Kirby Corporation

Good morning and welcome to the Kirby Corporation 2022 Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. We ask that you limit your questions to one question and one follow-up. To ask a question, you may press star 1 1 on your phone. Please note this event is being recorded. I would now like to turn the conference over to Mr. Kurt Inman, Kirby's VP of Investor Relations and Treasurer. Please go ahead.

Good morning, and thank you for joining us. With me today are David Grzbinski, Kirby's President and Chief Executive Officer, and Raj Kumar, 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 www.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 uncertainty, and our actual results could differ materially from those anticipated as results for various factors, including the impact of COVID-19 pandemic on the company's business. A list of these risk factors can be found in Kirby Corp's Form 10-K for the year ended December 31st, 2021. I will now turn the call over to David.

Thank you, Kurt, and good morning, everyone. Earlier today, we announced third quarter revenue of $746 million and earnings of $0.65 per share. This compares to 2021 third quarter revenue of $599 million and adjusted earnings of $0.17 per share. Both of our segments continued to steadily improve during the quarter, delivering higher revenue and operating income both sequentially and year-over-year. The third quarter's results reflected improved market fundamentals in both marine transportation and distribution and services, partially offset by continued inflationary cost pressures as well as ongoing supply chain challenges that delayed sales in our distribution and services business. In inland marine transportation, continued high refinery utilization led to a steady improvement in demand with our overall barge utilization running in the low 90% range. Tight market conditions due to limited supply of barges as well as cost inflation continued to put upward pressure on prices, with spot prices up in the high single digits sequentially and in the mid 20% range year over year. Pricing on term contracts moved higher as well, with term contracts renewing up in the low teens versus the year-ago period. Overall, third quarter inland revenues increased 9% sequentially and margins improved into the low double-digit range. While we continue to face headwinds with inflationary pressures in the quarter, We expect margins will gradually improve further as fuel and other cost escalation contract clauses reset in the fourth quarter and into 2023. In coastal, market conditions steadily improved with our barge utilization in the low to mid 90% range and some incremental pricing gains with spot prices up in the high single digits sequentially. Better coal shipments in our dry cargo business also contributed to improved revenues and increased operating margins. Overall, third quarter coastal revenues increased 6% year over year and operating margins were in the low to mid single digits. In distribution and services, similar to last quarter, our markets remained very active across the segment and contributed to strong sequential and year-over-year improvement in revenue and operating margins. In oil and gas, high commodity prices and increased oil field activity contributed to improved demand for new transmissions, parts, and services. In manufacturing, our backlog continued to grow with the addition of new orders for our environmentally friendly pressure pumping equipment and power generation equipment for heat rack. As expected, significant supply chain issues delayed many new equipment deliveries during the quarter. We continue to work diligently to manage the current supply chain environment. In our commercial and industrial market, overall demand remains solid across our different businesses, with growth coming from the marine repair power generation and on-highway sectors. In summary, despite meaningful inflationary and supply chain challenges in the quarter, Our third quarter results reflected continued improvement in market fundamentals for both segments. The inland market is inflecting nicely, demand is strong, and rates are moving higher. While the coastal market remains challenged by industry supply dynamics, our barge utilization is good, and we realized modest rate improvements. Demand in distribution and services is strong, and our backlog is growing. While supply chain issues are expected to persist for the foreseeable future, looking forward, we see continued strong market fundamentals. We continue to focus on working safely, efficiently, and responsibly to meet and exceed our customers' needs and expect to drive incremental earnings growth into 2023 and beyond. I'll talk more about our outlook later, but first I'll turn the call over to Raj to discuss the third quarter segment results and the balance sheet.