the the well, As of orders from

During the margin XX% businesses and The approximately mid-single the businesses in and of margin quarter, low operating and digits. an industrial operating represented revenue represented double the digits. of gas-related third a had segment segment commercial in the negative XX% revenue oil and approximately had

sheet. balance the Turning to

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

enabling quarter, $XXX.X During debt had the of operations cash repayments flow from strong million, of $XX million. we

end quarter, the free have to use $XX.X of fund solid Since available end $XXX and the cash of generate cash of total we to the flow We hand million. quarter, capital of had we on million. the flow. also liquidity At expenditures a cash continued

of debt during billion. As week, to spending trend was fourth this our $X.XX billion down total is the expected to continue Capital quarter. $X.XX

million, capital XX% full reduction approximately represents of $XXX XXXX. the which we For to year, expect a compared expenditures

we expect as the disclosed. free includes Cares tax in generate cash As to Act, refunds of million $XXX to a result, previously $XXX which flow million,

like to quickly taxes. Before close, I'd income I address

the During legislation. benefit allowed rate years a higher to prior were of the as third carried which operating net tax by back losses, effective an quarter, tax Act we had result as CARES

the turn also back low tax to to call discuss We outlook David expect have the our over fourth quarter for I'll now fourth to rate. quarter. the a

David Grzebinski

for last Thank very Kirby. have you, times Bill. most been months challenging including six The everyone,

higher was margins capacity the history. to was Activity increments. industrial were some Services, to high marine and and contracts XXXX, approaching In and on coastal, COVID-XX backup has in percentage for around demand commercial oil levels shut down renewing power were not strongest single the Before which path Operating a gas, were Even with recorded was declines since low some on strong, on the we business throughout is strong economy, In businesses expectations struggled signs world, utilization improving. seen was barge lows, saying increasing showing XX%. our rates company. from a we track. and sector to with and demand Since It is and showing year. will environmentally-friendly back and levels for steep is is goes the question economy Kirby's improved bottomed, double-digit across equipment. XXXX. and without generation. levels and in utilization gradual and improvement have activity there and inland tightening our believe increasing economies Distribution will exceed It at in growing oil very Kirby's Refinery see double-digit of especially were gas clear life. the the the activity plant is the and get chemical significantly unprecedented next when of up recovery occurred have our signs April economy biggest pressure then, respect mind later everyone's recover of the with and year, pumping pricing

The the difficult COVID is fourth seasonality second refinery However, with continued starting relatively believe and low range pace a size the quarter wave to this the and mid-XX% recovery negatively in of are be the of to of barge appear. with will risk economic slow, recovery utilization impacted potential We hovering and results slope uncertain. highly our by utilization. of

this rebounds. is demand when as we However, believe recover our said demand-driven downturn we've and before, utilization will

As In mitigated capital of better cost the and is the in control, focused ahead XXXX. meantime, virus in discipline, on months, very reduction. debt the intend we are days are to coming remain generation we impact the cash optimistic

improvement economic business-by-business to during provided not me through inland grind slight COVID-XX continues in expect new the are Let In the thoughts. lockdowns and run barge utilization, implemented. related market, quarter, activity fourth to some slowly higher we

down We yet in Coast, hurricanes Gulf storm the early this week. of notably recover refinery River, and recent was include the quarter which powerful as reopening important and in are throughout and which also and The another tows plants of from slowly to also end starting waterway. benefit storm October, third is to Illinois this along move expect shut October by chemical the a out

pressure remain on refined absence is and the remain inland a with muted, to economic material market oil crude for demand pricing. that will challenging However, products in expected the expectations of with recovery and

oil with will onset seasonal inland affect profitability as efficiencies operating the compared Additionally, income and market we of down the levels products fourth operating to the the contracts anticipate are demand for the realized. increased of spot remain flat black and to recovery low demand Overall, to coastal, in revenues delays a meaning will for expected which until be third in on affreightment. winter reduced near-term slightly weather, expected quarter, quarter. In at is refined and normal is the

end with revenues term represented However, to remain of contracts, of exposure expected stable the to prior XX% our the year. which minimal approximately coastal renewal are

As delays. well, hurricane-related modestly coastal's results are benefit from expected reduced to

in and marine harvest during and season. reduced remain as fleet equipment season service and limited operating the to fourth during repair and for As In Services, for gas and will a power expected hurricane oil the third and result, new reductions we to dry benefited result market, demand commercial the and flat we we modestly will during is major But in seasonality on-highway to income. In In in expect we parts, likely overhauls cargo quarter, revenue decline operating to be economy, fourth be in And the Distribution generation, parts new improved expect normal revenues quarter. utilization and engines marine. repair of rental fourth expect anticipate and service pumping marine the sequential demand is in ends. business, the compared margin in the pressure quarter. and coastal's quarter industrial from an power particularly generation

has and to activity continued in customer from oilfield prices exhaustion budget during potential second commodity quarter spending fourth reduced modestly levels, quarter. result are E&P Although low recovered expected the

flow well, capacity Kirby's remains of Services and earnings D&S oil significant quarter Nonetheless, reducing the as rationalize continue and expect margins the the further their but capital, and we the As third and pressure difficult the modestly Distribution many revenues third the difficult, free customers solid costs backdrop. our return in need to operating little was contain pumping will and conclusion, amount a resulted a demand frac likely requires because gas near-term across will In our will quarter. Overall, despite products a decline to expect for compared small very spare services. of to fleets, quarter, contribute to positive loss. cash the segment we efforts business during industry

also liquidity pre-COVID Transportation build will from this strong segment. demand no be free services – enabled Although has in $XXX sheet to million times. and we D&S, generated provider increased slightly service. and to we Kirby's businesses, demand for and inland to is contained. grind In is drive pressure remains materializes, down; the new for leading sequentially In the is power a position expected and equipment on-highway check, economy new material we remanufacturing us barge Kirby's lower which expect our environmentally-friendly the for D&S balance planned products strong construction near-term XXXX, challenges, and leading with has will a demand which In quarter, will to in we increased bottomed incremental below parts coastal, on generation of the COVID-XX for a to which activity we flat inland, have economy is capacity year-to-date, flow and Despite drive flat. anticipate services earnings levels. and fourth perspective, occur believe the Kirby significant with coastal. provided in confident in our uncertain in across the higher, meantime, cash position marine once of these a beginning to is slightly for new economy oilfield, well and are In down; limited as improvement overall pumping the Supply Marine remains cash recover begin

debt. the to Operator, ready to prepared We trend $XXX strong for of quarter in continue expect our to $XXX remarks. direct this million flow we the reducing this cash We're which will will generating year, questions. with fourth full now concludes us free take million

Operator

of Stephens. question Atkins And Instructions] first come from [Operator the from our will line Jack

may begin. You

David Grzebinski

there? you Jack,

Jack Atkins

Yes. David, you hear can me okay?

David Grzebinski

morning. you. got Good We Yes.

Jack Atkins

morning. good Yes,

my taking about that. Sorry for questions. Thanks

kind is customers' you backdrop trends just demand industrial sort you So really refineries more customer chemicals? next that's David, up. demand sort look ultimately of inland. activity – here six else going there we need Miles maybe Or months? on about more of come the start Do has within of we out customers, to and sort us over broadly? that out from the impacting to both your what's something see with economy its help driven of more do volumes drive could driving seeing think trough. of as could your maybe of if we We're the picked

David Grzebinski

No, I there. in it's think former your alternatives the

Let little here. give context you a me just

starting their And Diesel's with it's we that. all gasoline's people just that's it's jet out think driven, refineries. really are products think I the enough that. back. of the is is pre-COVID, to mid-XXs, The pretty to coming the it to XX% the slow And and below too their I still big has passenger climb not are high-XX% fuel crank look across to XX%. in utilization our utilization, at bottom right If utilization, to utilization in down dipped XXs. you was when we maybe then little Refinery to refinery high it's think XX.X% the up but up, we miles activity. driving. COVID, almost range. At why believe they look the it and utilization Jet of say is our driving inland off, system, diesel line going it's problems. about Pre-summer miles But it fuel at for to but in way bit. what And XX%, back the do back robust. driven, the get mid- utility and and got to It's of did in be dropped about see a we you were going on inland, up now of off. XX%, gotten XX% the they off last utilization to bounced out about economic refineries of I moved It's couple refiners – one demand bottomed. a on? demand We're precise. out Yes, weeks

It's continued, you rise. to and it's I can traffic mean And they And go world at even don't up. look and bus pre-COVID cases city in about can example, look global know seeing you're website this and that the really certainly up. we track week, as TomTom. to what's is traffic Houston levels cities. as the whether has in see back even congestion. little online, I as But better I a every an pretty to is see to can And still that which you outbreak the car congestion come rise. it can happening, how but any you've much gone traffic starting open congestion, Kirby levels. at You really global And use track not we're we're carefully.

Our country We're in the for business, X/X we're the and offices, offices and locations. rotating cautious probably We've in but them of people about our got around in smart, a – we've got XX X/X doing open to we're about way. it only out.

is the States. that think across United I phenomena occurring

getting you're So not seen. it's again, the normally crush people full that you've but driving

think it's to for back so I when how of them. on driven, than and to much being any taking biggest I refiners long So miles path I It's hope. they're slower vehicle the really long bad, XXs it's grind in that's just With that at itself think into And yet I up. just taking even look into spreads, and think just refinery disappointment jets and and to us up. their atrocious. this tough crack would It's drive not go you just But it's of a think that going while. how probably is the a passenger take between XXs. the to enough miles the flown, is utilization up It's

they're and that XXs, up chemicals, in utilization jacking fast seen as terms low utilization come that's the what's in still juggling probably to they and On their as money to in better XXs check. where keeping losing the they're their And run. we've utilization, basically, back were is in high little utilization. they they harder XXs the low of a because mid-XXs low can running So down without their But refineries. than

So little that's come better. back a

a of about that's think demand and I export chemicals. re-emergent Asian

we'll So see.

downturn is basically from we versus the supply-driven downturn said, that had Jack, As we've demand-driven XXXX this XXXX. through a

it about more we're So all. a constructive little

Jack Atkins

is Thank David. follow-up question. value. below that guess tangible color. book for trading Okay, my And I The of you stock for sort maybe

their flow. Because think cash able thinking You're I towards you At you delever. the know point profitable, back to stock? business. like buy compelling guys you to you're goal is buying begin generating depreciated acquire I maybe valuation, opportunity And value. as your replacement what to historically, should to got think outlook, we trading to guys to that being businesses current allocate own substantial this about your pretty I've view your free a below relative capital at long-term

of we how about should valuation current light in think So here? that your

David Grzebinski

Yes.

we I our the both strongest discussion. We Clearly, earnings that's about think our had industry, right? and And just view meeting. earnings things Look, quite thinking way our Board view. back, potential. business it part in We KDS in in strong. the you're are, our of player of we're leverage it's exactly when the come our the in Marine

right. you're So

has little I But think cautious, more stronger. a metrics book. value delevering this I in believe view, us at credit do time. great to incredible a a tangible uncertainty little clearly, is an Kirby's this our below is, our get stock we've been and

want commit something carefully. we anything, I don't but to look it's very certainly at So to

Jack Atkins

for Okay. Great. Thank the time. you

Operator

from you. Thank the will question line Research. our of Webber come Webber Michael And from next

You may begin.

Michael Webber

good Yes, morning.

David Grzebinski

morning, Hey, good Michael.

Michael Webber

into – start of a haven't been on kind pretty we've – you I'm a broad first, larger Yes, guys going at just at growth kind But the writing more a level the I'm expected. that of been area. trajectory setting taking wanted different post for was start that's expansive was maybe it in it what of decarbonization of maybe be of kind all internally, with push. looks of is was business their number And contemplating cycle wondering it's a off of might And – I just are COVID the businesses of different seen number what a resumption to was, thought about have demand that than some when how to that the do margins different what got post I And in? you I of trends? think frac with than the right COVID agree mean, I'm people maybe XXXX looks long-term maybe heading profile ago? not trends long-term pending a themes of profile then be into XXXX demand you in players black side, to might a oil degree think curious it slow kind say, those normalcy has mix mid-XX% most the heading to cycle of a just tap and it high-level to and position growth – Board most to like? ease. COVID? XX COVID the and IOCs recovery be I multiple of years during curious, would down kind that bit seen how than enough question. it's kind guess, was the I a one to and longer really obviously, the year of was than really Because you growth we garner can tough COVID it you key or wall over

David Grzebinski

Group O'Neil, major integrated inland major an and committees some and decarbonization big that's can customers Christian I the decarbonization question, the gaining on think is of We're Michael. the and do in on customers that momentum. with are our there, not I on chemical trend and President it's space. how – we integrated myself our No, our trend clearly, Yes. the ESG both excellent with different customers mean, working of Marine only

to demand this products it's be going refined going decarbonization. think to to is some a terms towards clearly, path destruction on while destruction, we play In I as demand But continue out. there take down total of its

the grow is bottom underdeveloped energy world the still world. – you're going So to living as the need expand The continues its energy continues line to standards. in usage

throughout that space more and units S&S, more also electric actually look We're our marine that's – Kirby, years frac. on the probably leader. carbon-reducing working in some We're electrification are and very five building market if projects good. We in frac doing nice you been We've both for now. at

move of think a provide to carbon-friendly best barging some I and to the transportation do is on mode going way. we're projects. probably pivot think I

at moving you you trucking, per our an magnitude If at terms probably rail, order ton if XX% And mile of look better. carbon probably we're in of versus footprint look better we're product.

if choice mode move. anything, of to be barging the should So

Michael Webber

– there industry that D&S business whether And itself kind know in the a something concept that, I'm I'm Yes. growth to maybe as business ammonia Is wondering come I something Is your specifically just fleet it's the nuclear There's this footprint? you've your you high diversified maybe a mix window Stevenson you Stewart kind a dressing. I of towards are gradually a it's maybe sectors. all question or book and terms future. tangible & can I customer ways you But of of I guess ramp services to ways the where off different for already. thinking of pivoting easy if got pivot guess, for something shift long-term in shift the to the methanol base, – higher of know and manifest just that and/or you volumes? more kind something – where – tangibly, don't

David Grzebinski

committees as moved and methanol and these of the Yes alternate fuels, well, we on, more moved United States anybody in is Yes. States ammonia, are mentioned them, and else. probably we In the that probably in short than I than you anybody more ammonia methanol else, two the answer. Chris United

those But look, alternative So great complex. that's from fuels our be would standpoint.

dangerous the most it's we handling carry. products You of start one ammonia,

looking pivot a we be NDAs, to wind. we're where it and wind I as we also we're support would choice, our under our but support tough. at got expertise to careful So type offshore couple because that be that in could tell things you, fuel marine can

precisely a good generate we've business. for There's of big world, talk us Nuclear forward interesting, some the of the and we and exposure the fuels lots got projects of obviously. is ammonia. at changing So we're have that bring nuclear and methanol and to that looking But hydrogen, are correct that two do can alternative revenue. you're

on I think energy. Yes. regularly. nuclear is a I carbon-free to Europe, we power it's ways you the it your lot Anyway, reason, though, is this interesting. read of one stuff space, and but know very true get against for some published

So for that. thank you

Michael Webber

You kind that. interesting nexus for already an of have

degree just that maybe wondering that what growth So ago. ultimately have about been opportunities quarters I'm creates couple talking of a wouldn't to you

can on I it. definitely up follow So

– back maybe you that? one, look the Just it really just to really I guess, book look on? buying future, Would And would X.X guess, on I tangible buybacks. a I going to par an pretty be think guys at. close or what to tangible it new barge are EBITDA, of I realistic at still focused I how given in XX uncertain how north times would if the a guess earlier is valuation, to leverage about question, be guys at we be terms of and profile you was that still near-term. metric two then trading be think to you'd – But you – would book the guess, in times valuation on, are tend

So it's creating if about whereas you're be weight in for think giving premium. you still asset, be of terms U.S. would guys value, going the a price hard credit, like replacement, to buying still is any if asset it you equity that that's – credit of

leaning to think that into realistic So now? right is where be would it you I

David Grzebinski

of to think pretty towards States, inflation. inflationary an what but our probably know to is I debt out massive that we're headed future asset Fed to out tools companies I of off attractive on believe is the actually debt one stimulus trying interim, environment. has, we expensive we on hard think from a very as I an value Look, value. use said, value but is, It's That the look don't sure. it stock as we're that's paying massive United the we price really not No. deficit in – the good growing going now at focused is us. DCF. all when the in much, get figure States. for of going we're with book have I that's a things certainly dollars cheap in of reduction the in asset in it's Yes. base we're things, indication And United the – tangible right we the don't the do given the And to deficits one said, ways

pretty So inflation high environments. – inflationary typically Kirby well has in done

Bill Harvey

as well last December. from fourth which the generate our require level reduction at our we level – was million. cash liquidity over flow it net debt – covered, $XXX David's debt to would mode, the lower in debt substantial And than we Mike, And expect quarter,

time credit cash the company. reduce metrics we we'll that need the investment believe manage see materially we sure do grade, – we we'll to to debt the time the So is not need we And substantial flow remain extensive. that but to in make

Michael Webber

a I your That’s appreciate guys. Okay. fair. time Thanks lot.

David Grzebinski

Thank Mike. you,

Operator

you. Thank

the Giveans from Jefferies. Randy come Our next question from line of will

You may begin.

Randy Giveans

going? How was it

David Grzebinski

Very good. How you Randy? are

Randy Giveans

all right. Doing

guided So in to last D&S improving levels. quarterly quarter on the you remaining call, the but breakeven below third

were you small here. clearly a However, profit turn to able

beat? drove I what And those following then, maybe guess quarterly to this how lower-than-expected Or you it guess, revenue? it times? Was incremental cost costs? could recover reductions, or of good I least do So expect was normal kind in operating high at income

David Grzebinski

expected. our we than are was little breakeven being One, thought. through Randy, there above question. Good savings better kind of we than was third stronger – would a And came say I cost factors. two quarter Yes.

were quarter inventory, can really a to so we ESG, is was working able that Then during they team and not you everything almost but we had second now. been I theme – The complete, going were they – in we is ship that. and had good. would on to after were mean, have it's that basically ship ESG-friendly this able some the environmentally frac as the expect thing environment, we units Our in really

All seems very one was that the we some take some our product well, customers, our able units we and be reduction, of to carbon customers, everybody and expertise of to our – pressure third and had customers some focused had in marine in that and frankly, pumping on too, quarter.

So right? helped results. that That helped, in quarterly

I are we thinking think question returns and I to firmly XXXX profitability. your believe what it broader probably about in it for gets D&S, is, to

little pretty trend on. ESG-friendly in lot I around are do and the said, – daily. That more U.S. of but of developing that it's a lot specific I growth old fast, the of think answer, of economy slower. because but & answer, the I the industrial grinding more have going definitely we I out take. the economic electrification economy, had is believe ESG. sectors long D&S products magnitude be its going side and the to a a profitable on at economy can't a that We Stevenson. of don't where a U.S. depends mentioned in economy – we I Stewart better have rebounding This we magnitude know We're products XXXX. It's just I in Certain And just in goes. wish how that. of answer we'll

I as you right answer, too we'll better XXXX. just give So wish a I now at Randy. could see. look uncertain It's we little a

Randy Giveans

fair. costs of a That's lot is stripping variable. the been I'm relatively And out assuming you've

few maybe Bill, I I ramp for So the all certainly guess, that item line the has business tax that right? that last kind map, the been up quarters. to you bring the does can has over of guess return, rate back if operations, been

for right, that for XXXX So use benefit should million expense the or what in third XQ we $X.X what benefit then purposes, modeling tax quarter? quarterly and drove And tax of XXXX? kind maybe

Bill Harvey

that again, And if Yes. X%, do to be cash And than – Prospectively tax of it's had you benefit. get tax I less – It's course, noise, of X% again. XX%. Again, CARES what some a it. refunds noise look any little get result was XX% tax in good you the are back NOLs years our we tax so it had guided – a – refunds. Act, tax that use We the rate Act, and versus question and in we against remember go affects and CARES know, No, to as a actually when there, XX% can the rate. pickup Randy, the of we apply with rate. or for nature noise. that, use fine. get way this that tax noise there's actually if a maybe There's associated we – cash. you at of we the think We just to that year, have And reasons another below it's you'll – some around actually the part Randy,

not item and I you'll – eventually, volatility, this there noncash ways, or the for trend to fine if but year, Randy, some a will less So use the next it's be and you X% is in XX%. think

lower XX%, tax XXXX do we because again, the than Next benefit. lower to some year be year though, have us – will does and provide

Randy Giveans

is And XQ? just that Sure. year for X%, or clarify for the that then to full

Bill Harvey

sorry. should I No, have No, said that, quarter. the fourth

Randy Giveans

Okay.

will there There on will So loss? tax item? line a be be expense that

Bill Harvey

around there's could But and be but moving it many – believe at It X. parts. so it's I breakeven. that, so. be should It very very, be it again, could could be or difficult,

Randy Giveans

I if fair. kind something That's $X.X the just didn't anything. million on you know of was or were duplicating planning

Bill Harvey

a quarter, the And it, in had fact, that. $X.XX we if you about benefit $X.XX because of third look to at for

Randy Giveans

fourth Good hey, Yes. the again thanks quarter. luck Well, Got in it. time. the for

David Grzebinski

Okay. Thanks Randy.

Operator

you. Thank

Our will ahead. line Jon of come Evercore Please the Chappell question from from next go ISI.

Jon Chappell

morning, Good everybody.

David Grzebinski

morning, good Jon. Hey,

Jon Chappell

to end other bottom. to fire, and recovering? Are on the aggressively up when think the off two and kind complete end there to David, demand needing we petrochemicals the that wanted start Or of side. just pressuring any is and are plants? utilization of other it But sense. I the markets I catch on these autos conceptually, makes markets industries bigger about utilization the being autos refinery rebounding low that is think the function are And of being housing a housing petchem at are

David Grzebinski

Yes.

latter. I been think okay. it's Petchems have the

steady. that Ammonia manufacturing. as I I an products methanol, products use stayed we've pleased tire goes Pressure been think which stayed pressure like pretty butadiene, steady. example, into product is about example, a for pretty – pressure and some things

COVID, there on. it down, no because shut real going was During vehicle they manufacturing

see for up. I think start as to demand you'll go come tires that back

spots there blend So go stocks fuel whatnot. some the in and but bright some of petrochemicals, volumes are into petchem

was third all an in in shut full our hard. And just open aren't painful. Laura, a come area. Charles for back really Lake The that's Hurricane one are Like other thing trying of still There really They're down Charles is hurricanes didn't for plants plants still hit some Lake help quarter. example, that the up. And month. petchem to volumes customers' at the

petchem a that, some refinery of the blends as into of refineries been do interact petchem in But complex. So go the there's hard stocks but and the because noise one well, has and – as blend hit whatnot. lot into with go they right, not another, they

they So linked. are somewhat

Jon Chappell

for to the you reset XXXX? kind of utilization Okay. is in, it see see of as tying going time the eyes the renewals? Or maybe to XQ, not nine see but in either. stabilize and the And margin know then term recovery the XQ more margins XX the have going spot can With through you to XX%, outlook this lower utilization take rates lumpy, months? term soon back contracts that light smooth see aggressive entirely because of we they're can expansion help and you're of about next we completely to kind a contract not on think for as a us in to in I part early drop that kind precipitous can contracts some your

David Grzebinski

the in the Yes. us positive mid-XXs to I needs in kind pricing be low momentum with XXs. pricing heard say you've – it – utilization well, to get of

see the market. continuing pressure pricing in are spot to We

a a – term from contract down pricing, people sequentially which to better. think XX% down down more roughly in that were versus more There little was contracts the Term we and I a mid-single Bill going like numbers about term think spot. quarter, XX% about year have and what's happen longer some in was spot the ago. there gave – digits, is outlook pricing renewals future the probably

think we'll I fourth in on pressure see the still. pricing quarter

the I margins it's – it get about to feel need real think I seeing confident into I to it's just bottomed range pick as and are that XX% starting going up. We other direction. back we utilization before said,

like to I pat say think a see to this a hate a I XXXX sounds some lot reverses, When for in depends we're now. that too predict right it pressure to answer COVID. while. hard it's because going on

Jon Chappell

David, That makes it thank appreciate you. I sense.

David Grzebinski

you. Thank

Bill Harvey

Jon. Thanks,

Operator

you. Thank

BTIG. question are from from Lewis next Our Greg me

You may begin.

Greg Lewis

and – the is things: wondering tangible in I'm to guess out lay thank go morning, of a of you guess what Yes, you value typically, talking is, I to good to a to be and you're they're reach one pressure a deliveries. tend need countercyclical of as lot book on is touched on orders chart when bit guys I'm shipyards two David, good there's you you everybody. out been the and potential little utilization. company. what wondering – over there I Clearly, year-end, next that orders, be in first, is given doing we you're values, right guess, that, that seeing And for the then XXXX? of afloat. faced think we is just write-downs now? as I head about on and something thinking kind we progress asset the where – those fleet's maybe towards kind that the that place potential we we to follow-up as I challenges the yards any are of in a as pricing keep could guess, about barge just on

David Grzebinski

utilization. thanks, market, Greg. the No, of not kind from say extra in barges of hear Yes. Good we're I XXs right in looking for the now. We're terms to inland you. in low would

barges we'd And So buy make company another as heard much say the barges going new. don't sense in interim. you've doesn't see probably near-term to build some building barges, it I new before, sure. than the new for us for so from rather us build

– the the are a look, the we think industry new going of your point. and there's not into retirements, of shipyards lot the And orders I think going terms the In I to in new up. builds retirements

their cash expanded We going year just retirements. kind to of look flow some generate to could this the year, barges we about barges. our XX And how older – off. they are think we're retired You at of retire at laid can for that these this looking many I were or retired up discounted

into going this time, build Greg. I don't the us So see to shipyards just at

flow. of thing a little the in That the market, margins, you good. look at that's still of may mid-teens mean it's good if money. pretty great bit, making kind – go I look, inland cash generating still terms impairment, down yes, we're In is pretty but

pretty feel good about we that. So

Bill Harvey

Yes.

think or on look you historical – few And go its franchise you at But these few I cover always there's we is are there's lay to any barges, a that if so look will is to profitable. the idle think things in that strong, I it, be we long-term – away. risk. if off the that I inland even the I not or a things mean a question. cost future in not it's that big the something think

Greg Lewis

kind other working that or with there on working are products S&S a kind other Great. the of about of like there And oilfield or It's of is an & the when clearly where think gets forward? customers a of clearly, on Stevenson position oilfield. being beyond looking at company just equipment Okay. of it. move things But anything think things what is it to that ESG other more always touched Are understand. big them it's environmental the into you the piece we can then of eFrac? on I and eFrac – kind Stewart doing it's and that is Or kind – easy kind move helping

David Grzebinski

list and call gas, whole obviously, necessarily there's generate are gas cat would with I a diesel, of ESG-friendly diesel generation a selling the sticking There DGB, it some products three real there's, kind newer. – just while there's say been got electricity, with won. of frac, which product. call – new out just electric a We've that drive, for isn't that could the Absolutely. doing drive. we've market leader we've which of we of good electric could electric work you the engine are We're been maybe And you driving turbine then is Then And some it coming that that dual-fuel traditional a have in space. ones. others the to to dual just be are instead I but driving would which burning – what that of a electric to the areas: probably kind electricity one, years. where drive just eFrac, for generating have the five pumps. direct one a We've turbine-driven

slip. little they One which or burn of with the called about where or natural products methane up to slip product no can little out there XX% DGB, no cat methane gas gas is is dynamic to blending, a

store towards I particularly into you electrification, areas electrification. with all see we that power, So they're just these it products in hurricanes, are a and tell very and we would And example, States impacted. big have and for give it caddy there's but more electrification XX-wheeler on, world are that around literally the a can standby box is mean that example, been versus for of refining rewiring products can that EVs, you an of and plug electric to of truck Think But communities keep ESG-friendly. we We store's that back get time kind our going into and in United backup another I'll open the things trend the we lot have just on back store plug efficiently. how customers splicing the things that some can in essentially into power space. developing work do you, I that about come have spending other for where manner. an we into do, and Obviously, into we electric the that a connections. you a of offer

we're of working where it's things part of that. on and exciting the headed is like world a It's an right So lot time, now.

So we're trying on capitalize to it.

Greg Lewis

thank for everybody, you Absolutely, To the okay. time.

Bill Harvey

Thanks, Greg.

David Grzebinski

Operator, Greg. one we’ll question. take more Thanks,

Operator

Sounds good.

come of the from next Bank America. from line Sanjay of question will Ramaswamy Our

begin. may You

Sanjay Ramaswamy

Hey guys, question. taking thanks for my

David Grzebinski

good Yes, morning.

Sanjay Ramaswamy

looking I But was was $X.XX.X. A ton – third to and at one start. just mile the revenue simple quarter, in that

there. question modeling just So a

you that miles? of I function Was do up think the mean, a think how about that ton year-on-year. just lower I was Or XX% that?

David Grzebinski

voyages. ton mile It's around a move on interesting. Revenue depending per can Yes. lot the

cross-channel So the revenue, pretty you're it's miles going have miles ton if ton Conversely, about to you're going a going moves move. in river, drops. doing Houston, if to mile that a just in per you're you're but because of low good of ton have bunch up revenue lot

we quarter. numbers, I just noise Do some Bill? had the in think you have the

Bill Harvey

Yes.

David Grzebinski

Go ahead.

Bill Harvey

this of so a $X.XX. know of movement. quarter that you I from Last fact a quarter. point quarter was in the the year point was the Yes. do an and remember, view too, We ton delays, was was miles, year terms it relative quarter, this excellent where the hurricanes do $X.XXX went last right, – that third – there were with all and In in out low very – quarter

extended relates – year But So of all David this end, things a there's said, just, those well, period. hurricanes, to froze a lot in it the last length of for things really weather in the the with as there. it lot as just

David Grzebinski

our XX% contracts. businesses have we term And Yes. of under

be moving, you'd very and would – they little some not So probably revenue miles. if even get ton you're

Bill Harvey

Yes.

Sanjay Ramaswamy

that No, for question. a just the of sense. And follow-up makes Perfect. lot

that of about right a wave fact, the – I but to back mean potential here take it's potential, out a now of it's you the take cost great can just of scale of lockdowns. D&S further and second Just now, potential maybe second can in job I within maybe stuff cost-cutting a of to inland both taking you thinking did can quarter, in for the that potential not kind talk guys is know Maybe initiatives out kind you the the inland. and and you D&S profitability. further of

the businesses just to keep those both the steady? maybe somewhat margins further of just for So potential out scale in cost

David Grzebinski

and Is Similarly, D&S mean a cost of there to to we've cut taken our go there? well a in gets, at painfully, the a heads probably we've No, out is still I amount. for $XXX looking structure as Yes. think business. and do that's out lot out lot after know, we've million we continue my the ways taken of answer. very cutting, fight. short our more you cost, to to it. have probably lot not in longer I cost looking But it We're taken harder enormous you an right? Marine, –

we've out The every So pretty you can down That said, part margins, you that smarter company, right? are that's pull about in pull about take of get thinking so worse, we the costs right out. because can now, equation get things much still how as on thin so to taken far. cost levers

where do look, of that. is, get think But we're far vaccine demand-driven be, it there's in mind, back. worst this a huge I normal one So is next case back. Who We to to demand that a life. desire mid-summer to up, as back number and though know And is impact? And I my has know pent-up the not is sufficient of demand when come an look back the distribution situation. will We to gets a at it And know off. the could year. we coming continuing think – that economy opens keys knows

normalcy. think desire back huge of amounts there's go I to some to of pent-up type

because surely And muscle to so We've don't to out cut a the don't to we've respond. muscle, but the put hit maybe be we you. It's a the proverbial of want cut able we've to little fat want or we saying, – all long-winded very cut bone, use the got to out. answer to a to into

about that, Sorry Sanjay.

Bill Harvey

you worked Sanjay, quarter in inventory at then of issue levels our customers those down. high part look if And it, was the had, and they've third the the

imagine they the they is high their to linked had can demand. demand demand inventories, as And So – doing. were our when you what

more in that improve, we side. the or that may scenarios, will more be happen not it our even be steady. might will – steady think it lockdown personally but will think it It So I – be what from

Sanjay Ramaswamy

appreciate I Thanks That’s it. it. guys.

David Grzebinski

Okay, thank you.

Eric Holcomb

call. Sanjay, for in right. your everyone, All and Kirby you, for in Yes, participating interest thank and today's thanks,

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

David Grzebinski

Thank you.

Operator

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

You disconnect. may now