Kirby(US:KEX)2020-05-05 18:37Financial Data and Key Metrics Changes - In Q1 2020, Kirby reported adjusted earnings of $0.59 per share, excluding one-time items totaling $4.74 per share, resulting in a GAAP net loss of $4.15 per share [6][20] - Total debt as of March 31 was $1.7 billion, with a debt-to-cap ratio of 35% and cash totaling $321 million [32][34] - The company expects to generate free cash flow of $250 million to $350 million in 2020, which will be used to enhance liquidity and reduce bank debt [58] Business Line Data and Key Metrics Changes - Marine transportation revenues were $403.3 million with an operating income of $50.7 million, representing a 10% increase in revenue and a 43% increase in operating income compared to Q1 2019 [22] - Distribution and services revenues for Q1 2020 were $240.7 million, a decline of approximately 36% year-over-year, with operating income down by $33.9 million [29] - The inland business contributed approximately 79% of marine transportation segment revenue, with average barge utilization in the low to mid 90% range [24] Market Data and Key Metrics Changes - Refinery utilization has declined to the 60% range from 90% earlier in the year, impacting marine transportation demand [38] - The company has seen a modest decline in U.S. chemical plant utilization, with significant reductions occurring globally [39] - The oil and gas market is expected to be extremely challenged throughout 2020, with rig counts potentially declining to 250-300 rigs, a 65% reduction from 2019 levels [50] Company Strategy and Development Direction - Kirby is focusing on cost-saving measures, including workforce reductions, furloughs, and reduced capital expenditures, in response to the challenging oil and gas market [17][49] - The company plans to maintain segment margins at or near breakeven levels, with a focus on commercial and industrial sectors while reducing reliance on oil and gas [54][99] - The acquisition of Savage is expected to contribute positively to earnings despite challenges posed by COVID-19 [43] Management's Comments on Operating Environment and Future Outlook - Management has withdrawn the 2020 full-year guidance due to uncertainties surrounding COVID-19 and its impact on demand [36] - The company believes it is well-positioned to manage through the pandemic, with a strong marine transportation business and solid term contracts [55][56] - There are expectations for a decline in barge utilization and revenues in the coastal market, but long-term contracts will help insulate the business from significant revenue reductions [46] Other Important Information - Kirby has implemented a pandemic response plan to ensure business continuity and employee safety during COVID-19 [9][10] - The company is actively pursuing cost synergies from the Savage acquisition and integrating fleets [43] Q&A Session Summary Question: Impact of declining inland utilization on margins - Management noted that while there has been a slight pullback in utilization, pricing has held firm, and if current conditions persist, margins may not decline significantly [61][64] Question: Details on the $433 million write-down - The write-down includes goodwill and intangible assets across the distribution and services segment, reflecting the impact of low oil prices and market conditions [68][70] Question: Future of the oil and gas segment within D&S - Management indicated a shift towards a smaller, more profitable commercial and industrial business, with oil and gas expected to face significant challenges [99][100] Question: Storage opportunities and pricing - Management confirmed that storage contracts are primarily inland, with durations ranging from one to six months, and these opportunities are helping to mitigate demand reductions [121][123] Question: Coastal market impact from floating storage - Coastal utilization has dipped, and while there are no current storage opportunities, the busy MR tankers are beneficial for Kirby's coastal business [131][132]