Q4 2021 Kirby Corp Earnings Call

January 27, 2022

Yeah.

Good morning, and welcome to the Kirby Corporation 2021 fourth quarter earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions.

We will ask you to limit your questions to one question with one follow up to ask a question you May Press Star then one on your Touchtone phone.

Joining a question. Please press the pound key. Please note. This event is being recorded I would now like to turn the conference over to Mr. Eric Holcomb Kirby's Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining US with me today are David <unk>, Kirby's, President and Chief Executive Officer.

Raj Kumar Kirby's Executive Vice President and Chief Financial Officer, and Bill Harvey Kirby's Executive Vice President of Finance.

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 at Kirby Corp Dot com.

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.

Including the impact of the COVID-19 pandemic on the company's business.

A list of these risk factors can be found in Kirby's Form 10-K for the year ended December 31, 2020, I'll now turn the call over to David.

Thank you Eric and good morning, everyone earlier today, we announced 2021 fourth quarter GAAP earnings of <unk> 18 per share, which included a onetime charge of nine <unk> per share related to a change in Louisiana State tax law, excluding this charge adjusted earnings for the quarter.

There were 27 per share.

The quarter's adjusted results improved sequentially by <unk> 10 per share, reflecting improved results in marine transportation, primarily driven by higher barge utilization and pricing in inland.

These improvements were partially offset by reduced earnings in distribution and services as a result of seasonality in the commercial and industrial markets and supply chain delays in manufacturing.

Looking at our segments.

<unk> transportation.

Inland business experienced improved market fundamentals and increased volumes as the economy recovered from the impact of the Delta variant and refineries and chemical plants in Louisiana resuming operations following hurricane Ida.

These factors contributed to our barge utilization increasing into the mid to high 80% range with rates near 90% for much of December .

With improved market spot rates increased both sequentially and year on year and term contracts renewed higher for the first time since the start of the pandemic.

However, the quarter was not without some modest headwinds in December our inland operations were challenged by poor weather conditions, which ultimately led to a 55% sequential increase in fourth quarter delay days.

Escalating cases of the COVID-19, Omicron variant also impacted our operations, resulting in Crewing challenges.

The omicron impact is estimated to be one to two cents for the quarter.

Despite these challenges to the quarter inland revenues significantly increased with operating margins approaching 10%.

In coastal market conditions were stable during the quarter, our barge utilization.

<unk> increased into the 90% range, primarily due to the retirement of idled tank barges in the third quarter.

Operating margins were near breakeven at the end of the quarter, we completed our exit from Hawaii, and we ended the year with 31 tank barges in the coastal fleet.

Going forward, we will be focused on key markets with our most efficient and cost competitive equipment, and we expect to generate significantly improved earnings and favorable returns for the company as this market recovers.

In distribution and services or markets remained strong and we continue to build black clog. However, as mentioned and expected fourth quarter revenues sequentially declined due to seasonality and commercial and industrial and ongoing supply chain constraints in manufacturing.

And oil and gas strong commodity prices and increasing rig counts contributed to strong demand for new transmissions and increased orders for new environmentally friendly pressure pumping equipment and E Frac power generation equipment.

However, as highlighted last quarter significant supply chain issues, and our manufacturing business delayed many of our deliveries into 2022.

As a result, our oil and gas businesses had a sequential reduction in revenues and operating income.

In commercial and industrial overall demand remains solid, but we experienced normal seasonality in thermo King and with the power generation fleet, which resulted in a sequential reduction in revenues.

The marine repair business was also impacted by seasonality, but this was mostly offset by increased parts sales.

Early in the quarter, we acquired the assets of a small energy storage system manufacturer and we are now offering its products under the trade name <unk> adaptive.

They're ESL products and technology have been key to the development of our new power generation solutions for electric fracking equipment.

This acquisition represents a key step in our ESG journey and will be important as we develop new energy storage solutions for the oilfield and other commercial and industrial applications.

In summary, our fourth quarter results point to improving fundamentals in our business, despite normal seasonality COVID-19 challenges and supply chain issues.

We see continued improvement in our markets and momentum across the company as we enter 2022 and inland favorable market conditions resulted in strong barge utilization and improved term contract pricing for the first time in nearly two years and coastal we are now focused on our best assets and <unk>.

Markets setting the stage for better earnings in the future in distribution and services or markets are strong and our backlog continues to grow which is expected to result in significantly improved earnings in 2022.

In a few moments I'll talk more about our outlook, but first I'll turn the call over to Raj to discuss the fourth quarter segment results and the balance sheet.

Thank you David and good morning, everyone in the fourth quarter of 2021 Marine Transportation revenues were $350 6 million with an operating income of $25 7 million and an operating margin of seven 3% comp.

Compared to the third quarter Marine revenues increased $12 1 million or 4% and operating income increased by $8 8 million.

These improvements were primarily due to increased refinery and chemical plant production.

Following the impact of Hurricane Ida as well as improved barge utilization and increased spot market pricing seen in the inland market.

Compared to the fourth quarter of 2020, Marine revenues increased $51 2 million or 17%.

This was primarily due to improved <unk> utilization and inland spot market pricing.

Higher fuel rebuilds.

Seen in both the inland and coastal businesses also contributed to the revenue increase as we saw the average cost of diesel fuel approximately double in price.

These increases were offset by lower pricing on inland term contracts that had renewed prior to the fourth quarter.

Marine operating income declined $3 5 million year over year, primarily due to lower inland term contract pricing from the peak Covid period.

During the quarter the inland business contributed approximately 77% of segment revenue.

We saw average barge utilization improved considerably.

Barge utilization was in the mid to high 80% range as compared to the low 80% range in the third quarter in the high 60% range in the fourth quarter of 2020.

Long term inland marine transportation contracts are those contracts with a term of one year or longer contributed approximately 65% of revenue with 57% from time charters and 43% from contracts of affreightment.

Tom contracts that renewed during the fourth quarter on average will encourage Italy up approximately 10%.

Spot market rates also increased in the middle single digits sequentially in the high single digits year on year.

Compared to the fourth quarter of 2020 inland revenues were up 20%, primarily due to increased barge utilization fueled rebuild and spot market pricing, partially offset by reduced pricing from term contracts that renewed earlier in the year.

Compared to the third quarter inland revenues were up 6% as a result of increased barge utilization and improved spot market pricing.

During the fourth quarter, the inland business was impacted by the omicron barrier.

As David mentioned, we estimate the omicron impact to be between <unk> <unk> per share due to crewing challenges and other associated costs.

In spite of omicron inland operating margins improved sequentially and approached 10% in the quarter.

Now moving on to the coastal business the coastal business represented 23% of revenues for the Marine Transportation segment.

Revenues declined 4% sequentially due to planned shipyard activity.

Back to the fourth quarter of 2020 revenues increased 7%, primarily due to higher fuel rebuilds.

Overall, <unk> had a breakeven operating margin in the fourth quarter average coastal barge utilization improved to 90% range driven primarily by the retirement of Idaho, Idaho tank barges in the third quarter.

This compares favorably to the mid 70% range in the third quarter and the fourth quarter of 2020.

Average spot market rates and renewal renewals of term contracts was stable during the quarter. The percentage of coastal revenue from term contracts was approximately 80% of which approximately 85% were time charters.

With respect to our tank barge fleet for both the inland and coastal businesses. We have provided a reconciliation of the changes in the fourth quarter as well as projections for 2022. This is included in our earnings call presentation posted on our website.

Now I'll discuss the performance of the distribution and services segment.

Revenues for the fourth quarter of 2021 with $247 million with an operating income of seven 5 million.

Compared to the third quarter revenues declined $19 7 million or 8%.

The sequential reduction was primarily due to supply chain delays in manufacturing and typical seasonality in commercial and industrial. This in addition to integration costs related to our ESG related energy storage technology acquisition known as <unk>.

Led to segment operating income declining by $3 $5 million during the quarter.

When compared to the fourth quarter of 2020, the distribution and services segment saw a revenue increase of $50 3 million or 26% with operating income improving by $10 $4 million.

These improvements are primarily due to more favorable economic conditions, which have raised demand in our commercial and industrial market as well as increased demand for new transmissions parts and service in the oilfield.

We've also seen increased orders and manufacturing deliveries of new and environmentally friendly pressure pumping equipment and power generation equipment for E. Frac.

On the commercial and industrial site increased economic activity contributed to a 2% year on year increase in revenues with improved demand for equipment parts and service for on highway and power generation.

We continued to see stable year on year, very and repair revenues.

Compared to the third quarter commercial and industrial revenues declined 1% due to seasonality in the thermo King business and lower activity in the power generation rental fleet.

Marine activity Marine repair activity was also impacted by seasonality.

But was sequentially stable, we've increased spot sales the commercial and industrial business represented approximately 63% while segment revenue and had an operating margin in the mid single digits.

In oil and gas favorable commodity prices and increase in completions activity contributed to a healthy 110% year over year increase in revenues.

Most significantly improvement was in our distribution business with increased demand seen for new transmission.

And services.

Our manufacturing businesses also experienced substantial increases in new orders for pressure pumping an E frac related power generation equipment.

Compared to the third quarter oil and gas revenues declined 16%, primarily due to supply chain issues that resulted in delayed shipments of new equipment.

Finally oil and gas represented approximately 37% of segment revenue and had an operating margin in the low single digits.

I will now move on to discuss the balance sheet.

As of 31 December we had $34 8 million of cash with total debt of $1 $1 6 billion.

And our debt to cap ratio declined to 28, 7%.

During the quarter, we had cash flow from operations of $41 $2 million, and we repaid $45 million of debt.

We also used cash flow and cash on hand to fund capital expenditures, our capex of $26 million.

In 2021, we generated $224 million of free cash flow defined as cash flow from operations minus Capex. We continued our focus on reducing debt and repaid over $305 million during the year as of 31 December we had total available liquidity of approximately <unk> <unk>.

$888 million.

Looking forward into 2022 with a forecasted increasing activity across much of our businesses Capex is expected to increase for the full year, we expect capex of approximately $170 million to $190 million, which is primarily comprised of maintenance requirements for our marine fleet.

Despite the increased capital spending we expect strong cash flow from operations of $400 million to $480 million with free cash flow of $210 million to $310 million.

At these levels of free cash flow at our balance sheet position, we remain extremely confident in our ability to repay debt, while also being able to fund any potential attractive investment and acquisition opportunities.

Before I close I would like to discuss income taxes.

During the fourth quarter, we had a one time deferred tax provision of $5 $7 million <unk> per share.

This was related to a recent change in Louisiana tax law, which became effective on the first of January .

This change eliminated the income tax deduction for federal income taxes paid and lowered the corporate tax rate by <unk>, 5%.

The net result was an increase in the effective Louisiana state income tax rates, which required a re measurement of Kirby's, Louisiana and U S deferred tax assets and liabilities in the quarter.

As we look into 2022, we expect our effective income tax rate to be in the 26% between the 8% range.

I will now turn the call over to David to discuss our 'twenty to 'twenty to 'twenty two outlook.

Thank you Raj looking into 2022, our outlook is very positive driven by the ongoing economic recovery growth in volumes favorable barge and oilfield markets and strong demand for our products and services.

For the first time in many years all of our businesses are poised to deliver meaningful improvement in profitability.

While all of this is very positive there are still some challenges around COVID-19 that are providing some near term headwinds as we noted earlier our marine operations were challenged by the Army Kron variant during December resulting in Crewing challenges loss revenue and increased costs.

These issues have increased through January , particularly with crewing throughout the marine business.

While we believe the omicron issue will subside relatively quickly. We currently estimate that our first quarter results could be negatively impacted in the range of five to 10 per share.

Looking at our businesses in more detail in inland Marine we expect a strong market in 2022, driven by continued economic growth increased volumes and minimal new barge construction.

This should contribute to further improvements in the spot market with our barge utilization ranging in the high 80% to low 90% range for the year.

Term contracts that renewed lower throughout much of 2021 are expected to continue the reset that started in the fourth quarter.

For the full year, we expect inland revenues will grow 10% to 15% with progressive growth throughout the year as business improves and term contracts renewed.

However, the first quarter is expected to be more modest with sequential low single digit revenue improvement due to winter weather and ongoing challenges related to the omicron variant.

Inland operating margins are expected to range in the low double digits to the mid teens during the year with the first quarter being the lowest due to seasonality and the headwinds related to COVID-19 with the positive pricing environment building throughout the year.

In coastal market conditions are expected to modestly improve but remain challenging with underutilized barge capacity across the industry and a weak pricing environment.

Despite the industry weakness Kirby's coastal barge utilization is expected to be strong in the 90% range.

Full year coastal revenues are expected to be down in the mid single digits compared to 2021, driven primarily by the company's exit from Hawaii and anticipated reductions in coal shipments in our offshore dry cargo business.

In the first quarter increase in cases of Covid and Crewing issues have resulted in lost revenue and increased cost.

With respect to maintenance, we expect increased shipyard activity in the second through fourth quarters due to the timing of regulatory surveys and ballast water treatment installations on certain vessels.

Overall coastal operating margins are expected to range between the negative low single digits to near breakeven for the year.

Looking at distribution and services, we maintain a robust outlook.

Increased oilfield activity and strong manufacturing backlog will result in material year over year growth in revenue and operating income.

In commercial and industrial we anticipate growth in on highway with strong trucking and municipal fleet miles some improvement in bus repair and increased demand for thermo King refrigeration products.

In power generation, new backup power installation parts and service activity are expected to grow further as demand for electrification and $24 seven power supplies.

Marine repair is also expected to grow with increased oil and gas activity in the Gulf of Mexico, and improved commercial markets on the east and west coasts.

Overall, we expect.

Full year revenue growth in the low double digit percent range for commercial and industrial.

And oil and gas, we expect current commodity prices will contribute to increased rig counts and frac activity during 2022.

Industry analysts have predicted rig counts will rise to near 650 by year's end and if so that would represent a full year average increase of approximately 30%.

Similarly, the active average Frac crew count is expected to decline to as many as 250, which would represent a 10% to 20% increase over 2021.

As a result, we expect to see higher demand for transmissions engines parts and service and distribution in.

In manufacturing, we start the year with a strong backlog position and we expect continued order growth for our environmentally friendly products.

However, due to ongoing supply chain issues, new equipment deliveries are expected to progressively ramp up through the year with the first quarter being the lowest of the year.

Overall in distribution and services, we expect 2022 revenues will increase 30% to 40% year over year with commercial and industrial representing approximately half of the segment revenues in oil and gas representing the other half.

We expect segment operating margins will improve to the mid single digits and as the year progresses with the first quarter being the lowest we're at slightly below the 2021 fourth quarter due to due to timing of projects and ongoing supply chain constraints, we do expect.

A normal seasonal reduction during the fourth quarter.

Before we wrap up I'd like to take a moment to say thank you to Bill Harvey who will be retiring from Kirby in the next couple of weeks after four years as Kirby's CFO .

Bill has been an integral part of the Kirby team and help to guide us through several large inland marine acquisitions, the integration of Stewart, <unk> Stevenson and the historic Covid downturn Bill.

<unk> contributions to <unk> success in his help to maintain our financial strength through difficult times has been significant and we will certainly be missed bill. We wish you all the best in your well deserved retirement and May Your handicap go down.

Thank you David I will certainly Miss working with you and the whole <unk> team you can tell a lot about our company and its culture as to how it deals with adversity and the Kirby culture deals with challenges exceptionally well.

Either it is preparing in helium with category, four or five hurricanes and oil price collapse or a pandemic that reduced utilization to unprecedented low levels. The Kirby team aggressively response, there is no we can't and the Kirby vocabulary.

Proud to say that I was a member of that team I'm also pleased that our retiring as kirby's entering what I expect to be an exceptionally strong market for all of its businesses over the next few years.

Im certain that Raj will fit in well with the Kirby culture, and I look forward to watching his kirby significantly improves profitability.

<unk> creates tremendous shareholder value over the next few years.

Also be sure one thing my golf Handicap will move just not in the right direction.

Thanks, Bill to closeout 2021 was a difficult year that began with weak barge markets had continued COVID-19 challenges and was greatly impacted by unprecedented weather events.

Like many we are ready for better days as we look into 2022, while Covid remains an issue for at least the near term, we see better days with stronger revenue and profit growth for the full year.

And inland volumes continue to improve barge utilization is strong and pricing is moving higher from a supply standpoint, the price of a new barge is at historical highs and there is extremely limited new barge construction on the horizon.

All of this is very positive for our inland business and is expected to contribute to significant earnings improvement and what we expect is the beginning of a multiple year up cycle.

In coastal the market's still needs more time to recover but we expect strong utilization with our smaller more efficient fleet our efforts to right size the fleet and reduce the cost structure of this business paved the way for significantly reduced near term losses.

In distribution and services, a stronger economy and increasing demand throughout the marine repair power generation on highway sectors will drive continued growth.

Oilfield fundamentals are favorable and activity is expected to continue to grow with the current commodity price environment with E&ps and service companies continuing to advance their ESG strategies, we are benefiting with a strong backlog of environmentally friendly equipment.

Which we expect will continue to grow and to expand.

And finally, our balance sheet remains strong as Raj mentioned, we generated strong free cash flow of $223 million in a very difficult year, and we made significant progress in paying down debt. We expect 2022 will be another strong cash flow year, we will use this.

Cash flow to further reduce debt, but we will also be looking for attractive acquisition opportunities that align with our strategy and create positive returns for the company and our shareholders.

Operator. This concludes our prepared remarks, and we are now ready to take questions.

We will begin the question and answer session to ask a question.

The pound key and then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press the pound key as a reminder, we ask that you. Please limit your questions to one question and one follow up.

First question comes from the line of Kenn Hoekstra with Bank of America. Your line is open.

Great Good morning.

Good luck and always great to chat with you happy to hit of course whenever you want Raj welcome to these calls.

Good morning.

Good morning, it sounds like a true inflection point on marine and particularly in the margins that we've been kind of waiting for the past year over in the past you've talked about getting to mid twenties on the margins and given the time it takes to turn the carrier around and get in this direction and the time it took rates to finally aid margins look good.

You're back to that mid twenty's or create headwinds kind.

Kind of when you think about the scaling of the market you've done maybe throw in kind of your commentary your thoughts on pricing there.

How fast do you think we could see this accelerate.

Yes, Thanks for your question Ken.

No look it's Ben.

A tough couple of years, our barge utilization hit the lows during the pandemic, we were down into the <unk>, but.

As you've seen and watched over the last several quarters can our utilization has improved and the industry's utilization has improved in the fourth quarter, we were in the.

Basically the mid to high <unk>, the whole quarter and we finished December in.

In the high eighties, and mostly around 90, so pricing improved as you saw.

Spot pricing was up.

Sequentially mid single digits and year over year.

High single digits contract pricing, which is the most important we're up about 10% year over year in the fourth quarter. So thats helped the margins.

I think this continues.

Throughout 2002 and 'twenty three.

We've said our margins would be starting in the double digits and then get to the mid teens throughout 'twenty two I think we get to 20% in 'twenty three.

And here's why I think supply and demand are not only tight now but are going to kind of tightened some more.

Let's just take each of them.

Separately demand.

Continues to grow we still got some chemical plants coming on and as you know demand for liquid volumes typically goes up with GDP. We're looking at a pretty good GDP number this year and probably next year I know, the fed's tamping that down a bit but.

With GDP in chemical plants coming on demand looks pretty good.

I'd tell you supply is that.

That picture is even better with barge pricing a new 30 is probably $4 one to $4 2 million.

For a brand new 30000 barrel barge thats.

The highest we've ever seen in a lot of that is steel price and some labor.

Cost but.

At those prices, we're not seeing much new builds.

If any at all I think there may be six barges that are carried over from 2021 into 'twenty two.

And barge retirements are still going on because the equipments getting older. So when you put supply and demand together. This is about the best we've seen in a long long time, and we think it's a multi year kind of the upswing, which should put maher.

Our margins on a good track this year and probably into that 20% normalized range in 'twenty three.

It could go wrong, another pandemic or a continuation of this pandemic it gets worse, but our feeling is that pandemic is as burn in itself out or at least that's our hopeful view.

Maybe a global conflict, but even if there was a global conflict.

Whether it's Ukraine, or China or Taiwan.

Domestic production should be pretty important so when we put all that together were about as optimistic as we've been Ken.

No that's definitely evident.

That insight.

A follow up with just beyond.

Your last comment talking about maybe looking at attractive acquisition opportunities.

Your choices, given your improving cash flow and margins and alike. So youre going to have that cash flow.

Reduced at what what would you like to focus on would it be more on the barging side would increase that.

Ownership would it be more manufacturing.

Gain scale on that business, maybe just talk about your vehicles there.

Yes, no I would say, we've always liked the consolidating acquisitions on the inland side, we'd probably stay away from coal school in favor the inland side and in terms of.

Another consolidation move, but you did see in the fourth quarter, we bought a small battery manufacturing company as.

As we look at the electric fracking and grid micro grid.

Equipment that we're building now.

That battery manufacturing component.

Is a very nice add and it fits really well, but let me scale the capital there that was there.

That was under $5 million for that acquisition. So we think we will add stuff that adds to our ESG capabilities on on manufacturing and distribution.

But the scale of those type of additions are relatively minor.

I would say the only other caveat would be offshore wind.

We're working on on some things there.

Some of those come that could could add to our capital expenditures. If we if we do some vessels to support offshore wind.

So that kind of gives you the picture of where we deploy dollars.

But I've always felt and we've had good luck with the inland market consolidation I think thats.

Where we get a lot of leverage when we bring in and just our ability to absorb and spread cost.

That said again.

We're very trying to be very judicious and smart about what we invest in.

To increase our ESG profile.

Appreciate the time and insight Thanks best of luck alright. Thank you.

Thank you. Our next question comes from Jon Chapell with Evercore. Your line is now open.

Thank you good morning, everyone.

Good morning, John .

David first one for you I feel like we asked us.

Kind of every quarter, but its probably.

Even more important this time given the inflection point on the term pricing what percentage.

Would you estimate of your inland term portfolio has been kind of mark to market for this improvement in the spot market and as you anniversary. Some of these kind of deeper pandemic impacted renewals that you added maybe late 'twenty early 'twenty, one is that upside to that contractual part of the portfolio is still around the 10% that you noted for <unk> or even potential greater upside.

And mark to market.

Yes.

Well, let me start with look contract pricing is was at the bottom. We are just now coming off the bottom so.

In the fourth quarter, we had contract pricing up 10%, but again thats off the bottom. So it's still got a ways to go.

I would tell you in terms of contract renewals you know the fourth quarter is usually the heaviest quarter.

With the other three quarters being lighter.

It was probably 20% of our portfolio re priced off the bottom and.

In contracts now remember, 35% of our portfolio is spot and Thats.

Contracts that are less than a year, so they could be anywhere from.

One week to two nine months on average, it's probably three to four months for those spot contracts.

They can reprice pretty rapidly.

As you would expect because the duration of those contracts are lower.

I would tell you that does give some upside but it is factored into our thinking for 2022.

But when we look at it.

With barge pricing, where it's at now with the inflationary pressures.

That are out there the cost of just doing business has gone up.

And then if you look at how tight.

The horsepower market.

Running the tow boats and tug boats.

Got tighter crewing, it's been tougher.

Omicron in.

Covid has not helped that situation so.

All of that makes pricing a lot tighter and the market a lot tighter so.

We're optimistic and we think.

2020 to continue the trend of what we saw in the fourth quarter.

Supply and demand is there and the need to get pricing up as there as well.

Okay, Great and then just shifting gears to D&S for a second I'm just curious is the.

The oil price has been really strong maybe the public guys are a bit more reluctant to start producing more because of the shareholder pressures, but the private guys. Certainly are what's the M&A environment like in DNS today, and I ask that from the angle of are there any pieces of year DNS business, probably primarily in oil and <unk>.

Gas that you would consider non core that maybe you could look to monetize this industry comes off the bottom.

Yes.

It's a great question I would tell you for DNS, we've got the two pieces of commercial and industrial and then the.

The manufacturing piece in.

Most of the oil and gas exposures in that manufacturing piece.

We made a lot of frac equipment over the years, but I would tell you looking at our inbound over the last six to nine months.

It's been all electric frac related or power generation equipment, Thats being used on electric Frac sites.

Not necessarily equipment, we build on the.

The electric pumping side, but with the power generation side, so we're getting into making micro grids basically an equipment that can support that.

Yes, that's why the little battery manufacturing company was an important addition.

So when we look at it yes, there is some oil and gas exposure for sure.

Transmission and parts that we do are there.

But we're pivoting pretty hard towards electrification. This is everybody goes to $24 seven electric power.

To your core question I mean is there a divestiture or an acquisition either side.

I'd say not right now, we're pretty happy with our portfolio, we're running it as hard as we can.

But as you know, we're always open minded for opportunities whether it would be.

<unk> acquisition based on adding shareholder value.

But to predict that and forecast that.

Obviously.

Difficult.

Yes got it thanks, a lot David and best of luck Beth.

Thanks, John .

Operator.

Norma are you there.

Hello, operator Norma.

Can she tech sooner.

Yes.

I don't know if <unk>.

You guys can hear us on the call, but we appear to have some technical difficulties with the question queue.

Just give us a moment.

Okay.

Okay, well evidently we're having some technical.

Cole.

Issues with the Q&A queue.

So I'm just going to talk for a few minutes about the company I think you heard much of what we wanted to say in our prepared remarks.

But I would tell you we're pretty optimistic about where the company is right now given that.

Our.

<unk> and services business in our marine businesses are improving.

A lot of that.

Is demand driven with GDP going up but.

Crude and refineries.

The inventories are low for refined products and crude and the refineries in.

And the petrochemical plants are ramping up production there are still new chemical plants coming on I think it's interesting to note that crude's approaching $100 a barrel.

Which could spur more moves.

In the marine side and more U S production, which I think would be good for both of our businesses. So we're watching that carefully.

I think.

It only adds to our constructive outlook.

And I think we may have the Q&A then they have a new operator crystal are you there.

Hi, Yes, Sir I'm here, we will take our next question from Ben Nolan from Stifel. Your line is open.

Great I'm glad to open back up again and that was a nice covering there.

Yes.

Not sure what happened next February .

We're back.

Thanks.

It gives me a chance to.

<unk>.

And Collyn I appreciate him always making me feel like that was a good fisherman. So thanks Bill.

Yes.

But as you say.

He was a bad fishermen.

Can you just maybe Murphy electric.

But.

Let's see.

I guess my first question.

It goes to what you were just talking about just now David on that.

On the inland side and just in general about more activity more.

More petrochemicals more refining happening.

But I think one of the nuances around that is.

The impact of U S exports.

Which had with refinery utilization and everything and it hadn't been as high as it was but.

That was a major trend a few years ago.

Hi.

We get back towards that.

In the next year or two.

And do how does that help.

On the inland side or does it help us.

Barrels or chemicals start, leaving our shores and going elsewhere.

Yes.

Because a lot of the export volumes.

<unk>, our refined products gasoline diesel and maybe to a lesser extent jet fuel, but when they have.

Have ships going out of say the Houston ship channel.

To go abroad or to Latin America, South America or Asia.

<unk> often put blending components.

Those and they have different compartments.

Within these big Oceangoing ships, so that often leads to barge moves.

We may take.

Some of those blending components from one of the refineries over two to say like Kinder Morgan or a big tank farm.

So export volumes.

Do help barging because there is just more liquids moving on the system I would tell you there is still not back up to where where we'd like to see them. They are improving.

We can see more volumes moving to Mexico. For example, now and some of the Mexican moves we do are actually not two ships, but actually we go down the intercoastal waterway down to towards Brownsville, and corpus and there's distribution points, there that we get involved with but those.

Export volumes are not fully back up I do believe that adds to kind of our demand picture as we look into 'twenty, two and 'twenty three.

The World is still there is a lot a lot of parts of the world that are shut down still with Covid. So we view that that will reverse itself at some point and add to those export volumes.

But to your point of your question those export volumes are important to demand.

And I think our view is the good news is demand is pretty solid right now and that would only add to the demand picture for us going into into this year and next.

Okay. That's helpful. I appreciate it David and then for my follow up.

Switching gears over to D&S.

30% to 40% revenue growth is a lot, but just kind of backing into the math I mean, you're almost talking about a doubling of revenue on the oil and gas side.

I know that you guys had had pare down that business quite a bit in the downturn.

Is there is there much risk do you think of being able to move up that quickly on that scale I mean, and just in terms of hiring people in.

And equipment and everything else, obviously their supply chain challenges at the moment, but setting those aside.

How easy is it to.

To pivot that that quickly and that much.

No. That's a great question I would tell you.

As everybody knows hiring people now is more challenged than it has been.

We are still able to bring in new technicians, new assemblers.

It's getting more difficult.

I would tell you, though our biggest problem is the supply chain.

We're having problems getting getting key componentry one of our.

One of our major suppliers of a key component for what we're doing on electric Frac.

Basically just in the last months has told US that lead times have gone from 32 weeks to 52 weeks. So.

That's all supply chain, driven so that supply chain has been the bigger constraint for us to deliver than labor.

But.

We're not pollyanna ish the labor situation is tight.

Turnover is up.

Finding new candidates is more difficult.

But all that said, we're able to fill those positions I would tell you on the marine side.

The decision we made last year to startup our school in January in anticipation of kind of a rebound in demand.

<unk> has paid off.

We have hired and trained over 250 deck hands last year with our school and so that really helped we kind of seeded the.

The pipeline so to speak we did a little bit of that on the kgs side.

But we wanted to be judicious about it.

But your question's a good one.

It is getting harder and harder to find labor, but so far we.

Sure.

We're doing okay.

And.

Obviously, you just gave the guidance so you're entirely comfortable with.

Being able to.

To solve supply chain, and labor and everything else and hit on that growth.

Number yes.

Based on what we think deliveries or B is what's in our.

Component deliveries is what's in our guidance now could that shift to the right a little bit we put a little bit of room to shift a little bit to the right.

But if it ships shifts a lot more it could put us at risk now.

We're getting good feedback from our Oems and the people that we do business and our supply chain.

We are getting some deliveries so it's happening, but the supply chain is an issue and I think.

And I'd love to hear other People's opinions on this and you can listen to the pundits on CNBC and whatnot, but I think the supply chain sorts itself out over the next nine months.

That's kind of my my view, we kind of incorporated a little bit of that into our guidance.

Great I appreciate it thanks, Dave and again good luck.

Sure.

Thanks Ben.

Thank you. Our next question comes from Jack Atkins from Stephens. Your line is open.

Thanks for taking my questions.

So I guess, David maybe if I could start with coastal.

The obviously the economy is.

Doing fairly well oil prices are elevated we will walk through all of that I guess, what's the scenario that we really need to see to get the hit coastal back solidly profitable.

And sort of what's the timeline do you think for that.

Sort of unfold.

Yeah, that's a good question Jack.

Look whats happened in coastal is the same thing that happened in the inland market, but it's taken a little longer for it to get back on track, let me describe it a little bit.

In the inland market in the coastal market, we were moving a lot of crude.

And that crude oil.

Was a lot of demand.

There were over 500 barges moving crude oil in the inland side and and what ended up happening pipelines came on in and we had to absorb all the all those barges through GDP growth in petrochemical growth and so the petrochemical growth helped.

Absorb all of that excess supply in the inland side and the coastal side. What happened is the same thing there were a lot of barges built for crude moves and at one point and Kirby 50 barges, we had 11 moving crude.

And then.

Change the export ban you remember it used to you couldnt export crude and then they changed it.

You could and so are the number of barges moving crude for US went from 11 kind of at its peak.

Down to one so.

So we've got one barge moving crude now and that happened throughout the entire coastal market, but unlike inland there was there's not a lot of petrochemical moves on the on the coastwise business. It's really just refined products move so the demand growth there needed to offset the overhang in supply.

Has been slower to come but it's coming.

And then the retirements are coming you saw us retire quite a few barges on the third quarter. So we're getting back to balanced in the coastal market. When you look at some of the consultants that do work on on supply and demand forecasting for coastal <unk> is one of them.

It's about two years out when you start to see prices rising meaningfully enough to start.

Getting earnings back in in the solidly positive.

Range I wouldn't disagree with that we are tighter now our postal utilization as you heard in Roger's remarks is about 90%, but a lot of thats because we retired a lot.

Other people are retiring coastal barges now too so.

We're getting a lot more constructive on it.

Think the other thing about coastal and you know this Jack is it takes a long time for new.

New.

New equipment to come in right if somebody wanted a new coastal barge, it's probably three years out right now.

So I don't see any any new supply coming on.

Even if somebody announced it today.

It's three years out before we'd see it so I think the elasticity of pricing is going to be really strong in coastal and will probably hit.

Two years or so is what I would say.

Meanwhile, we are.

We're edging up pricing just a little bit it needs to go higher.

And it's gone up a little bit for us not enough but.

I think that trend will continue into 'twenty three and then we'll turn the corner in a meaningful way.

Okay.

That's helpful color, David Thank you for walking through that and I guess for my follow up question, just going back to inland for a moment.

Pricing is coming off the bottom, which is very encouraging but.

Obviously costs have been rising fairly steadily over the last year and a half two years, even when prices were going down. So I guess is there a way to maybe think about.

Where we stand today in terms of I don't know if you want to think about.

Cost per ton mile.

Or your inland business relative to your revenue per ton mile. How is that sort of delta changed and.

Do your customers understand that to the point that there can be a catch up here over the next.

A couple of quarters, maybe a year.

To help get you home because I think.

Obviously there is this is a highly inflationary operating environment out there right now.

Yes.

Well, Jack I'm going to let <unk> give you some of the components on inflation and then I'll tie it together with what we're seeing on the pricing.

Raj you want to give them some details on what we're seeing in terms of cost inflation, absolutely David So Jackie inflation, Israel. They know who we all know that it is driving up costs. So if we look at all of our key components right supplies food Crewing costs. They were all up in the mid single digits, we've seen wage inflation that David talked about that.

Really.

The real impact to us fuel costs have also risen sharply but.

On the side on the fuel side.

We have mechanisms in place for us to recover it from our customers.

We also do have some mechanisms in place with good mechanisms in place that are contracting that helped us recover some of this inflationary impact.

But.

I think the final. The final result is going to be what we're seeing right now which is <unk>.

Pricing trending upwards pricing, becoming a bit becoming fuller.

To address this inflationary.

Sherri aspect that we are seeing right now when.

When we have conversations with our customers they understand the inflation there.

And they are.

Frankly, seeing it with their cost too so.

Jack It is helping the pricing momentum frankly.

We're doing our best to manage it you can imagine.

Crude transportation costs are up as Raj mentioned food food prices are up.

Almost double digits.

We were joking the other day that maybe we should have with the price of pork and meet that we should have our crews go to vegetarians.

We didn't think that would work.

But nonetheless, we're working on on containing costs, but to your point Jack.

It is helping drive pricing because everybody understands that.

The inflationary pressures are real and crew shortages are real.

And demand and supply are in balance so it's.

It is helping the narrative and it has to happen.

All of us have to get higher prices to cover these causes costs.

So it's a long rambling answer hopefully got what you needed other than Jack.

A long rambling question, so I think thats great.

Alright, Thanks again, David really appreciate your time, Thanks, Raj Alright take care Jamie.

Yes.

Thank you. Our next question comes from Randy given from Jefferies. Your line is open.

Howdy gentlemen, how's it going.

Good Randy how are you.

Well two questions here first you mentioned the higher rates on the term inland barge contract renewals for the first time basically since the start of the pandemic for those contracts signed in December they were about 10% higher than December 2020 levels, but how far below the December 19 levels.

Those rates.

Yes, that's a good question.

You know I'm trying to do the math in my head, where we do it.

We're still below.

December 2019, Youll recall, Randy we said this in our commentary several calls ago that in the first quarter of 2020 before Omicron Omicron excuse me. The Covid started to hit we had a month where inland margins were up in the 20% range. So we were almost there.

So I would tell you we're still.

10% to 15% below.

Where we were in.

The fourth quarter of <unk> 19.

So.

That tells you how far we've got to go.

We're just coming off the bottom.

I think the key point is that that the inflections happen and.

There is true pricing momentum it has to happen any wages as we talked about to cover cover inflation, but supply and demand is tight so.

It set up but we've got a long way to go we've got it we got to get rates back up to to cover our costs and then obviously to cover returns on capital.

Sure certainly head in the right direction here.

And then second question in terms of DNS.

You mentioned, 30% or 40% revenue growth overall, I guess, how much of that is driven by maybe expected oil and gas new ordering versus kind of what you currently have on the order backlog and then in terms of margins how does new pressure pumping our E frac equipment compare with the margins.

On say on highway or marine repair.

Yes.

Great question.

Okay.

Lot of the revenue growth in 'twenty two is from backlog.

We entered the year was with a pretty healthy backlog.

Be it with supplies train.

Pie chain constraints that we've talked about.

That said, we do believe that we could be around a one.

Or better book to Bill.

422 so.

We've got a lot of backlog and that's that's driving a big part of that revenue growth.

But we're also seeing revenue growth in commercial and industrial.

The off highway and on highway markets are both both doing better in commercial and industrial so.

That's part of the revenue growth that we see but but make no mistake the backlog.

<unk> E Frac and electric equipment is a big part of that revenue growth.

I do think it will continue to grow.

We're still seeing good interest in it to your margin question.

A lot of this equipment due in generally speaking kind of.

The first versions of new equipment as lower margins, just because theres reengineering and things so that that is in our forecast in our margin guidance, we factored that in that said the margin should be higher than that over time.

We've just got a ways to go because.

This E frac market and the electric unification generation equipment market.

Is very innovative and evolving so theres some pretty heavy engineering.

Upfront costs and were.

All in our guidance, but thats, a long way of saying the margins will start lower and ramp higher.

I would hope to get DNS.

Kind of into the high single digit margins.

And the next.

12 to 24 months.

Sure.

Well good deal. Thanks again, congrats on the retirement Bill.

I'll talk to it.

Alright take care.

Okay.

Thank you. Our next question comes from Greg Watson Koski from Webber Research. Your line is open.

Hey, good morning, guys, how you doing.

Hello, Greg.

Great.

Doing well thanks.

First question just wanted to see if you've noticed any disparities between the 30 K and the 10-K market just thinking about rates newbuild prices, and then particularly utilization any differences in how that's trending now versus historically.

Yes, I would see this as on the margin. The 10-K is a little tighter.

Just a little more small lot chemicals in the 10-K and more refined products in the 30 K.

But it's not meaningfully different.

And the pricing of 10-K barges in the pricing of 30, K barges or are both up significantly.

One is not any cheaper than the other on a proportional basis. So.

Yes.

Big difference, but a slight difference I minutes.

Really driven around small lot chemicals more than anything else.

Got it okay.

Alright.

Sorry go ahead.

No no.

Thats, all I had to say.

Okay.

For for my followup, just keeping going off of the DNS backlog.

Thinking about supply chain and kind of what what that does to the to the revenue cycle. So can you.

Can you frame it for us is how.

How the whole product cycle. The whole revenue recognition cycle is has changed where does it stand now.

Given the supply chain constraints.

Versus where it's been a couple of years ago, and really what I'm getting at is if we think about.

The 2022 backlog.

Now or as of 12 31, how many more months do we have for you guys to keep building that backlog that would actually be recognized into 2022 versus at what point does it start to shift into 2023, whether thats now or three months or six months from now.

Yes.

Thats a good question.

Right.

We used to turn backlog on <unk>.

Regular fracs and probably.

Six to nine months, but I would tell you now it's more like.

Six to 12 months.

I would expect we'd still turn in the backlog.

Within 12 months.

The supply chain is certainly stretch that.

Yeah.

In order to use percentage of completion accounting it and I'm looking at Raj here I think you've got to have it be longer than a year in order to use and he is nodding yes.

Yes, we were not able to use POC has almost been completed contract type accounting so.

All that said, we still think we can turn to backlog within within 12 months, but it's.

Not at six month level like we used to have its more like the 12 month and those are gross averages right. Every every project is a little different and got different.

Different componentry or different engineering requirements are different customer requirements.

It's a gross generalization anything to add.

So.

We're going to control what we can control from a supply chain perspective I think.

The key message that we want to leave with you all.

The.

To David's point the supply chain is stretched.

By the end of the day I think the plan that we have in place.

The backlog that we have right now.

The plan is to convert.

That backlog in the current year.

Our what we're forecasting for.

For 2022 is to have a book to bill it.

One of slightly more than one so.

Plenish went off the backlog and executing to the current backlog that we have as we enter the year is what we're targeting.

Just to add to that is if we take orders.

Let's say in this first quarter.

<unk>.

The likelihood is probably wouldn't ship until next year, so really a lot of the revenue growth we've been talking about as backlog driven.

Got it okay.

Helpful. Thanks, Thanks, David and Rush and congrats again Bill best of luck on the link.

Take care Alright, Chris So we're going to run long and take one more one more question.

Thank you and we'll take our last question from Greg Lewis from <unk>. Your line is open.

Hey, guys. Thanks for squeezing me in on the on the end of the call Bill Hey, before I forget.

Congrats it's been a pleasure.

I did want to touch a little bit about.

Higher oil prices.

And.

For the guidance on inland.

I am kind of curious as we think about the higher oil price environment, realizing that it's funny that it feels like crude is kind of <unk>.

<unk> kind of <unk>.

Hi, Ali climbed to $90.

And it's happened really quickly.

Does that impact.

Your operations I E you're fueling.

Like how that works with customers.

Any kind of way, how we should be thinking about it in a higher price fuel price environment, what that should do to I mean.

I have to think it has to be highly supportive of higher rates.

Is there a way for Kirby to benefit from those higher fuel prices.

Yes.

In general, we try and work fuel to be a pass through we don't try and make money on.

On fuel.

Just the cost for our customers and we'd like to pass it through if you think most of our customers are large energy companies any rate anyway, right. The big oil integrated oil companies are big refining company. So they understand the fuel markets better than we do.

So we tend to just pass the fueled on it.

It does.

No from an accounting standpoint, we have to recognize it as revenue.

So it does actually dilute the margin a little bit right because higher higher revenue all associated not all of it but the revenue associated with higher fuel.

Kind of dilutes margin all of that said, though I think are higher.

Oil price is good it's good for our customers. It's good for our chemical customers is good for our refinery customers is good for our oil integrated oil customers.

So that that also will drive volumes. So it's generally good just from more from a demand standpoint than a price leverage standpoint.

And then the cost of transportation as a percent of cost of their product goes down so they get a little less price sensitive on that which is which is good.

So.

Generally higher oil prices are better for us than lower end.

But we don't really profit off of the actual fuel cost.

Now that said, we do do well in and KBS right, a higher oil price general generally drives demand for our pressure pumping customers.

And we're seeing that that said they do have more capital discipline. You know this Greg you cover it.

We're seeing our oilfield customers be very very disciplined with capital.

Which probably is helping drive the oil price up a bit.

Any rate.

Another long rambling answer no no that was great and then as I think about Capex I mean, it went up I assume some of that was kind of carryover for our kind of carryforward from I guess holding back some money last year, but.

I guess in the press release, you did call out $20 million to $30 million around.

The DNS business and some technology upgrades.

That capex is that kind of spin.

Used you mentioned electrification a few times on the call.

Is that kind of how we should be thinking about that capex for DNS or is that just once again, maybe we didn't invest as much as we should have last year, and it's kind of a little bit of catch up.

It's a little bit of catch up as you said we.

On on Marine in particular.

During COVID-19 .

We did the necessary maintenance.

There's a little catch up.

We do more.

To get our barge fleet.

Better so we've spent a little more maintenance capex, but.

And we've also got ballast water treatment as you know on the coastwise business.

Having this is Ben.

Probably $5 million to $7 million per barge to put ballast water treatment on we're about 65% through our fleet.

There's probably 30 $30 million to $40 million of ballast water treatment capital in the next year or so I think it's $50 million over the next two years. So a ballast water treatment is part of that but then on the <unk> side, we have invested.

In the <unk> side.

Really.

Incremental small stuff, but we did add to our power generation rental fleet, that's part of our budget.

As you know power backup power is just crazy.

Everybody wants that everybody knows they need power 2047.

So we do a lot of.

Backup power generation rental equipment.

So we added a bit to that fleet and KBS.

As well as a few improvements due.

Two are.

<unk> manufacturing area.

Our branches.

All right perfect. Thank you all for the time, everybody have a great day alright.

Alright, Thanks, Greg.

Thank you and that does conclude our question and answer session for today's conference I'd now like to turn the call back over to Eric Holcomb for any closing remarks.

Thank you Crystal and thanks, everyone for participating in our call today.

If anybody has any questions feel free to reach out to me today. My direct line is 70 134351545, thanks, everyone and have a great day.

Thank you. This concludes today's conference call. Thank you for your participation and you may now disconnect everyone have a wonderful day.

[music].

Good morning, and welcome to the Kirby Corporation 2021 fourth quarter earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero after today's presentation there'll be opportunity.

To ask questions. We will ask you to limit your questions to one question with one follow up to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press the pound Kate. Please note. This event is being recorded I would now.

Now like to turn the conference over to Mr. Eric Holcomb, Kirby's Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining US with me today are David <unk>, Kirby's, President and Chief Executive Officer.

Raj Kumar Kirby's Executive Vice President and Chief Financial Officer, and Bill Harvey Kirby's Executive Vice President of Finance and Slide presentation for today's conference call as well as the earnings release, which was issued earlier today can be found on our website at Kirby Corp Dot com.

Statements involve risks and uncertainties and our actual results could differ materially from those anticipated as a result of various factors, including the impact of the COVID-19 pandemic on the company's business.

A list of these risk factors can be found in Kirby's Form 10-K for the year ended December 31, 2020, I'll now turn the call over to David Thank.

There were 27 per share.

The quarter's adjusted results improved sequentially by <unk> 10 per share, reflecting improved results in marine transportation, primarily driven by higher barge utilization and pricing in inland.

These improvements were partially offset by reduced earnings and distribution and services as a result of seasonality in the commercial and industrial markets and supply chain delays in manufacturing.

Looking at our segments.

<unk> transportation.

These factors contributed to our barge utilization increasing into the mid to high 80% range with rates near 90% for much of December .

With improved market spot rates increased both sequentially and year on year and term contracts renewed higher for the first time since the start of the pandemic.

Escalating cases of the COVID-19, Omicron variant also impacted our operations, resulting in Crewing challenges.

Omicron impact is estimated to be one to two <unk> for the quarter.

Despite these challenges through the quarter inland revenues significantly increased with operating margins approaching 10%.

In coastal market conditions were stable during the quarter, our barge utilization increased into the 90% range, primarily due to the retirement of idled tank barges in the third quarter.

Operating margins were near breakeven at the end of the quarter, we completed our exit from Hawaii, and we ended the year with 31 tank barges in the coastal fleet.

In distribution and services or markets remained strong and we continued to build black clog. However, as mentioned and expected fourth quarter revenues sequentially declined due to seasonality and commercial and industrial and ongoing supply chain constraints in manufacturing.

However, as highlighted last quarter significant supply chain issues, and our manufacturing business delayed many of our deliveries into 2022.

As a result, our oil and gas businesses had a sequential reduction in revenues and operating income.

Marine repair business was also impacted by seasonality, but this was mostly offset by increased <unk> sales.

Early in the quarter, we acquired the assets of a small energy storage system manufacturer and we are now offering its products under the trade name <unk> adaptive.

They're esf's products and technology have been key to the development of our new power generation solutions for electric fracking equipment.

This acquisition represents a key step in our ESG journey and will be important as we develop new energy storage solutions for the oilfield and other commercial and industrial applications.

In summary, our fourth quarter results point to improving fundamentals in our business, despite normal seasonality COVID-19 challenges and supply chain issues.

In a few moments I'll talk more about our outlook, but first I'll turn the call over to Raj to discuss the fourth quarter segment results and the balance sheet.

Thank you David and good morning, everyone.

In the fourth quarter of 2021 Marine transportation revenues were $356 million with an operating income of $25 7 million and an operating margin of seven 3%.

Compared to the third quarter Marine revenues increased $12 1 million or 4% and operating income increased by $8 8 million.

These improvements were primarily due to increased refinery and chemical plant production following the impact of hurricane Ida as well as improved barge utilization and increased spot market pricing seen in the inland market.

Compared to the fourth quarter of 2020, Marine revenues increased $51 2 million or 17%.

This was primarily due to improved <unk> utilization in inland spot market pricing.

Fuel rebuilds.

Seen in both the inland and coastal business sales also contributed to the revenue increase as we saw the average cost of diesel fuel approximately double in price.

These increases were offset by lower pricing on inland term contracts that had renewed prior to the fourth quarter.

Marine operating income declined $3 5 million year over year, primarily due to lower inland term contract pricing from the peak Covid period.

During the quarter the inland business contributed approximately 77% of segment revenue.

We saw average barge utilization improved considerably.

Barge utilization was in the mid to high 80% range as compared to the low 80% range in the third quarter in the high 60% range in the fourth quarter of 2020.

Tom contracts that renewed during the fourth quarter on average while encouragingly up approximately 10%.

<unk> market rates also increased in the middle single digits sequentially in the high single digits year on year.

Compared to the fourth quarter of 2020 inland revenues were up 20%, primarily due to increased barge utilization fueled rebuilt and spot market pricing, partially offset by reduced pricing from term contracts that renewed earlier in the year.