Kirby Corporation

Good day and thank you for standing by. Welcome to the Kirby Corporation 2023 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press TAR11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press TAR11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kurt Nimitz, Vice President and Treasurer. Please go ahead.

Good morning, and thank you for joining us. With me today are David Grzywinski, 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. 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 risks and uncertainties, and our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby's Form 10-K for the year-ended December 31, 2022, and in our other filings made with the SEC from time to time. I will now turn the call over to David.

Thank you, Kurt, and good morning, everyone. Earlier today, we announced second quarter revenue of $777 million and earnings per share of $0.95. Both of our segments continued to perform well during the quarter and produced higher revenue in operating income sequentially and year over year. In marine transportation, Pricing on spot and term contracts continued to benefit from strong demand and limited availability of barges. Favorable weather conditions and increased operating efficiency helped improve margins for both inland and coastal. Distribution and services delivered improved margins and business remained stable at high levels. Overall, we had solid results and we generated $113 million of free cash flow, which helped support an increase in our share repurchases to $34 million in the quarter. In inland marine transportation, our second quarter results reflected continued improvement in pricing, together with better weather conditions and operating efficiencies. From a demand standpoint, customer activity was strong in the quarter with barge utilization rates running in the low 90% range. Spot market prices were up in the mid-single digits sequentially and in the mid-to-high 20% range year-over-year. Term contract prices also renewed up with low double-digit increases versus a year ago. Overall, second quarter inland revenues increased 11% year-over-year, and margins were in the high teens range. Also, shortly after the end of the second quarter, we acquired 23 inland tank barges from an undisclosed seller. With a total capacity of 265,000 barrels and an average age just under 14 years, these barges will be a nice addition to the Kirby fleet. In coastal, market fundamentals continue to improve with our barge utilization levels running in the mid to high 90% range. During the quarter, we saw solid customer demand and limited availability of large capacity vessels, which resulted in high teens price increases on term contract renewals and increases on new spot deals in the high 20% range. As mentioned on our first quarter call, our results this year are being impacted by planned shipyard maintenance on several large vessels. Consequently, second quarter coastal revenues decreased slightly year over year, but operating margins were positive in the low single digits. In distribution and services, demand remained strong across our markets with continued new orders combined with high levels of backlog. In manufacturing, revenues were up sequentially in year over year, as high market acceptance drove strong demand for our environmentally friendly pressure pumping equipment and power generation equipment for EFRAC. However, as expected, persistent supply chain issues, particularly with electronic and electrical components, delayed many new equipment deliveries during the quarter. We continue to work diligently to manage these supply chain challenges. 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, our second quarter results reflected ongoing strength in market conditions for both segments. The inland market is strong and rates continue to push higher, helping to offset inflation. While our coastal revenue is challenged near-term by planned shipyards, industry-wide supply and demand dynamics remain very favorable. Our barge utilization is good, and we are realizing price rate increases. Steady demand and distribution in services is contributing to further growth in the segment, and while supply chain bottlenecks are expected, the outlook for the market is very strong. I'll talk more about our outlook later, but first I'll turn the call over to Raj to discuss the second quarter segment results and the balance sheet.