Kirby Corporation

Good morning and welcome to the Kirby Corporation 2024 4th 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. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1 1 again. We ask that you limit your questions to one question and one follow-up. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Kurt Nemitz, Kirby's Vice President of Investor Relations and Treasurer. Please go ahead.

Good morning, and thank you for joining the Kirby Corporation 2024 Fourth Quarter Earnings Call. With me today are David Krasinski, Kirby's Chief Executive Officer, Christian O'Neill, Kirby's President and Chief Operating 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. 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 latest Form 10-K filing 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 fourth quarter GAAP earnings per share of 74 cents, which included a one-time charge of 74 cents related to a non-cash write-down of inventory in our distribution businesses, which was partially offset by a one-time credit for a change in Louisiana tax law of 19 cents. Excluding these one-time items, which Raj will provide more detail on later, adjusted earnings for the quarter were $1.29 per share. Our fourth quarter results reflected some seasonal softness in both marine transportation and in distribution and services, as we experienced weather and navigation challenges for marine and typical seasonal slowness in activity in distribution and services. These headwinds were offset by good execution from our teams in both segments during the quarter, and that drove strong year-over-year financial performance with adjusted earnings per share up 24% year over year. We also generated over $151 million of free cash flow in the quarter, which was used to further strengthen our balance sheet by paying down $105 million in debt and to buy back $33 million of stock. We ended the year on a good note, and we anticipate strong growth in 2025. In inland marine transportation, we experienced normal headwinds from poor operating conditions and a slight slowdown in some trade lanes during the quarter. From a demand standpoint, refinery activity dipped in the early part of the quarter. However, activity began to pick up and tighten utility as we exited the quarter. Overall, our barge utilization rates averaged in the 90% range for the quarter. Spot prices were flat to slightly down sequentially, but were up in the high single-digit range year over year. More importantly, our term contract renewals were in line with our expectations with high single-digit increases versus a year ago. Fourth quarter inland operating margins were approximately 20%. In coastal, Market fundamentals remain steady with our barge utilization levels running in the mid to high 90% range. During the quarter, stable customer demand combined with a continued limited availability of large capacity vessels resulted in mid to high 20% year-over-year increases on term contract renewals and average spot market rates that increased in the low teens range year-over-year. Planned shipyards impacted the quarter, with fourth quarter coastal revenues increasing only 6% year over year, with an operating margin in the low teens. Turning to distribution and services, demand was mixed across our end markets, with growth in some areas offset by slow lists or delays in others. In power generation, total revenues grew 16% sequentially, and 36% year-over-year. The pace of orders was strong, adding to our backlog, with several large project wins from major backup power and industrial customers, as the need for power remains critical. In oil and gas, revenues were down 38% year-over-year and 24% sequentially, driven by a very soft conventional oil and gas business. This was partially offset by some growth in our EFRAC business. In our commercial and industrial market, even though revenues were down 7% year over year, driven by softness in on-highway truck service and repair, operating income was up 28% year over year due to favorable product mix and ongoing cost control initiatives. In summary, while our fourth quarter results were challenged by temporary seasonal issues, The underlying market fundamentals for both segments remain positive. So far in the first quarter, we have seen inland utility improve, which is helping firm up spot prices overall, with rates in some trade lanes starting to push higher. In coastal industry-wide supply, demand dynamics look very favorable for the years to come. Our barge utilization is strong, and we are realizing strong rate increases. In distribution and services, demand continues to grow for power generation and is mostly offsetting softness in the legacy oil and gas arena. All in all, we have a very favorable outlook for our business as we look into the coming year. I'll talk more about our outlook later, but first I'll turn the call over to Raj to discuss the fourth quarter segment results and the balance sheet.