Good morning and welcome to the Kirby Corporation 2023 Fourth Quarter Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Kurt Niemietz, Kirby's VP of Investor Relations and Treasurer. Please go ahead.

Good morning and thank you for joining the Kirby Corporation 2023 fourth quarter earnings call. With me today are David Grzebinski, Kirby's President and Chief Executive Officer, and Raj Kumar, Kirby's Executive Vice President and Chief Financial Officer. The slide presentation for today's conference call, as well as the earnings release, which was issued earlier today, can be found on our website. 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. A list of these risk factors can be found in Kirby's latest Form 10-K filing, and in our other filings made with the SEC from time to time. With that I will now turn the call over to David.

Thank you, Kurt, and good morning, everyone. Earlier today, we announced fourth-quarter revenue of $799 million and earnings per share of $1.04. This compares to 2022 fourth-quarter revenue of $730 million and earnings per share of $0.62. During the fourth quarter, continued strong fundamentals in both our businesses resulted in significant year-over-year growth in our revenue and earnings, and Marine Transportation pricing on spot and term contracts benefited from strong demand and limited availability of barges, while the onset of winter weather conditions proved to be a headwind to our efficiency in the quarter. Distribution and Services delivered higher revenues sequentially, but margins were down slightly from the third quarter as a result of lower demand in our Power Rental business and typical seasonal impact. We ended the year on a good note and we anticipate strong growth in 2024. In Inland Marine, we continued to experience strong demand and high barge utilization, with our barge utilization rates in the low 90% range. Spot market prices continued to push higher and we were up in the low to mid-single-digits sequentially, and in mid-teens year-over-year. Pricing increases on term contract renewals were up year-over-year on average in the high-single-digits during the quarter. While the efficiency of our operations was challenged during the quarter, with delays in days up 86% sequentially, strong pricing and utilization mostly offset this, allowing for Inland Marine margins to remain flat sequentially, with operating margins remaining in the high-teens on average. In our Coastal Marine business, we saw consistent customer demand during the fourth quarter that helped maintain barge utilization in the low to mid-90% range. Overall, Coastal Marine revenues were up 4% sequentially, as improved spot and term contract pricing more than offset planned maintenance and ballast water treatment installations, which reduced equipment availability. As a result, the Coastal business was able to finish the year with operating margins in the low-single-digit for the quarter. In Distribution and Services, demand in the fourth quarter remained steady throughout much of the segment, marked by a sequential increase in revenues, increases in new orders and steady backlog. In Oil and Gas, revenues and operating income were up sequentially and year-over-year, as solid execution on our backlog and deliveries were partially offset by lingering supply chain delays. In Commercial and Industrial, while revenues were up sequentially, the seasonal falloff in our Power Rentals business led to a sequential decline in operating income. Despite supply chain issues and seasonal weakness, the business segment overall concluded the year very strong. Overall, segment revenues were up 13% year-over-year and operating margins were in the high-single-digits. In summary, our fourth-quarter results reflected growing strength in market conditions for both segments. Despite the temporary headwinds of seasonal winter weather in the quarter, the Inland market is strong and rates continue to push higher, helping to offset lingering inflation. While our Coastal revenue was challenged near-term by planned shipyards, industrywide supply and demand dynamics remain very favorable, our utilization is good, and we are realizing healthy rate increases. Steady demand in Distribution and Services is contributing to further growth in the segment, and while supply chain bottlenecks are expected, the outlook for the market is stable. I'll talk more about our 2024 outlook later, but first, I'll turn the call over to Raj to discuss the fourth-quarter segment results and balance sheet in more detail.

Thank you, David, and good morning, everyone. In the fourth quarter of 2023, Marine Transportation segment revenues were $453 million, and operating income was $68 million, with an operating margin of 15%. Compared to the fourth quarter of 2022, total Marine revenues increased by $30 million or 7%, and operating income increased $21 million or 46%. Increased pricing and utilization in the Inland market were partially offset by weather-related inefficiencies in Coastal shipyards. Compared to the third quarter of 2023, total Marine revenues, Inland and Coastal together, increased 5%, while operating income increased by 7%. Now looking at the Inland business in more detail, the Inland business contributed approximately 82% of segment revenue. Average barge utilization was in the low-90% range for the quarter. Long-term Inland Marine Transportation contracts, or those contracts with a term of one year or longer, contributed approximately 60% of revenue, with 62% from time charters and 38% from contracts of affreightment. Tight market conditions contributed to spot market rates increasing sequentially in the low to mid-single-digits and in the mid-teens range year-over-year. Term contracts that renewed during the fourth quarter were, on average, up in the high-single-digits compared to the prior year. Compared to the fourth quarter of 2022, inland revenues increased by 11%, primarily due to higher term and spot contract pricing. Inland revenues were up 6% compared to the third quarter of 2023, due to higher pricing and the reopening of the Illinois River locks. While Inland operating margins remained, on average, in the high-teens, we did exit at 20% in the final month of the quarter. Now moving to the Coastal business. Coastal revenues decreased 7% year-over-year and were up 4% sequentially, as downtime from planned shipyards was partially offset by higher contract pricing. Overall, Coastal had low-single-digit operating margins, as improved pricing was partially offset by increased shipyard base. The Coastal business represented 18% of revenues for the Marine Transportation segment. Average Coastal barge utilization was in the mid-90% range, which was in line with the fourth quarter of 2022. During the quarter, the percentage of Coastal revenue under term contracts was approximately 95%, of which approximately 94% were time charters. Average spot market rates were up in the mid-single-digits sequentially and in the mid-30% range year-over-year, and prices on term contract renewals were up in the 20% range year-over-year. 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 2024. This is included in our earnings call presentation posted on our website. At the end of the fourth quarter, the Inland's fleet had 1,076 barges, representing 23.7 million barrels of capacity. On a net basis, we currently expect to end 2024 with a total of 1,078 Inland barges, representing 23.8 million barrels of capacity, driven by a modest number of additions in the year. Now, I'll review the performance of the Distribution and Services segment. Revenues for the fourth quarter of 2023 were $347 million, with operating income of $29 million and an operating margin of around 8%. Compared to the fourth quarter of 2022, the Distribution and Services segment saw revenues increase by $39.2 million, or 13%, with operating income increasing by $11.6 million, or 68%. When compared to the third quarter of 2023, revenues increased by $12 million, or 3%, and operating income decreased by $4.5 million, or 14%, with the decline in margins related to product mix. On the Commercial and Industrial markets, strong activity contributed to a 24% year-over-year and 5% sequential increase in revenues, with improved demand for equipment parts and service in our marine repair and on-highway businesses. Power generation was also up year-over-year. Overall, the Commercial and Industrial business represented approximately 64% of segment revenue and had an operating margin in the mid to high-single-digits in the fourth quarter. In the Oil and Gas markets, revenues were down 3% year-over-year and up 2% sequentially, as solid execution on our backlog was partially offset by lingering supply chain delays. While we saw slowing trends in our conventional remanufacturing business, we experienced continued favorable trends in new orders and backlog, driven by our e-frac units and associated power generation equipment. Overall, Oil and Gas represented approximately 36% of segment revenue in the fourth quarter and had operating margins in the low-double-digits. Now I'll turn to the balance sheet. As of December 31st, 2023, we had $33 million of cash, with total debt of around $1 billion. During the quarter, we decreased our debt balances by $51 million, and our debt-to-cap ratio improved to 24.2%. We achieved cash flow from operating activities of $216 million for the quarter. We used cash flow and cash on hand to fund $127 million of capital expenditure or CapEx, of which $56 million was related to maintenance of equipment and the remainder was directed to growth CapEx in marine and e-frac. We continued to return capital to shareholders in the quarter and repurchased $52 million of stock at an average price of $77.08. As of December 31st, we had total available liquidity of approximately $491 million. For 2024, we expect to generate cash flow from operations of $600 million to $700 million on higher revenues and EBITDA. We still see supply chain constraints posing some headwinds to managing working capital in the near-term. Having said that, we expect to unwind most of this working capital as orders shipped, as 2024 progresses and beyond. With respect to CapEx, we expect capital spending to range between $290 million and $330 million for the year. Approximately $190 million to $240 million is associated with marine maintenance capital and improvements to existing Inland and Coastal marine equipment, including the remaining ballast water treatment system on some coastal vessels and some facility improvements. Up to approximately $90 million is associated with growth capital spending in both of our businesses. The net result should provide approximately $300 million of free cash flow for the year. We are committed to a balanced capital allocation approach and we'll use this cash flow to opportunistically return capital to shareholders and continue to pursue long-term value creating niche investment and acquisition opportunities. I will now turn the call back to David to discuss the remainder of our outlook for 2024.

Thank you, Raj. We had a good quarter in both our businesses, despite some temporary headwinds. Refinery activity remains at high levels, our barge utilization is strong in both Inland and Coastal, and rates are steadily increasing. While we expect typical seasonal weather conditions to pose some near-term headwinds in the first quarter and some high shipyard activity in our Coastal business, our outlook in the Marine segment remains strong for the full year. In Distribution and Services, despite supply chain constraints that we've discussed, demand for our products and services is good and we continue to receive new orders. Overall, we expect our businesses to deliver improved financial results in 2024. While all of this is encouraging, we are mindful of challenges related to a slowing global economy and additional economic weakness due to interest rates. However, even with these uncertainties, we remain very positive and expect to drive strong earnings and strong cash flow from operations going forward. In Inland Marine, our 2024 outlook anticipates positive market dynamics with tight conditions due to limited new barge construction in the industry and many units going in for maintenance, combined with steady customer demand. With these market conditions, we expect our barge utilization rates to be in the low to mid-90% range throughout the year. Overall, Inland revenues are expected to grow in the mid to high-single-digit range on a full-year basis. Normal seasonal winter weather has started and is expected to be a headwind to revenues and margins in the first quarter as usual. With respect to operating margins, we expect to gradually improve during the year, with the first quarter being the lowest, and averaging around 20% for the full year, which will be a 300-basis point to 400-basis point improvement from the 2023 average. In Coastal, market conditions have tightened considerably and supply and demand are balanced across the industry fleet. Strong customer demand is expected throughout the year, with our barge utilization in the low to mid-90% range. With major shipyards and ballast water treatment installations concluding in the first half of the year, revenues for the full year are expected to increase in the high-single to low-double-digit range when compared to 2023. Coastal operating margins are expected to be in the mid to high-single-digit range on a full-year basis, with the first quarter the lowest due to weather and shipyards. In the Distribution and Services segment, despite the uncertainty from volatile commodity prices, we expect to see incremental demand for OEM products, parts and services within the segment. In Commercial and Industrial, strong demand for power generation and stable marine repair is expected to help drive full-year revenue growth in the high-single-digit to low-double-digit percent range. In Oil and Gas, our manufacturing backlog is expected to provide stable levels of activity through most of 2024, but will be somewhat offset by lower activity levels in the oilfield market. We anticipate extended lead times in the near-term to continue contributing to volatile deliveries with respect to the schedule of new products in 2024. Overall, the company expects segment revenues to be flat to slightly down on a full-year basis, with operating margins in the mid to high-single-digits but slightly lower than year-over-year due to mix. To conclude, we ended 2023 in a position of strength in both of our segments. In Marine Transportation, barge utilization and customer demand remained strong, and rates continued to increase. In D&S, demand for our products and services remained strong and we continued to receive new orders in manufacturing. Overall, we anticipate our businesses to deliver 30% to 40% earnings growth in 2024. Key risks putting us at the lower end of that range would be the impact of a recession or lingering inflation. While achieving the higher end of this range would be driven by stronger-than-expected chemical markets for Marine and stronger-than-expected oil and gas markets in D&S. As we look long-term, we remain confident in the strength of our core businesses and our long-term strategy. Our Marine businesses are in the early innings of a multiyear upcycle and demand remains solid in D&S. We intend to continue capitalizing on strong market fundamentals and driving value for our shareholders. Operator, this concludes our prepared remarks. We are now ready to take questions.

Our first question will be from Jack Atkins of Stephens. Your line is open.

Okay, great. Good morning, guys. Thanks for taking my questions.

Yes, good morning, Jack.

So David, I guess I'd like to, maybe if I could start with the CapEx guidance for a second, the $90 million I think in growth CapEx, can you kind of give us a little more color how that's split between the Coast - excuse me, the Marine versus the Distribution businesses? And I guess if I look at the 39, if I'm reading this right, 39 new - I guess, how many barges are you planning on adding in 2024? I'm just trying to get that correct, as we think about next year. Are you building barges for 2024 in Inland?

No, what happened Jack is, we stepped into a competitor's shipyard contract. They were building some barges in some boats, they needed to not do that and we were able to step in and get a good deal with the shipyard. So those boats and barges, it's basically two boats with about thrusting units that go with those, and then four barges. So we stepped into those that contract for them. It was kind of underway and the competitor couldn't.

I got it. Oh, okay.

So we stepped in to it and it's a good price. We were happy with it. Do we want building? No. New construction doesn't make sense now. We were able to get a decent price on these and so we stepped into it. So that's part of that growth CapEx and then we're doing some things in C&I for KDS, it's helping a little bit, but the biggest part of our CapEx, as is maintenance CapEx. We've talked about the maintenance bubble, it's real. It's real for the industry, it's real for us. So our CapEx is still pretty elevated with the maintenance side of things.

Okay. No, that makes total sense. And thank you for clarifying that. And then I guess maybe just to that last point, I guess as you think about new builds in 2024 for the industry relative to, maybe anticipated retirements, can you walk us through that? And then, I know that a lot of the industry is going to be down for maintenance on the inland side in 2024, how much of your fleet do you think will be out for maintenance relative to your normal maintenance schedule in 2024?

Yes, it's significant. It's - in any given day, we'll have 80 barges out, and I think for the industry, this is going to be a big year, it could be on the order of - well, I know it's north of 600 and maybe as high as 1,000 for this year. So it's a big number. I actually think this is positive for a number of reasons. One, it helps tighten up utility, but more importantly, people are busy maintaining their fleet. They're going to put their cash to that instead of going in to build new. It doesn't make sense to build new. So it - I think it actually helps the whole supply picture quite a bit, but it is a known bubble and, the good news is our customers understand that. They're sophisticated, they get it, they know what's going on. And inflation's not helping this either, as you might imagine. Shipyards used to be, Jack, they'd run three shifts. Three shifts. Now a number of them can only crew two shifts and, shipyard costs have gone up, steel costs are going up, labor costs are very high. So all that's factoring into keeping that supply in check, and I think that continues through '25 to be honest. Yes.

And just on that first part of the question, would you think about new builds for the industry relative to retirements, would you expect net capacity attrition in '24?

Absolutely. I think, what we've heard, there's only about 20 barges, maybe 25 on dock for 2024. It's, I would imagine - I don't have good data on retirements, but I could imagine, you bring something into the shipyard and you see it's going to cost you a heck of a lot, you just soon retire it if it's only got five, five years left of its life. So we should see attrition of, my guess is 50 to 150 barges this year, so we should have a net decline this year in supply.

Okay, that's really encouraging. Thanks for the time, David.

Hi, thanks, Jack.

And our next question will come from Ben Nolan of Stifel. Your line's open, Ben.

Thank you. Hi David, Raj. Good numbers. So my first question is on the D&S side, specifically on the industrial side, it seems like that business has just really grown well over the last number of years, and as I'm looking forward and trying to sort out how sticky that is, I'm just curious, if you could maybe talk to, on the industrial side, how you think of that with respect to whether it's cyclical or maybe structural, and you've changed your business mix and that's just resulted in more growth or have you captured share? How are you thinking about that industrial side of the business?

Yes. No, thanks, thanks for the question, Ben. Look, on the C&I side, there's really three parts to it. There's, on-highway and marine repair, and then there is power generation. So I'd say the first two, marine repair and on-highway really are going to move with the economy, right? We see a little pullback on-highway trucking space, you saw one of the truckers go bankrupt last year. We have seen a little pullback, that's in our guidance for 2024. On marine, marine repair, we do both commercial marine and pleasure craft. With it being an election year, we're seeing a little pullback in pleasure craft, but commercial marine repair is pretty strong, as you would expect, as you hear us talk about maintaining our vessels. And then - but the real secular growth story is in power generation. I think it's pretty obvious, everybody needs power 24/7 now. Every business runs using computing power. I think AI and machine learning's only adding to that demand. So we're seeing secular growth on our power generation side. As you know, we provide backup power to places like the New York Stock Exchange, JP Morgan and others, as well as retail environments like Walmart, Costco, Target and the like, as well rentals too, we rent power out. So it's - we're seeing a lot of growth there. We manufacture some of that equipment. So it's - it helps the manufacturing as well as the distribution side and that's more of a secular growth story.

Okay. So, all in, if you were just to sort of take a high-level approach to it, does it feel like the business is less cyclical than it used to be two or three years ago as a function of that power business?

Absolutely. Yes, absolutely. Oil and gas is still going to cycle. Overall, you'll see, '24 versus '23, we're seeing that revenue and D&S is going to be down to flat to slightly down. And that's really all based on oil and gas. C&I is offsetting it, but you've - I'm sure you've heard calls on the oilfield side, whether it's pressure pumpers or E&P or service companies, they're all looking for a down year, '24 over '23. That's in our guidance, and that's why you're seeing kind of flattish revenue for D&S. Really the strength of C&I is making that look not as bad.

Okay. And then for my second question, shifting gears a little bit. The Coastal business looks like it's finally going to be in for a pretty good year, although I was looking at it, I mean you're down to, I think, like 28 Coastal barges, I mean there was a point at which you were at 80. I know that has not been obviously a focus of growth for you and you've said it, at least in the past, it hasn't been, but is there a point where you just need sort of critical scale or is there a point at which you maybe think about adding to that or it remains sort of not the primary focus?

Yes, well, I mean our preference would be Inland Marine. If we're going to grow anywhere, it would be in Inland Marine, would be our preference. That said, Coastal's going to be a great five-year story here. We are - supply and demand are in balance now. We're - as you saw in our prepared remarks, we saw spot prices up year-over-year in the mid-30% range and term contracts up in the mid-20% - or low-20% range. That's going to continue in '25, '26, probably into '27 easily. We need it. The rates have been low. We've been bouncing along in our Coastal business at breakeven. This year for '24, we're going to be kind of mid-single-digits, maybe even get to the high-single-digits in terms of operating income margins, and really, that should continue because of the supply picture. As you know, these vessels are very expensive. A 185,000 barrel unit we built five years ago for $80 million, right now if you were to build that, it would be $130 million, $135 million to build it, and nobody's got one on the books. And even if they did, you wouldn't get it until 2027. So we're very enthusiastic about the Coastal business. Does that mean we want to go out and speculatively build? Absolutely not. I mean, we're - there may be some contracts coming from customers that we would get that, but we're not going to go. And just to comment on our fleet. Our actual high, I think, was 59 barges, not 80, but we took out a lot of wire barges, wire. The customer demand for wire barges was low, they were older. We've got a much higher quality fleet now. And the other thing, just in terms of construct there, what happened to that business was the ban on exporting crude was lifted. So, at one point, we had 17 barges moving crude in the coastwise business, now we have zero, and that happened all across the industry. And that's why we've been in a protracted downturn in that business. And all that excess supply has been retired and it's in balance now and we're pretty excited about it, Yes.

Okay, and there's - you don't think there's any critical mass issues or economies of scale issues or anything where you are just playing large now?

Yes, I - no, I think we're still one of the largest players in this space. On a barrel volume basis, we're probably one or two. There is - two of our competitors are trying to get together in a joint venture, so that we'll see what that brings, but we're still one or two in the market in terms of size. So we've got the critical mass, and as it's the same customers that we deal with on the Inland side. So we have that scale, just because our commercial team deals and our bidding team deals with the major customers every day, and it's the same group, whether it's Coastal or Inland.

Got you. I appreciate it. And lastly, just congratulations to Joe Pyne, it was a heck of a career.

Yes, thanks for saying that. I mean, Joe, he's an institution, he's basically been the father of our business for 46 years and grew it from nothing into what it is today. He'll be missed. Thanks, Ben.

Hi, good morning, David, Raj. So, just, by the way, first, let me throw it in as well, just long career, long time working with Joe, so best of luck as he moves on. And thanks for all the help over the years. Your Inland barge segment, right, if 4Q exits at 20% and most contracts renew in - or near 20%, sorry, and most contracts renew in the fourth quarter, has pricing stalled at Inland and thus, we're not seeing acceleration in your margin target from basically fourth quarter run rate levels? I'm just trying to guess maybe where are spot levels now, is it possible to achieve the mid-20s, kind of that you talked about, if pricing keeps accreting it, given your costs, hopefully, have decelerated on inflation basis? Thanks.

Yes, and the short answer is, yes, we will definitely get to the mid-20s. But let me give some color, Ken. I think it's a great question. The average for the fourth quarter was in the high teens. December was an okay weather month, so we touched that 20%. First quarter is always the worst weather, so we're anticipating margins will dip back down into the high teens in the first quarter because of the weather, but by the second and third will be probably north of 20%. Fourth quarter, we'll have to see, that's always a tough weather month. I - the way I look at margins, Ken, is, look, we will be up year-over-year 300 basis points to 400 basis points in margin. Because of weather, high water, low water, hurricanes, lock closures, it's just hard to get any one quarters too specific, but my view is that the whole entity will be up 300 basis points to 400 basis points. And more importantly, as I - we anticipate the same kind of improvement in that order of magnitude in '25. It's a - this is a runway and it should take several years to play out. Now in terms of pricing rolling over or even flattening, we didn't see that. Spot prices year-over-year in Inland were up 15% to 18%, term pricing was up 7% to 9% year-over-year. So there's actually a healthy gap between spot and term. You want spot above term, which what we see, it's a pretty good gap. And then even sequentially, we saw from third to fourth quarter, spot pricing was up 2% to 5%. So, we didn't see any flattening. Look, pricing needs to continue to go up. We're offsetting inflation, we're trying to get returns back up to where we can get a return on our invested capital. And we're still a long way away from justifying new builds. So it - it's very constructive. I think you'll see the margin progression of 300 basis points to 400 basis points up this year, and then perhaps something similar in 2025.

So really the best way, I guess to take away from that is, is you can't look at the fourth quarter as the exit rate, run rate, you got to look at the annual as far as the improvement, given the seasonality and repricing?

And just, I think that's fair. We - I mean, you heard our term contracts were up in the high-single-digit, 7% to 9%.

Yes.

So that's going to roll through this year and, it'll progress.

And then did you mention where spot rates are now for a 2-tow barge?

No, I didn't. I better not. I shouldn't, or my attorney will - he'll kick me.

And then going now to the O&G side, you keep mentioning supply chain delays. I just would imagine we're well past everything post-COVID and supply chain issues, I mean maybe Red Sea is now popping up now with rerouting, but what are the issues that you're still dealing with on the supply chain?

Yes, no, it's gotten a lot better, Ken, for sure. You saw our deliveries, well, probably infer, our deliveries in the fourth quarter were pretty good out of our manufacturing facility. We were having problems with electronic componentry and one-off items holding up all series of equipment. That's kind of worked its way out. What's really happening now is long lead time. Engine packages, for example, if we were to order engines today, we wouldn't get them until kind of mid-'25. So that's the big componentry is the problem, that the lead times on engines in particular have been a problem, and it's really about boundary constraints in the engine world, but it's just long lead times. So we're still dealing with that. If that was compressed, we would deliver better results. If we could get engines quicker, particularly on C&I for power generation, Ken, we're seeing a lot of demand for backup power and if the engine packages could flow quicker, we'd have better numbers in D&S for 2024.

David, I just want to clarify two things, one is real quick, if I can on the first answer on the margins, so just the 300 basis points, 400 basis points, if December exited close to 20%, does that mean December '24 could exit close to 24% for that month, just given that seasonality? Is that kind of conceptually how we should think about it? And then do we need to change the supply chain in any way to affect that change?

Yes, on the margins, it depends on weather in December, right? But yes, I mean, directionally if we saw a mild December, I think, absolutely we'd be close to that number, yes.

That's great. That's good.

On the supply chain, we're - look, we use - it's best for me not to name engine - different engine companies, but we use all kinds of different engines and they're seeing it, whether it's a German-based engine company or U.S.-based engine company, they're all - have the same issues in terms of foundries producing blocks and getting it through. There's not much we can do, it's their supply chain. We're working with them, trying to pre-order stuff and work that side of the thing. But look, they're working hard to get the engines, they want to sell as many as they can as well. So, we're working on it with them, some of it's out of our control. We're trying to do better job planning as you would expect.

Thanks a lot, David. I appreciate the time.

Thanks, Ken.

Our next question will come from Jon Chappell of Evercore ISI. Your line's open.

Thank you. Good morning. David, I'm going to ask you a bit of a longer-term question but it ties together I think a lot of things we've been talking about for the last couple of years or so. When you lay out a path for 300 basis points, 400 basis points both this year and next, that kind of gets us close to the mid-20s, we had spoken maybe a year-and-a-half ago now at this point about inflation really kind of pinching you and potentially, precluding the Inland margin from getting back to the cyclical peaks of 10-plus years ago. Is inflation easing at all now and when you talk about the early innings, I would assume that would mean this has a couple more years of runway, can we revisit then, those kind of mid to high 20% Inland margins, barring an extraordinary event?

Yes, I'll take those in kind of reverse order. I do believe we can get to the high 20s in margin. We'll see, but inflation is real. We're seeing it even when you listen to the pundits out there. That we're still seeing inflation, not deflation. I would tell you, maintenance is - maintenance inflation has gone up a lot. We talked a little bit about the shipyards having a hard time getting labor. Steel prices haven't abated at all. In our ecosystem, mariners are short, critically short across the entire industry. Fortunately, we have our own school where we train mariners, but we're still really tight on crewing. So you're - we're seeing labor inflation, everybody's seeing it. Things like paint and steel and all of that, we're still seeing inflation. Believe it or not, rental cars are - we do a lot of crew moves and rental car inflation has hit us. So we're still offsetting that. I think everybody's been a little frustrated with the pace of our margin improvement, certainly us. We would like to have improved it faster, but it's really about this inflation and trying to offset it. Look, our customers are experiencing the same thing, they have inflation in their refineries and then at chemical plants, they're fighting steel cost, the supply chain issues, and of course, labor costs. So, our sophisticated customers definitely understand it. They understand we're fighting inflation. We are getting some real price increases, but we need it to get to prices that could justify replacement capacity. But it's a long rambling response, Jon, sorry, but inflation is there. But the fundamentals are such that we're going to get to the mid-20s at some point, and barring anything unforeseen, we should get to the high 20s.

That's great. For my follow-up, maybe a tag team here, tying two things together. So, David, you were able to pick up those barges that your competitor had to walk away from conceivably, and you're in a obviously great balance sheet position to do that. When I look at your buybacks in '23, as far as I can find, it's the second highest year for at least 15, 16 years after 2015, and a ton of free cash flow per your guidance for '24. So I guess the question is, picking up barges, and the orders are I think a one-off event, but is the M&A market kind of bubbling up a little bit now where you're off the bottom, no one wants to sell at the low, so maybe there is some activity brewing there, and how much dry powder do you want to keep for that vis-a-vis maybe using all this free cash flow to continue to ramp the buyback pace? So for David and Raj.

Yes, well, I'll let Raj chime in here a bit too. We still have liquidity available on our revolver and our debt-to-EBITDA is fine. We've got plenty of borrowing capacity, and to your point, we do - we're going to have a lot of free cash flow this year and we've been aggressive buying our stock. We like our stock where it's at. Particularly when we look at the next three to five years, it's going to be - it's going to be a good run, so we're happy to buy back our stock. That said, we always like those inland acquisitions, but we're not going to lose our price discipline. We'll be very disciplined, they're hard to predict. We did pick up, we bought some barges from a competitor last year as well. We'll look for those one-offs. Predicting a big deal, that's a lot harder. I would just tell you, we're going to stay disciplined. We think we've got good borrowing capacity in any event, and we also like our stock, but Raj, you want to add anything?

Yes, David, thank you. Thanks, Jonathan. I think, you saw last year in '23, we dedicated about 80-plus percent of our free cash flow towards share repurchase and, to David's point, it's very difficult to predict any M&A. We always look at it, we're very, very - we have a rigorous approach towards looking at projects and M&A opportunities, but barring anything that's attractive, I think you can continue to see us progressing that trend of share repurchases similar to what we did in 2023.

Okay. Thank you, Raj. Thanks, David.

Thanks, Jon.

And our next question will come from Greg Lewis of BTIG. Greg, your line's open.

Hi, thanks, and good morning, everybody.

Hi, good morning, Greg.

Good morning, Greg.

David, and I guess this is for Raj, too, I did want to ask about, I guess, the decision to kind of reintroduce full-year earnings guidance. I mean, like it seems like we pulled it away a couple of years ago. I mean, David, you're talking about a, I guess a multi-year run in terms of the operating environment. Is that kind of the genesis for what drove the full-year earnings guidance back into the equation?

No, I mean, we - you notice this is not numeric and we're not giving quarterly, we debated a long time about whether we should give a number but, I think in the kind of the environment, that there's a lot of moving pieces, we thought it would be good to give a little more specificity on it. Just at the outset of this year, I don't think, we're going to give quarterly guidance or anything like that or even a numerical EPS. It's just kind of - we wanted to set kind of the range for the year, given everything we're seeing both at D&S and Marine.

We reported an increase in delay days, primarily due to weather. Is there any way to quantify the impact on EPS? Was it a few pennies or something more significant? Any additional insights on that would be helpful.

Yes, the delay days increased significantly, as you heard, sequentially. It's challenging to quantify due to the many factors involved. January has been very difficult, similar to last year, which was a tough quarter because of weather delays. We'll have to wait and see how February plays out, but it certainly has a significant effect. You can observe our margins usually decline during the fourth and first quarters because of weather, potentially by a couple of hundred basis points. However, it's hard to define precisely. As Greg mentioned, we have time charters and contracts of affreightment; these contracts somewhat negatively affect us during winter weather but provide substantial benefits in the summer. Additionally, one aspect we observed in the first quarter, reflected in our guidance, is that a freeze impacted some refineries and chemical plants in January, and they are still recovering from that. So, all of this information is accounted for.

It's multifaceted.

Yes, and that's why we approach it by examining the year-over-year average for the entire year, as there are many factors at play, including weather, lock delays, and hurricanes. Hopefully, we won't face a hurricane this year, but there are numerous variables to consider. I hope that clarifies things, Greg.

Yes, yes, I guess, I mean it's just, it's just interesting because I think it needs - kind of needs to be quantified with those numbers. And then I did, just in terms of the guidance, you mentioned, the potential opportunity in chemicals. Is that a function of - and, I don't follow the chemicals industry maybe as closely as I should, is that a function of - could you kind of talk a little bit about, broad strokes, what - why we could see maybe chemicals be a little better than - why that could help drive some upside, the high end of the range?

Yes, look, in the fourth quarter we saw the chemical industry pull back a little bit, the volumes pulled back a little bit. We haven't seen China re-emerge in terms of chemical demand, back to where they used to be. So, if that started in earnest again, it would just help volumes. As we move a lot of chemicals on the inland waterways and it just be very constructive for us to see some growth in that end if it came back. Now we are seeing in January, a little uptick in chemical movements, but it's kind of one of the things on the margin that could help us and get us closer to that high end of the range.

Okay, super helpful guys. Thank you.

Thank you.

Our last question will come from Greg Wasikowski of Webber Research and Advisory. Your line is open.

Hi, good morning, Dave and Raj. Thanks for taking the questions.

Good morning.

So I wanted to ask you, David, what are you seeing out there on the order books right now on the inland side of things, and I know rates are still ways off of, making that equation, makes sense to build new, but the movements that you're seeing out there, does it give you any sense of concern at all or do you think it's kind of widely understood throughout the industry that, any chunks of orders here would be a function of either owners biting the bullet for the sake of customer satisfaction or customer retention and/or fleet renewal? Is there - where are we in terms of not necessarily for the economics, but in terms of sentiment and, making sure that nobody panics?

Yes. No, this isn't precise, but we think there are only 24 or 25 liquid barges on order for 2024 delivery. Certainly, nobody's panicked. I think I referenced this in some earlier comments, but most of our competitors, including us, we're very busy just trying to maintain our fleet with this maintenance bubble that's hitting us. So that's soaking up a lot of capital for - in finances for a lot of our competitors including us. I mean, we're spending a lot more. You heard our maintenance CapEx is up a lot in the last couple of years. So nobody is really panicking and trying to go out and build any new equipment right now. It's, everybody's pretty absorbed and disciplined right now just trying to keep their current fleet running.

Okay, great. That makes sense. And then you kind of alluded to this before on labor and mariners' availability. But can you - can you remind us how many or what percentage of towboats you guys are chartering in currently or expect to for the coming year? And then any commentary on, labor constraints and wage increases kind of affecting the availability and cost of chartering in?

Yes, look, mariners are short across the board. Whether it's in the charter fleet or owned fleets. We operate probably 290 inland towboats and 28, 27 offshore. Our charter fleet, we don't get too specific on it, but it's in the 60 range. We're seeing labor pressure across the board and just getting qualified mariners - I think what happened is kind of interesting, people - that, there was a trucker shortage and there was a lot of shortages of labor and a lot of people kind of moved away from maybe the marine side. They're maybe moving back now, but it's tough to find qualified mariners. That's why we have our own school. It that it's a very skilled set of - well, it's a high set of skills to push a football field full of barges with a towboat on a river that's moving with wind blowing. These are highly skilled individuals, including the tanker men and the deck hands on that. So yes, I'm rambling a bit here, Greg. Sorry about that, but we are seeing labor pressure both on the charter side and on the owned side. It's just, just a shortage of them. We're trying to train them as fast as we can, but it takes a while to train for these very specific tasks that are very highly skilled.

Thanks, yes, I appreciate that. How do you think the industry kind of solves that problem? I mean, I know you guys have your school and have that method, but just industrywide, is it simply a function of rates getting to a place where wages can increase enough to attract additional labor back in to the industry or do you think - like is it a solvable issue, do you see it getting solved over time or do you think it's just a necessary evil in the future?

No, I mean crewing is always a bit of a challenge. Look, I mean living on a boat is, it's a different lifestyle, right? I mean, some of our guys worked 30 on and then 30 off, or two weeks on, one week off, not being home every night, it is a challenge. So, it's a specific lifestyle that's hard to fill, just because you're away from home and family a lot, so there's that natural tension away from it, from a kind of a life balance standpoint. That said, we do pay well, I think our industry plays really, really well. We recruit in high schools. Last year, we hired 300 new deck mariners and we're doing everything we can. I think it solves itself. We will keep running as a business, but that is part of the reasons rates have to go up, Greg, to your point.

Right, with all the inflation and the training facility that we have, Greg, helps us a lot and it's a differentiator for us.

Got it, okay. Thanks, David and Raj. I appreciate it.

All right. Thank you.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.