 Second quarter 2020 earnings of 0.42 per share Marine transportation and distribution and services revenues decline amid weak economic conditions, but activity is slowly starting to improve Marine operating margins increase despite reduced volumes and barge utilization levels Significant cost reductions implemented across the Company and expect FY2020 capital expenditures down 40 year-on-year Strong net cash flow provided by operating activities of 171 million and free cash flow of 127 million in the second quarter Expect FY2020 free cash flow of 250 to 350 million HOUSTON, July 30, 2020 GLOBE NEWSWIRE -- Kirby Corporation Kirby or the Company NYSE: KEX today announced net earnings attributable to Kirby for the second quarter ended June 30, 2020 of 25.0 million, or 0.42 per share, compared with net earnings of 47.3 million or 0.79 per share for the 2019 second quarter. Consolidated revenues for the 2020 second quarter were 541.2 million compared with 771.0 million reported for the 2019 second quarter.David Grzebinski, Kirbys President and Chief Executive Officer, commented, The dramatic economic slowdown associated with the COVID-19 pandemic in the second quarter was felt across our marine transportation and distribution and services businesses. We responded by aggressively lowering costs across the Company and were able to generate solid earnings and strong cash flow. Although the demand impacts have continued into the third quarter, activity appears to have bottomed and is starting to slowly improve.In marine transportation, with demand for many liquid products down significantly during the quarter, refiners scaled back their utilization levels into the high 60 range before it gradually improved into the mid-70 range, and chemical plant utilization fell to near 70. As a result, demand for barge transportation weakened as the quarter progressed, and when combined with favorable summer operating conditions, our barge utilization fell into the mid-70 range in inland and the low 70 range in coastal by the end of June. To offset the impact of these activity declines, we aggressively implemented additional cost reductions across the business, significantly reducing horsepower, operating costs, and general and administrative expenses. Despite a 6 sequential reduction in segment revenue, our cost reduction efforts contributed to a sequential improvement in segment operating margins from 12.6 to 13.5. Distribution and services experienced significant headwinds during the second quarter with a 33 sequential reduction in revenue. In the oilfield, the decline in oil prices, lower rig counts, and reduced demand resulted in an approximate 80 decline in U.S. frac activity and contributed to the bankruptcy of a large customer for which we incurred 0.04 per share of bad debt expense. As a result of the reduced activity, our oil and gas businesses experienced minimal manufacturing orders, parts sales, and service throughout the quarter. In commercial and industrial, activity levels in on-highway and power generation declined sharply as a result of lockdowns for much of the quarter. To reduce the impact of declining activity, we implemented additional workforce reductions, which resulted in severance charges of 0.02 per share, as well as furloughs and aggressive reductions in general and administrative expenses. We expect the segment will remain at a loss in the third quarter, but the impact of our cost reductions combined with an expected slow increase in activity should improve the segments results compared to the second quarter, Mr. Grzebinski concluded.Second Quarter 2020 Segment Results Marine Transportation Marine transportation revenues for the 2020 second quarter were 381.0 million compared with 404.3 million for the 2019 second quarter. Operating income for the 2020 second quarter was 51.4 million compared with 53.2 million for the 2019 second quarter. Segment operating margin for the 2020 second quarter was 13.5 compared with 13.2 for the 2019 second quarter.In the inland market, average barge utilization was in the mid-80 range during the quarter compared to the mid-90 range in the 2019 second quarter. Barge volumes were heavily impacted by reduced demand for refined products and petrochemicals. Operating conditions were fair with improved weather conditions across the waterway network and reduced flooding on the Mississippi River. Lock delays remained elevated during the quarter. Overall, these conditions resulted in 2,815 delay days or a reduction of 15 compared to the 2019 second quarter. As a result of lower barge utilization, average spot market pricing for the quarter declined in the mid-to high single digits both sequentially and year-on-year. Average term contract pricing on expiring contracts was stable. Revenues in the inland market declined 2 compared to the 2019 second quarter due to the impact of reduced barge utilization and lower fuel rebills, but were partially offset by the Savage Inland Marine Savage asset acquisition which closed on April 1, 2020. During the second quarter, the inland market represented 80 of segment revenues and had an operating margin in the mid-to high teens.In the coastal market, as a result of reduced demand for refined products and black oil transportation, barge utilization was in the mid-70 range during the 2020 second quarter compared to the mid-80 range in the 2019 second quarter. Spot market activity declined throughout the quarter; however, spot market and term contract pricing were stable. Revenues in the coastal market declined 17 compared to the 2019 second quarter as a result of reduced spot market activity, retirements of two large capacity vessels, and planned shipyard activity. The coastal market represented 20 of segment revenues and had a breakeven operating margin during the quarter.Second Quarter 2020 Segment Results Distribution and Services Distribution and services revenues for the 2020 second quarter were 160.2 million compared with 366.8 million for the 2019 second quarter. The segment had an operating loss for the 2020 second quarter of 14.1 million which compares with operating income of 23.1 million for the 2019 second quarter. Operating margin was 8.8 for the 2020 second quarter compared with 6.3 for the 2019 second quarter. The quarters results were adversely impacted by 3.3 million of bad debt expense resulting from a large oil and gas customers bankruptcy as well as 1.4 million of severance.In the oil and gas market, revenues and operating income declined due to low oil prices and reduced activity which resulted in limited customer demand for new and overhauled transmissions, parts and service. The manufacturing business experienced a sharp reduction in orders with minimal deliveries of new and remanufactured pressure pumping equipment. During the quarter, the oil and gas market represented approximately 19 of segment revenues and had a negative operating margin.In the commercial and industrial market, revenues declined primarily due to reduced economic activity and stay-at-home orders across the U.S. which heavily impacted activity levels in the on-highway and power generation businesses. The marine repair business was also down year-on-year due to reduced major overhaul activity and engine sales. These reductions were partially offset by the contribution from Convoy Servicing Company Convoy, a Thermo King distributor which was acquired in early 2020. During the quarter, the commercial and industrial market represented approximately 81 of segment revenues and had an operating margin in the low single digits.Cash Generation For the 2020 second quarter, EBITDA of 90.8 million compares with 133.2 million for the 2019 second quarter. During the second quarter, net cash provided by operating activities was 170.6 million, some of which was used to fund capital expenditures of 43.6 million. The Company also used 279.0 million to acquire the Savage assets. As of June 30, 2020, the Company had 108.5 million of cash and cash equivalents on the balance sheet. Total debt was 1,642.8 million, reflecting a 59.7 million reduction compared to March 31, 2020, and the debt-to-capitalization ratio was 35.0.2020 Outlook Commenting on the 2020 full year outlook, Mr. Grzebinski said, In the past quarter, our businesses experienced unprecedented declines in demand as a result of the COVID-19 pandemic. Recently, we have seen slight increases in demand across the Company which we believe represent an initial recovery and a bottom to our activity and utilization levels. However, given the risk of future spikes in virus cases and governments issuing new restrictions, the timing and magnitude of a material recovery remains unclear. Until we see a significant improvement in demand, we will continue to aggressively manage our costs, restrain capital spending, and focus on cash generation. Kirby has ample liquidity, and we continue to expect strong free cash flow in 2020 which will be used to repay debt, increase liquidity, and strengthen the balance sheet.In inland marine, although refinery and petrochemical plant utilization rates have started to improve, Kirby expects a slow recovery going forward until economic activity rebounds more significantly. With barge utilization rates starting the third quarter in the mid-70 range, the Company anticipates sequentially lower average barge utilization for the quarter. This is expected to have an adverse impact on revenues and operating margins. Overall, Kirby expects inland revenues and operating income will sequentially decline in the third quarter.In the coastal market, with 85 of revenues under term contracts, much of coastals business is expected to be stable through the end of the year. 