Kirby Corporation

Thank you for standing by, and welcome to the Kirby Corporation 2021 Second Quarter Earnings Conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone, as today's program may be recorded. I would now like to introduce your host for today's program, Eric Holcomb, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us. With me today are David Grzybinski, Kirby's President and Chief Executive Officer, and Bill Harvey, Kirby's Executive Vice President and Chief Financial Officer. A slide presentation for today's conference call, as well as the earnings release, which was issued earlier today, can be found on our website at kirbycorp.com. During this conference call, we may refer to certain non-GAAP or adjusted financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings press release and are also available on our website in the investor relations section under financials. As a reminder, statements contained in this conference call with respect to the future are forward-looking statements. These statements reflect management's reasonable judgment with respect to future events. Forward-looking statements involve risk and uncertainties, and our actual results could differ materially from those anticipated as a result of various factors, including the impact of the COVID-19 pandemic and the related response of governments on global and regional market conditions and the company's business. A list of these risk factors can be found on Kirby's Form 10-K for the year ended December 31, 2020. I will now turn the call over to David.

Thank you, Eric, and good morning, everyone. Earlier today, we announced net earnings of 17 cents per share for the 2021 second quarter. The quarter's results were improved across both segments as the U.S. economy continued to rebound, the Gulf Coast petrochemical and refining complex recovered from winter storm Uri, and oil field activity and spending ramped up. Overall, our activity levels increased significantly in both marine transportation and distribution and services. which led to a 13% sequential increase in total revenues and a material improvement in earnings. Looking at our segments in marine transportation, the inland market experienced a strong improvement in demand with overall barge utilization increasing into the low to mid 80% range. The quarter started with some softness as many petrochemical plants struggled to restart following the February winter storm, which shut down up to 50% of the Gulf Coast production for a period of time. But by early May, however, most of the petrochemical complex had resumed production. Refinery utilization was firmly in the high 80s, and demand for refined products was steadily increasing as the U.S. economy reopened. As a result, activity in the barge markets started to ramp up nicely, and barge pricing moved off the bottom. The inland market tightened further in mid-May when the colonial pipeline shut down and many of our customers turned to barges for transportation and storage. In a matter of days, our barge utilization increased to near 90%. While this event was temporary and overall activity levels moderated in June, the inland business experienced a favorable shift in market dynamics. As a result, inland ton miles increased 17% when compared to the first quarter. Average spot market pricing also improved sequentially for the first time in more than a year, and although still down relative to last year, term contract pricing pressure moderated. Overall, inland revenues sequentially increased 13% and operating margins recovered into the high single digits. In coastal, market fundamentals for the second quarter were largely unchanged with continued low barge utilization and few spot requirements. However, overall pricing remained stable during the second quarter. In distribution and services, we experienced continued positive momentum with improved activity levels strong sequential and year-on-year increases in revenues, and operating margin levels not seen since the third quarter of 2019. The most significant increases came from our oil and gas businesses, which experienced increased demand as U.S. rig counts and track activity moved higher and our customers increased their spending levels. In manufacturing, incremental orders and deliveries of new environmentally friendly pressure pumping equipment and frac-related power generation equipment contributed favorably to the quarter's results. We also experienced a strong increase in demand for new transmissions, parts, and service in our oil and gas distribution business from major oilfield customers. In commercial and industrial, the continued economic recovery resulted in sequential improved demand in our on-highway businesses. Product sales in Thermo King also increased during the quarter. These gains were partially offset by sequentially lower revenues in commercial power generation related to the timing of large backup power installations. Marine repair activity was also down modestly during the quarter. In summary, the second quarter was a turning point for Kirby, with both our segments, experience improved activity levels and better financial performance. We expect to see this momentum continue in the second half of the year. And in a few minutes, I'll talk more about our outlook for the remainder of 2021. But before I do, I'll turn the call over to Bill to discuss our second quarter segment results and the balance sheet.