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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Presentation
Executive
William G. Harvey

average spot market rates improved 10% to 15% year-on-year. During the quarter, the percentage of coastal revenue under term contracts was approximately 80%. Of which approximately 85% were time charters. Coastal's operating margin in the second quarter was slightly positive. With respect to our tank barge fleet, at the end of the second quarter, the inland fleet had 1,067 barges representing 23.7 million barrels of capacity. We expected in the year with 1,063 inland barges, representing 23.7 million barrels of capacity.

In the coastal marine market, during the quarter, we sold one barge and returned one small charter barge with a combined capacity of 165,000 barrels. At the end of the quarter, we had 49 coastal barges with 4.7 million barrels of capacity. We do not expect further changes to the coastal barge fleet during the remainder of 2019.

Looking at our Distribution and Services segment, revenues for the 2019 second quarter were $366.7 million with an operating income of $23.1 million. Compared to the 2018 second quarter, revenues declined approximately 14%, primarily due to lower activity in our oil and gas related businesses. This was partially offset by higher sales in power generation. Compared to the 2019 first quarter, revenues declined 3% and operating income declined $14.5 million, again, primarily as a result of reduced activity in the oil and gas related businesses. These declines were partially offset by higher revenues in power generation. During the second quarter, the segment's operating margin was 6.3% and was unfavorably impacted by the reduction of higher-margin oil field related revenues and increased sale -- sales of lower margin power generation equipment.

In our Oil and Gas market, revenue and operating income were down compared to 2018 second quarter due to softening of activity levels, which resulted in lower demand for nearly all our products and services, including new and overhaul transmissions, engines and parts as well as new and remanufactured pressure pumping units. Similarly, compared to the 2019 first quarter, revenue and operating income declined with reduced demand for overhaul transmissions, parts and pressure pumping unit manufacturing. In the second quarter, the oil and gas related businesses represented approximately 55% of distribution and services revenue and had an operating margin in the mid-single digits.

In our Commercial and Industrial market, compared to the 2018 second and 2019 first quarters, revenue and operating income increased primarily due to growth in our power generation business. In the second quarter, the commercial and industrial businesses represented approximately 45% of distribution and services revenue and had an operating margin in the mid-single digits.

Turning to the balance sheet. As of June 30, total debt was $1.59 billion and our debt-to-cap ratio was 32.4%. During the quarter, we paid down approximately $73 million in debt. We remain focused on repayment of debt for the remainder of 2019. As of this week, our debt balance was $1.55 billion.

I'll now turn the call back over to David to provide additional details about our outlook.

Executive
David W. Grzebinski

Thank you, Bill. As