Good morning and welcome to the Kirby Corporation 2021 Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. We ask that you please limit your questions to one question and one follow-up. [Operator Instructions] 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 Grzebinski, Kirby’s President and Chief Executive Officer; and Bill Harvey, 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 at kirbycorp.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 and the related response of governments on global and regional market conditions and the company’s businesses. A list of these risk factors can be found on Kirby’s Form 10-K for the year ended December 31, 2020. I will now turn the call over to David.

Thank you, Eric, and good morning everyone. Earlier today, we announced the adjusted earnings of $0.17 per share for the 2021 third quarter, which excludes a one-time non-cash charge totaling $4.58 per share related to our coastal marine business. On a GAAP basis, we reported a net loss of $4.41 per share. Overall, our quarter was messy with the one-time charge in coastal, a devastating hurricane, which significantly impacted our inland marine business and increased issues related to COVID-19. We’ll talk more about each of these, including the one-time charge, in a few moments, but first I’ll discuss our key markets. In marine transportation, our inland business started the quarter with improving customer demand. In August, however, barge volumes declined as the cases of the COVID-19 Delta variant increased, which slowed the pace of the economic recovery and reduced demand for refined products and crude. Vehicle miles traveled in the U.S. declined, including an overall 4.4% decline in August with all regions of the U.S. impacted. In our operations, we experienced a meaningful rise in positive cases among our mariners. As a result, we incurred increased costs to charter additional horsepower during the quarter to ensure our operations were seamless. Our inland business was also materially impacted by Hurricane Ida, a significant category four storm, which made landfall near New Orleans in late August. This storm left a widespread path of destruction, which led to prolonged shutdowns of many customer plants, as well as significant damage to marine equipment and waterway infrastructure. As this storm approached, all refineries and chemical plants in the New Orleans, Baton Rouge corridor, were forced into shutdowns. The storm damage was so significant that many remain closed or operating at reduced production levels through September and in some cases well into October. At the height…

Thank you, David and good morning everyone. Before I review our segment results, I want to provide a little more detail on the one-time charge and coastal marine. During the third quarter, we sold our coastal marine transportation assets in Hawaii, including four tank barges and seven tugboats for cash proceeds of $17.2 million. We also retired 12 wire tank barges and four tugboats, which had limited customer acceptance in low utilization. These events resulted in a non-cash impairment charge of $121.7 million. As a result, the company concluded that a triggering event had occurred and performed interim quantitative impairment tests on coastal goodwill, which resulted in a non-cash impairment charge totally $219 million. In total, the company recorded a non-cash impairment related to coastal marine equipment and associated goodwill totally in $340.7 million before tax, $275 million after tax or $4.58 per share. Looking at our operating segments, in the third quarter marine transportation revenues were $338.5 million with an operating income of $16.9 and an operating margin of 5%. Compared to the 2020 third quarter marine revenues increased $17.9 million or 6% primarily due to higher fuel rebuilds in inland and coastal as the average cost of diesel fuel had increased 76%. Improved barge utilization in inland is offset by lower pricing on term contracts that had renewed during the last year. Operating income declined $15.5 million primarily due to Hurricane Ida lower term contract pricing and increased made it’s. Compared to the 2021 second quarter, marine revenues increased $5.6 billion or 2% due to modest improvements in coastal barge utilization and increased fuel rebuilds. Operating income declined $1.6 million as a result of sales mix increased horsepower costs in the impact of Hurricane Ida. During the quarter, the inland business contributed approximately 76% of segment revenue. Average…

Thank you, Bill. Although the third quarter certainly had its challenges. We are very encouraged by the improving market fundamentals across our businesses, which are setting the stage for materially improved earnings in the coming year. In the near-term for the fourth quarter, we expect a sequential improvement in an overall revenues and earnings driven by increased volumes and more favorable market conditions in Marine transportation offset in part by nominal and normality and continued supply chain issues in distribution and services In the inland market although some issues associated with Hurricane Ida have carried over, including extended customer shutdowns, barge repairs, and waterway closures. Our outlook remains very positive. During October, our barge utilization has been in the mid-80% to high 80% range with recent utilization at the high end of that and then a high 80s. Some of this increase can be attributed to waterway closures in Louisiana, which have extended transit times. However, turnarounds in pent-up demand are also driving up large volumes. Well, the waterways are expected to fully reopen soon. We expect barge utilization levels will be minimally impacted due to the ramping up of Hurricane Ida affected plants, economic improvements, new chemical plants coming online and the onset of winter weather. With increased inland activity levels, minimum new barge construction and continued retirements, we expect further improvements in the spot market going forward. During the fourth quarter and into next year, term contracts that renewed lower during the pandemic are expected to reset and gradually reset to reflect the improved market conditions. Overall inland revenues are expected to sequentially increased in the fourth quarter with operating margins, improving to around 10%. In coastal, we expect the market will continue to recover with modest demand improvement for refined products and black oil transportation. The recent…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ben Nolan with Stifel. Your line is open.

Thank you and good morning, Dave and Bill.

Hi, good morning, Ben.

Hi. My first – for my first question, I wanted to start with something a little bit more store – maybe strategic or a function of sort of where the broader market landscape is headed. And certainly one of the things that we’re seeing is all the supply chain issues, but it’s impacting things like driver shortages and even on the railroads being somewhat capacity constraint and definitely inflation in some of those – specifically those other two categories. I am curious sort of what’s the crossover is? If those areas are starting to see significant inflation, is there any ability for some of the excess chemical or petroleum products to sort of be priced out of the market for you guys to capture share if those or the two modes of transportation get more expensive?

Yes. I’m not sure there is a lot of crossover. There could be some – basically if it can move on water, it does. I would just tell you in general, inflation is happening. We’re seeing a little wage pressure. We gave some raises in July, but we’ve not had a problem filling positions. As you know, Ben, we started our school, which is a kind of a Kirby advantage. We started training mariners in January and have continued throughout the year. So we feel pretty good about where we are in terms of our labor supply and we’re pretty excited about that. We are seeing some inflation with supplies and food and whatnot, but so far it’s okay. The big news for us really is that the demand is growing. We’re starting to see it. I mean, you can see it in the consumer, right. The consumer is doing better. Gasoline demand is back, backup above the five-year average. Manufacturing orders are up. Our chemical customers are doing really well. You can look at their earnings announcements. Our refining and integrated customers are seeing inventories low one, but the crack spreads really high. One of our independent refining customers that had shutdown their refinery during COVID has restarted it. So, from our perspective demand is increasing. It’s not really crossover demand. It’s just real demand that we saw in our base business. And as you know that demand with supply and check means that we’re headed for a much better pricing environment. We’re starting to see that now. We’re getting price increases. In the spot market, spot prices are above contract prices and things are moving along really well there.

All right, great. That’s a good color. Appreciate it. And then for my second question, just switch gears a little bit on the coastal side, I know you guys have sort of been mentioned or danced around some of the opportunities around offshore wind development. I’m curious if you can just sort of give some sort of an update as to where that stands and maybe frame in the opportunity set from a Kirby perspective?

Yes. Well, we’ve got to be very careful. We’re under a couple of different NDAs and we really can’t say too much in specific, but you could imagine we very much want to be in the wind service business whether it’s wind installation or service and we’re working hard on it. As you’ve seen with these offshore installations, the contracts kind of drag out over time and it’s not moving as fast as anybody wants, but suffice it to say we’re in the middle of things and looking forward to some meaningful avenues of future growth for Kirby in our marine operations. I can’t really tell you much more than that. I wish we could, but we’ll see as these projects progress.

Understood, I’ll be on that lookout for that. So appreciate it. Thanks guys.

Thanks, Ben.

Thanks, Ben.

Thank you. Our next question comes from John Chappell with Evercore ISI. Your line is open.

Thank you. Good morning everybody.

Hi, good morning, John.

David on the inland contract renewal, so Bill said 3Q, there was a few contracts and I guess they were reset down. So when you think about 4Q and 1Q, can you speak to some level of magnitude on number of contract renewals as a percentage of your book, and also given everything you’ve just laid out with utilization touching 90% petrochemical production coming back online, would you anticipate at least flat to starting to see some positive revisions in the contractual renewals this quarter?

Well, I’d be more positive than that actually. We’re – we’ve kind of lapped the lows of COVID renewals. So what we anticipate is contract renewals in the fourth quarter will be up. We’ll see how much they will be up, but when you look at what’s happening in the inland market and particularly tightness around horsepower, tightness around supply is growing, we’re very optimistic and we think we’ll renew a contract higher spot pricing is well above contract pricing. And we’re about to reprice some of these – the COVID low contract. So I can’t be too specific because it’s a negotiation with numerous customers. As you know, fourth quarter is usually one of the heavier quarters. I would say it’s kind of twice any other quarter. First, second, and third are kind of all around the same, maybe a little more in the first than the second and the third, but the fourth is always the heaviest. So we’re pretty optimistic. We’re heading in demands tight. Pricing is going up. Labor and mariners are in short supply. Horsepower is in short supply. It is set up to go up. It needs to, it has to and it will.

Great. And then sticking with that theme as well, a lot of people tend to watch refined product utilization, refinery utilization, because we actually have visibility on that every week. I think that data you provided on the petrochemical numbers out of Southeast Louisiana was pretty meaningful when you go from 89% to 25%. Is there any – I know that some of your new customers are coming back online, but when you think about 4Q overall, or maybe just kind of November and December run rates post a ramp up period, what are you expecting for the petrochemical plant utilization and overall production as the kind of rebounds from that 75% decline?

Yes. When we – I’ll just look at south – I’ll use Southeastern Louisiana ethylene as an example. Pre-Hurricane Ida, they were – ethylene plants in that corridor were running around 89%, as you heard, they dropped to 25%. I think they’re backed up to 89% and maybe even higher than that. There’s some of the big chemical customers, you know them, they’re saying they’re running full out and some of the refiners are saying the exact same thing. The independent refiners are saying they’re going to run out – run hard. Also we’re seeing a little heavier feedstock mix, which is pretty positive for barging. The heavier feedstock mix, the more byproducts. And those byproducts generally lead to a little more barge movements – maybe some of them are heavier products and not as readily moved in pipelines. So it’s shaping up nicely. It’s always good when your customers start making more money, right. Whether it’s the chemical guys or the refiners or the integrated, they’re all doing better and that’s good and they’re doing better because demand is picking up. And I think we’re all tired of talking about COVID, but its demand impact has been real. And hopefully, we’re turning the corner. We had the Delta variant, hopefully there’s not another variant coming. But everything looks pretty good from our perspective, just looking at refinery utilization and chemical plant utilization, ethylene production, aromatics production, C4 co-product production. They’re all kind of increasing. They have recovered from Ida and actually are starting to get above pre-pandemic levels and back to pre-pandemic levels.

All right. Well, that’s all great to hear. Thank you, David.

Yes, thanks.

Thanks, John.

Our next question is from Jack Atkins with Stephens. Your line is open.

Okay, great, good morning and thanks for taking my questions.

Hi, good morning, Jack.

So, David, I guess maybe to start with maybe a two-parter on inland, you’ve referenced sort of some heavier feed stocks. I would be curious maybe you could expand on that a bit with natural gas prices moving higher over the course of the last several months. Can you may be talk about how that impacts your business? Is that a positive or negative as you think about petrochemical output and activity? And then with the fundamentals accelerating in the inland market, is there – maybe any thought to going to some shorter term contracts just to be able to participate in maybe a stronger pricing environment as you look six or maybe even 12 months out, just trying to think of a way to capitalize on that versus locking yourself into 12 months commitment, but now right as the markets beginning to turn.

Yes. Let me take the first part first. The – look as natural gas prices go up, ethane is part of that kind of split and ethane is a big feedstock for the ethylene plants, right. But as those prices go up, you’ll crack more naphtha or heavies, could be C4s or propane. They’ll start cracking heavier because one the math starts to work for them for the heavier feedstocks. And we’re seeing that. I think there’s Dan Lippy and that publish on that, but the heavier feedstocks are going in to the chemical plants. And again, that’s good for us. The more naphtha they crack, the more heavies that you’ll see. You could see C4s and butadiene coming out. Butadiene is a nice one because it’s a pressure cargo and Kirby has got a pretty good position in pressure products. So, yes, the flexi crackers are taking advantage of kind of the pricing dynamics and cracking a little more heavy. In terms of more spot versus contract, Bill, you said the spots about what 35%...

35…

35% of our book right now. And then we’ve got a lot of contracts that are going to reprice here in the fourth quarter. So, 35% spots still feels about right. I hear you loud and clear. I mean, we we’d like to capture more price increases, but we’ll roll through this and see where it goes. It feels pretty good with 35% spot that will reprice pretty big – pretty quickly. Jack?

We lose you.

No, no, I’m here. Sorry. I was on mute. Thanks. Thanks David for that. Yes. So, I guess, for my follow up question with regard to the coastal barging market and the action that you took there to sort of clean up some underperforming assets with utilization, now at 90% or so kind of moving forward understanding there’s some issues in the fourth quarter kind of clean up there as you complete some contracts. But do you feel like that business now, even at current pricing can be breakeven and modestly profitable? How are you thinking about the profitability impacts of the actions that you took during the quarter?

Yes. We’re hopeful, we’ll be breakeven-ish next year. There’s still a little overhang and excess equipment in the coastal market. I think everybody’s aware of the blueshot equipment out there. And there’s still a fair amount of idle equipment amongst our competitors. The good news is, as we talked about demand is increasing, right? If you think about the coastal business, it’s pretty heavy in terms of refined products. And as you heard in some of my previous comments, refinery utilizations up product inventories are low, frac spreads are stronger, volumes are picking up. They just need to pick up a little more. There’s still too much supply in the offshore business. And, but we’re getting closer to the turn there. I think that turn is further out than the inland turn just because of how overbuilt that market got after. As you recall, Jack, a few years back, there were probably a third of the fleet was moving crude by barge. And I would say, it’s a lot less than that. There’s normally a handful of the coastal barges moving crude oil now. So all that excess capacity has to be soaked up by refined products, demand and that’s happening. It’s just happening a little slower. So, but it’s head in the right direction. We are doing our part. We’re taking out these older wire equipment pieces. And I also think that ballast water treatment may drive some others out to retire. We’re pretty far along on our fleet with ballast water treatment. I think a few other of our competitors are behind the curve on ballast water treatment. So as they start to spend that capital, perhaps we’ll see some retirement. So it’s a long-winded answer to say that supply and demand’s still a little out of balance. But it’s heading in the right direction. And we took the actions, we felt that were necessary. And I think, we’ll be breakeven-ish next year based on what we see now.

And Jack, one thing, David mentioned in the prepare remarks, but is not insignificant. It allows us to focus the spend on the good assets. These – the assets that are retired in the Hawaiian assets, we would’ve required significant capital, and that’s not the place to put capital.

Okay. Now makes total sense. Thanks for the time guys.

Thanks Jack.

Thank you. Our next question comes from Ken Hoexter with Bank of America. Your line is open.

Hey, good morning.

Good morning, Dave.

Hey, good morning, Dave and Bill. Just at the O&G side of DNS. Maybe, can you talk a bit about the supply chain issues? You talked about the drag on margin versus the rising demand. Maybe your thought obviously no easy answers to the supply chain, but your thought on how long that remains an overhang.

Yes. It’s look – it’s what you’ve been hearing. I can tell you that, we’re having problems with engine deliveries. We’re having problems with transmission deliveries, as you might imagine with the electrical nature of much of what we’re taking in an inbound circuitry, and components motherboards, and kind of chip based stuff has been slow. I would tell you that, if we had, could have gotten some engines in a few other electrical components, we would’ve – we would be shipping more product in the fourth quarter. I think, it resolves itself, in early 2022, but it’s real. I know you guys are tired of hearing about COVID and supply chain. We’re tired about it too, but it’s been real. You can look at some of the big engine OEMs they’re starting to catch up. So, I’m optimistic. But they were real. I think that the encouraging thing though, Ken, is our backlog has jumped meaningfully. I mean, our book-to-bill is a huge percentage. And we’re not talking tens of millions, it’s more like hundreds. And backlog is really growing. A lot of it is ESG centric. I’ll tell you, in oil and gas in particular kind of any new equipment is got an element of carbon reduction for our customers and our customers, customers, and you so that we’re very excited about it. And you may have heard also that we bought a small company during the quarter that that builds ESS, energy storage systems or batteries, if you will. ESS sounds a little more sophisticated. But one of the things we do is, we add that battery system to a frac spread, and it helps even the electric load on the generation equipment as they’re ramping up and down on their pressure pump, the actual pumping that’s, so that’s vertical integration, but the great thing about the ESS capabilities. We’re able to extend those into other parts of our KDS business, the distribution business you can imagine a commercial and industrial and the need for electric power it keeps growing and having a strong ESS offering will help us and is helping us. And then you can even take it to marine, we’re building basically an electric hybrid tugboat right now, Ken it will be able to run completely on electric power. And we’re really excited about that. We see that as a future and also a place to add product from this very small acquisition, but with it’s got high technology. No, that’s a long rambling answer. Hope, I got the answer you wanted there.

No, yes. It’s just, I guess to understand it’s helpful. So, I mean, it sounds like from your thoughts on inland really seeing some strength flow through, maybe I’m a little confused in your follow up answer from Jack in terms of, are you still concerned on the coastal pricing while you’re seeing that inflection at inland? Maybe just a little clarity on and then just a real quick follow-up there.

Yes. So well, we’re seeing a nice inflection on inland in terms of pricing. I would characterize coastal as flat in not yet rising the way it needs to, so sorry for that confusion, but yes, inland is definitely moving on pricing and coastal hasn’t really started, but it’s not declining. It’s just not going up the way we’d like.

So, let me just ask you on corporate actions. I know that’s a third one, but I guess I’m a little surprised by the move to eliminate part of the inland and coastal marine inside, versus I think the general expectations were maybe something was coming down the pipe on scaling or descaling on the distribution and services side. Maybe just step back and your thoughts on what other parts of the business. It sounds like you’re adding more with this acquisition on the eFrac side, but how do you think things stand now within the organization?

Yes, no, I think we’re very excited about marine. I think you’ll see it look, this small acquisition is, I mean, really small…

Its 40 – it’s immaterial in some ways…

Yes, it 40 really basically assuming some working capital liabilities, and that’s the extent of it, very little cash outflow. So it’s not – it’s not meaningful at all in terms of materiality in terms of cash. As we look at our business, the serious cash deployment would be to continue to consolidate the inland marine business. If we’re doing anything, you may see us spend some, some meaningful CapEx on wind support type vessels depending on contracts and how that might go. But the big capital deployment will be in the marine side of the business. I think the offshore assets, that was more of a restructuring as we look at it, our customers that they really have gravitated away from wire offshore barges to the favor of ATBs. And we just kind of took that and said, we need to restructure around that. But the meaningful capital deployment or acquisitions will likely be in the marine side, I would tell you on DNS, we’re running with the electrification side. And that has been meaningful in the oil and gas side, as we’ve seen eFrac come up, and power generation used in well servicing. I would tell you the rest of that commercial and industrials coming along too, almost every, every business nowadays is looking at the grid reliability and what they need to do to protect themselves. So, we’re pretty excited about that, but as you know, that doesn’t take a lot of capital, right? That’s, doesn’t require us to go buy companies or a lot of CapEx. It’s really pretty low CapEx. This small acquisition really was a small piece of vertical integration because we’re already selling the ESS with our eFracs.

Great. Thanks, Dave. Appreciate the time. Thanks. Bill.

Thank you.

Thank you. Our next question comes from Randy Giveans with Jeffries. Your line is open.

Hi gentleman, how’s it going?

Good.

Good. How are you doing Randy?

Good. So I guess first question, are there still any real lingering impacts from Hurricane Ida or has that largely subsided? I know you mentioned there was an $0.08 negative impact during the third quarter, so just trying to get the expected impact here in the fourth quarter.

Yes. There – in October, there were probably a couple cents worth of impact that we factored into our thinking the plants are just now coming up. We still have – we have repair activities going on right now with some of the barges that were impacted from Ida. They haven’t all been repaired yet. They’re underway that should be take care of itself in the next three or four weeks. The revenue is still down a little bit because of that. And some of our major customers were just, just now ramping back to full capacity, but they’re coming back. I’d say the only real lingering thing is the inter-coastal to waterway is still closed near New Orleans. But I think that’s going to open up in the next week or so. What that does is causes us to divert around a little longer transit times to get to that new Orleans Baton Rouge corridor. So it’s almost behind us and there were, there’s some headwinds in the fourth quarter there, but it’s not near as large what we saw in the third quarter. And as we talked a little bit about what our fourth quarter will look like, that’s all in the guidance.

Yes. All right. And then for the sale of the Hawaii assets, the retirement of that wire equipment, how meaningful is that in terms of potential profitability or maybe lost profitability for coastal, and then I guess on the other side of the sales of those assets, I think you mentioned this a little bit here a few minutes ago, but any appetite for additional kind of larger inland tank barge acquisitions at this point?

Yes. I’ll let Bill talk a little bit about the magnitude of kind of revenue and operating income for that. And, but I’ll come back and talk about acquisition.

Yes, we looked at those assets were underperforming assets. They were not assets that were generating profitability look Randy, and the contracts were ending and we didn’t see profitability perspectively and as well, there would’ve been capital employed. So, we would’ve had to invest capital. So the way we looked at it was the right time to leave. We had lined up all the contracts to the end of the year. So, we sold the assets and took $17 million and we’ll deploy our capital elsewhere.

Got it. Okay.

Yes. And in terms of acquisitions look it’s no secret there’s been a lot of pain in the marine side, both offshore and inland. I think this market’s been one of the work ever in history. We were coming out of the bottom pre-pandemic and then the pandemic just kind of set a new low. Many of our competitors have been an operating at cash breakeven, or lower, we had some con some way down there as well. You can look at our inland margins, right? They were kind of record lows. Now, that’s coming back, we were, low, mid-single digits. Now we’re kind of, I think we did a round 7.5 in the inland side and in the third quarter, we’re thinking we’ll do 10% margins in the fourth quarter. I would see, hopefully we get into the mid teens in 2022 in inland. But when you start at really low margins and break even for many of our competitors, there could well be some opportunities. I would caveat this and that is, we’ve been very prudent through this pandemic we’ve paid down a lot of debt as you heard from Bill. I think since the Savage acquisition, we’ve paid down over $500 million in debt, we’re still generating really strong cash flow. We’ll continue to de-lever and be prudent as we look for acquisitions, but there could, well be some, I would just tell you we’re going to be prudent. It’s been a rough couple years, and there’s a lot of pain out there. But by the same token, we want to de-lever a little more. We we’ve gotten our debt-to total cap down below 30%. It’s now got, I think it’s 29%. I’m looking at Bill 29%-ish so we’re going to de-lever a little more, but there could be some prospects in the coming year or two.

Okay. Yes, that all makes sense. Thanks for of time.

Thanks, Randy.

Thank you. And our next question comes from Greg Lewis with BTIG. Your line is open.

Hey, thank you. Thank you and good morning, everybody. David, I wanted to touch on, I mean, clearly the Q3, there was major disruptions, across the barge to weather was on the refining side and the Petchem side. As we think about it, historically, traditionally Q3 was a good quarter utilization pricing. It seems like then, you kind of step down a little in Q4 and then in Q1, you had really step down, in terms of utilization and spot pricing, just given what we saw in Q3, does that kind of change, how we should be thinking about normal, the normal seasonal path, maybe not in Q4, but in Q1 and what that means in terms of setting up Q2?

Yes, good question. Look there’s no doubt that Q3 was messy. We had the restructuring of coastal Hurricane Ida was about $0.08. COVID we didn’t really talk much about it, because I think we’re all tired of talking of COVID, but that probably cost us $0.05 or $0.06. As, COVID hit our marine crews, we had to divert toes. We had to take them off higher because we had to re-crew, we had higher medical costs, et cetera. So and then we had a higher tax rate if you throw that onto the third quarter too. So it was a messy quarter as I look forward. I would tell you that, some of that those kind of headwinds are definitely going away. Ida’s gone away. Third quarter is almost always our best, but and that’s because of our contracts of affreightment as you know when the weather’s good, that’s where we make good margins. So, I know it sounds cliche, but I think it quarter three was an anomaly. As you do know quarter four has the weather and quarter one has some weather as well. That that’ll be normal, but it won’t be near as bad as say what Ida and COVID did to us in this quarter.

Other way to look at that, weather’s still a factor. It was a factor in first and first quarter, fourth quarter have that, but it is a rising market. So the rising tide, the rising tide of pricing and utility is there.

Yes. Okay, great. And then, I mean, you touched on, obviously the barge, the loss of barges or submerge barges was more, of a dry bulk barge phenomenon than wet. Is there any sense to, I mean, do we have any sense for, maybe what type of negative impact on barge supply, whether it’s medium term or long-term, Ida hat on the tank barge market?

Yes, I think it’s all temporary, the amount of liquid barges that were impacted were, was pretty significant. There were some doc customer docs that were impacted. Yes, I don’t know if it would drive some retirement, if you had, a damaged old barge, you may retire it. But it’s, there’s a lot of barges in the shipyards now recovering from Ida. But I think it’s very temporary. It was more dry cargo and other vessels that were impact the liquid tank barge market was impacted. And I think, I use Kirby as an example, we’ve probably had 30 barges. We only got a handful left to come out to repair. So, we’re almost through it. And I wouldn’t think the rest of the industry is much different than we were in that. It was a meaningful impact though. It’s to have the Mississippi river go flow northward and rip a lot of fleets up. It was a significant impact, but I do think it’s largely temporary and not a systemic change to the inland market.

Okay, perfect. Great. Okay. Hey everybody. Thank you for the time.

Thanks Greg.

Hey, Carmen. This is Eric. We’ll take one more. One more question.

Yes, sir. Our next question is from Greg Wasikowski with the Webber Research. Your line is open.

Hey, David and Bill. Good morning. Thanks for squeezing me in

Greg. How you doing?

Good. Good. First question’s on the inland order book and just looking at the order book in prices for new barges, supply side looks pretty construction, pretty – sorry constructive for in probably next few years to come. And I’m just curious is, the increase in new build prices is that kind of directly attributable to higher steel prices or are there other factors that play there and I’m thinking specifically, is there any sort of, hesitation from owners or underlying technology, obsolescence risk embedded in there, kind of looking ahead five, 10, 20 years in the future. And maybe saying it another way if steel prices were normalized would we still be looking at a constructive supply picture here?

Yes, that’s a good multifactor question there. I would tell you, so look new barge, whether it’s clean or dirty or hot, hot oil barge, the prices, if you go back to 2017, 2018 prices are almost, I would say almost double a big portion of that is steel. But look, everything that goes into it has gone up in price too. Right. I mean, you can think about paint, you can think about, welding and labor. Yes, it’s just cost more now to build them, and that’s why, as we think about inflation, that’s, it’s not a necessarily a bad thing for Kirby. We’ve got this huge installed base of barges that are relatively young and well maintained. And yes, so the higher, the cost of new barges kind of the better, the better for us is the way we look at it. But steel is no doubt that, the majority of that cost and it’s yes, steel is up where the price of barges went up a 100%, steel is up 300% since pre-pandemic. So you could have imagined it steel that I would tell you that, most owner operators right now are not building new equipment. There has been some on order it’s been on order for a while deliveries or nominal. And I would say retirements should outstrip the deliveries there, in terms of your technology obsolescence, there’s not, barge is a barge. It’s a big steel box, but they are more and more sophisticated, but there’s not a lot of technology obsolescence. I would tell you that there is because of ESG, it’s becoming more and more important, is the pressure rating of a barge. A typical industry barge had a three pound pressure rating, Kirby’s only built six pounds. So if you think about it, [indiscernible] emissions from a six pound barge are a lot less than they are on a three pound barge. And the market’s starting to recognize that. And by the market, I mean, our customers, they’re worried about their fence line emissions and there’s a premium coming and starting for six pound barges. Now, is that an obsolescence thing? Not sure it’s an obsolescence thing. It’s a, it’s just a fact, right. That everybody wants their emissions down. Those emissions are getting measured more and more and reported more and more. So we’re seeing a, a premium kind of leak into the market, well driven into the market by more desire for six pound barges versus three pounds, but that’s not, it’s not technical obsolescence per se.

Got it. That’s helpful. Thank you. And then one more quick one just on the pace of inland recovery it’s thinking about it in terms of, it’s not as V-shaped as maybe previously thought six months or a year ago. Can you speak to maybe the benefits of it being of a longer, flatter curve and maybe it being more sustainable in the long run than a V-shape recovery?

Yes, the obvious benefits of that are, it keeps building down longer, right. But it’s also there’s a lot of pain and not that you like a lot of pain, but that pain may just discourage, people from building new barges, or trying to expand as we look at some of our competitors. It’s tough on them, it’s tough on us. Look I’m so, maybe that, that sobers people up about building and expanding, so that could be a benefit as well, but we’re now we we’d like to see our returns up. I’ll just say that. So not that we want a sharp fee, but things need to move and they are moving and it’s welcome.

Okay, Appreciate the time guys.

All right. Thank you.

Thanks, Greg.

All right. Thanks Greg. And thanks everyone for joining us today. If you have any additional questions or comments, you feel free to reach out to me directly throughout the day. I will be in the office. Thanks everyone. Have a great day.

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