Kirby Corporation (NYSE:KEX) Q2 2019 Earnings Conference Call - Final Transcript

Jul 25, 2019 • 08:30 am ET

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Kirby Corporation (NYSE:KEX) Q2 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] The first question comes from Ben Nolan with Stifel. Your line is now open.

Analyst
Ben Nolan

Great. Thank you, operator, and good morning, David, Bill and Eric.

Executive
David W. Grzebinski

Good morning.

Analyst
Ben Nolan

My first question relates to the D&S side of the business. And I think we -- and the market has expected there to be a slowdown coming there given what's going on in the oil patch. My question though relates to, sort of, how are you thinking about that business strategically right here, is it, given that it's a little slower now but you expect it to get better or you're just kind of battening down the hatches and waiting for the storm to blow over? Is there a shift maybe to a little bit more international business or something like that? Is this something where you might look to be opportunistic, like you do in the barge business and find somebody that is a potential acquisition target that can't weather the storm to the same extent that you can? Just curious, how you are thinking about it, I guess?

Executive
David W. Grzebinski

Yeah. Good set of questions, Ben. Look, we believe, as I said in our prepared remarks, that this shale phenomena, if you will, is going to last for a few more decades and we are positioned strategically pretty strong in that business. So it's really at this point, it's battening down the hatches, as you said. We're cutting cost as you would expect, eliminating discretionary spending. We've reduced headcount in the manufacturing areas in our -- in and around pressure pumping by about 22% so far year-to-date. We're going to batten down the hatches. Keep this business as profitable as we can.

And to your other part of your question, we continue to grow our commercial and industrial sides of the business. Backup power generation continues to grow, it's got a nice healthy growth profile. As the world becomes more and more data intensive, backup power becomes more and more important. So we're investing manpower into those areas around commercial and industrial. So we're kind of happy with the portfolio as it is. You may see us look for a tuck-in acquisition that beefs up some part of that business, maybe in the commercial and industrial area.

In terms of buying more pressure pumping capabilities in this downturn which would be more of our playbook, I would say we don't need to. We've already got the largest non-captive manufacturing capability in the industry. We're where we need to be. Our two manufacturing facilities, one's in Oklahoma and one's in the Texas. Our re-manned capabilities and our sites around the US are strategically positioned. So I think what we have to do is weather the storm, watch our cash flow, make the appropriate business adjustments and be ready for the inevitable rebound. And we do think that's coming. You can look at the Permian pipeline situation. There's a number of pipelines coming on at the end of the year. I think two at