Earnings Call Transcript - KEX Q1 2026

Operator, Operator

Good day and thank you for standing by. Welcome to Kirby Corporation 2026 First Quarter Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Kerin. Please go ahead.

Matthew Kerin, Investor Relations

Good morning and thank you for joining the Kirby Corporation 2026 First Quarter Earnings Call. With me today are David Grzebinski, Kirby's Chief Executive Officer; Christian O'Neil, Kirby's President and Chief Operating Officer; and Raj Kumar, 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. 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. I will now turn the call over to David.

David W. Grzebinski, Chief Executive Officer

Thank you, Matt, and good morning, everyone. Earlier today, we announced first quarter earnings per share of $1.50, a 13% year-over-year increase compared to 2025's first quarter earnings per share of $1.33. Our first quarter results reflected improving market fundamentals in marine transportation with utilization and pricing strengthening as the quarter progressed, alongside continued strength in underlying demand for Power Generation in Distribution and Services. While results were partially impacted by weather-related disruptions and navigational delays in our inland marine transportation operations and ongoing OEM-related supply constraints in Distribution and Services, underlying demand conditions remained strong across both segments. Overall, our combined businesses executed well and generated positive momentum entering into the second quarter. In inland marine, market fundamentals improved throughout the quarter as customer demand strengthened, refinery utilization increased and barge availability remained limited. As expected, operations were impacted by typical seasonal weather, lock delays and other navigational disruptions. However, market conditions became increasingly constructive with barge utilization strengthening as the quarter progressed and averaged in the low 90% range for the full quarter. Spot pricing improved in the low single digits sequentially. Term contract renewals were flat to slightly up year-over-year and pricing momentum continued to build during the quarter. Overall, the inland business delivered strong operating margins in the high-teens range for the quarter, driven by improved pricing and disciplined execution. Entering the second quarter, demand visibility has continued to improve, supported by strong refinery utilization and improving conditions across petrochemical markets, contributing to strong utilization and improved pricing. Coastal marine transportation fundamentals remained strong throughout the first quarter with barge utilization averaging in the mid-to-high 90% range, which was supported by steady customer demand and limited supply of large capacity vessels. This favorable supply-demand dynamic continued to drive pricing gains with term contract renewal rates rising in the 20% range year-over-year. Our team delivered strong operational execution and maintained a disciplined focus on cost and efficiency, and this resulted in operating margins in the high teens range. Turning to the Distribution and Services segment results reflected mixed conditions across our end markets with Power Generation remaining a key growth driver. Segment revenues increased 12% year-over-year, but declined sequentially due to OEM engine availability and continued softness in conventional Oil and Gas activity. Operating income increased modestly year-over-year, though declined sequentially as margin performance varied across our businesses. In Power Generation, revenues grew 45% year-over-year from solid backlog execution and significant demand for behind-the-meter power solutions. However, revenues declined sequentially as OEM engine deliveries were lower in the quarter. Operating income increased year-over-year with margins remaining in the mid-single-digit range. In Commercial and Industrial, revenues increased 8% sequentially and operating margins were in the high single-digit range, supported by strong marine repair activity and disciplined execution. In Oil and Gas, revenues improved 13% sequentially, though results continue to be pressured by softness in conventional oil and gas markets and resulted in margins in the mid-single-digit range. Overall, the segment remains well positioned with steady execution across a diverse portfolio of end markets. In summary, Kirby continues to operate from a position of strength. Marine transportation fundamentals remain constructive with high utilization and improved pricing across both inland and coastal markets. In Distribution and Services, strong activity in Power Generation and Commercial and Industrial markets continued to offset softness in our conventional Oil and Gas business. With this backdrop, combined with solid execution and ongoing cost discipline, we announced in this morning's press release that we are increasing our EPS guidance range for the year to up 5% to up 15%, which is up from flat to up 12% previously. I will discuss our outlook in more detail on the call. But first, I will turn it over to Raj to discuss the first quarter segment results, balance sheet and capital allocation in more detail.

Raj Kumar, Executive Vice President & Chief Financial Officer

Thank you, David, and good morning, everyone. In the first quarter of 2026, Marine Transportation segment revenues were $497.2 million and operating income was $89.7 million with an operating margin of 18%. Compared to the first quarter of 2025, total marine transportation revenues increased $21 million or 4% and operating income increased $3 million or 4%. When compared to the fourth quarter of 2025, total marine revenues increased 3% and operating income decreased 11%. As David mentioned, typical seasonal winter weather produced a 25% sequential increase in delay days and negatively impacted operations and efficiency in the first quarter. Looking at the Inland business in more detail. The Inland business contributed approximately 79% of segment revenue. Average barge utilization was in the low 90% range for the quarter, which was an improvement over the fourth quarter of 2025 and in line with the first quarter of 2025. Long-term inland marine transportation contracts or those contracts with a term of one year or longer contributed approximately 65% of revenue, with 56% from time charters and 44% from contracts of affreightment. Improved market conditions resulted in spot market rates moving up in the low single digits sequentially but were down in the mid-single-digit range from a year ago. Our term contracts that renewed during the first quarter were flat to slightly up. Compared to the first quarter of 2025, inland revenues were flat but increased 4% compared to the fourth quarter of 2025 due to improved market conditions. Inland operating margins were in the high-teens range. Now moving to the Coastal business. Coastal revenues increased 23% year-over-year, driven by strong customer demand and limited availability of large capacity equipment. Overall, Coastal had an operating margin in the high-teens range, benefiting from higher pricing and effective cost management. The coastal business represented 21% of revenues for the Marine Transportation segment. Average coastal barge utilization was in the mid-to-high 90% range, which was in line with both the first quarter of 2025 and the fourth quarter of 2025. During the quarter, the percentage of coastal revenue under term contracts was approximately 92%. Renewals of term contracts were on average approximately 20% higher 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 first quarter as well as projections for the full year. This is included in our earnings call presentation posted on our website. At the end of the first quarter, the inland fleet had 1,124 barges, representing 25.1 million barrels of capacity and is expected to be slightly up in 2026. Coastal Marine is expected to remain unchanged from the first quarter of 2026. Now I will review the performance of the Distribution and Services segment. Revenues for the first quarter of 2026 were $347 million with operating income of $23.3 million and an operating margin of 6.7%. Compared to the first quarter of 2025, the Distribution and Services segment revenue increased by $37.4 million or 12%, with operating income increasing by approximately $1 million or 3%. This growth was primarily driven by Power Generation and strong marine repair activity. When compared to the fourth quarter of 2025, revenues decreased by $23.2 million or 6% and operating income decreased by $7 million or 22% as a result of lower power generation shipments due to OEM engine availability, weakness from on-highway repair and continued softness in the conventional frac market. Moving through the segment in more detail. In Power Generation, we continue to see meaningful order activity for the behind-the-meter prime power and backup power solutions for data centers and other industrial applications. This has resulted in continued growth in our backlog. However, engine availability from OEMs is limiting how quickly some of that demand converts to revenue. Overall, total Power Generation revenues were up 45% year-over-year with operating margins in the mid-single digits. Power generation represented 44% of total segment revenues. On the Commercial and Industrial side, activity was strong in marine repair. As a result, commercial and industrial revenues increased 1% year-over-year and 8% sequentially. Commercial and industrial made up 46% of segment revenues and had operating margins in the high single digits. In the Oil and Gas market, we continue to see softness in conventional frac-related equipment as lower rig counts and fracking activity softened demand for new engines, transmissions, service and parts throughout the quarter. Revenue in oil and gas was down 25% year-over-year, but increased 13% sequentially, while operating income was down 53% year-over-year and down 28% sequentially. Oil and Gas had operating margins in the mid-single digits in the first quarter and represented 10% of segment revenue. I will now move to the balance sheet. As of quarter end, we had $58 million of cash with total debt of $983.4 million, and our debt to capitalization ratio was 22.3%. We ended the first quarter with $635.4 million of available liquidity. During the first quarter, we entered into an amended and restated credit agreement that extended the facility maturity date to March 26, 2031, and increased the revolving credit facility commitments to $750 million, and eliminated the term loan credit facility. During the quarter, net cash provided by operating activities was $97.7 million and capital expenditures were $48.3 million, resulting in free cash flow of $49.4 million. In the first quarter of 2026, Kirby returned $52.7 million of capital to shareholders through share repurchase at an average price of $123.18. We continue to execute on our focused and disciplined acquisition strategy by agreeing to acquire 23 barges and three high horsepower boats from an undisclosed seller in the Inland Marine business for $95.8 million, of which $81.4 million was paid during the first quarter. With respect to CapEx, we continue to expect capital spending to range between $220 million and $260 million for the year. Approximately $170 million to $210 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and for facility improvements. Approximately $65 million is associated with growth capital spending in both our businesses. We remain on track to generate cash flow from operations of $575 million to $675 million for the year, resulting in expectations for another year of very strong free cash flow generation. As always, we remain committed to a balanced capital allocation approach using free cash flow to return capital to shareholders while pursuing long-term value-creating investment and acquisition opportunities. I will now turn the call back to David to discuss our full 2026 outlook.

David W. Grzebinski, Chief Executive Officer

Thank you, Raj. We are off to a solid start in 2026. Global macro and geopolitical developments, including the Iran conflict, the Venezuelan oil situation and the broader geopolitical uncertainty continue to create near-term variability. That said, the current conditions are proving somewhat supportive for our operations. In Inland Marine, we anticipate positive market dynamics driven by limited new barge construction and strong demand from refining and petrochemical customers. Barge utilization is expected to be in the low 90% range as we move through the year. This is supported by strong refinery utilization and improving chemicals activity. However, we do expect near-term cost headwinds in our inland marine operations during the second quarter due to rising fuel, particularly diesel costs. We currently expect the cost escalators and rate recovery mechanisms in our contracts will lag the near-term fuel cost increases during the second quarter, but will ultimately be realized in the following quarters in the second half. As most of you are aware, there is generally a 30- to 120-day delay or lag before term contracts adjust for fuel. We anticipate this timing issue could result in approximately $0.05 to $0.10 of earnings per share impact in the second quarter. Overall, we expect inland revenues to grow in the low to mid-single digits on a year-over-year basis with margins averaging in the high-teens to low 20% range for the full year. In Coastal Marine, market conditions remain favorable with balanced supply and demand across the fleet. Steady customer demand is expected to continue through the balance of the year with barge utilization in the mid-90% range. While we anticipate elevated shipyard activity in the second quarter, we continue to expect mid-single-digit revenue growth year-over-year and operating margins in the high-teens, driven by gradual pricing improvements as term contracts renew. In Distribution and Services segment, ongoing demand in power gen and marine repair activity is expected to help offset softness in on-highway service and repair and low levels of Oil and Gas activity with results remaining mixed overall. In Power gen, underlying demand fundamentals remain strong. Results, however, continue to be impacted by engine availability. Delayed OEM engine deliveries continue to contribute to variability. And as a result, we expect approximately $0.10 to $0.15 of earnings per share impact in the second quarter as certain projects shift into the second half of the year due to delayed engine deliveries from OEMs. As we have discussed in the past, engine availability rather than end market demand continues to be the primary constraint in this business. Within Commercial and Industrial, marine repair demand remains healthy, while on-highway service and repair demand continues to be constrained. In Oil and Gas, results continue to be pressured by lower overall activity as the shift away from conventional frac continues and customers maintain a disciplined approach to capital spend. However, the current Oil and Gas ecosystem may become a potential upside if it persists much longer. Overall, the Distribution and Services segment continues to benefit from its diversified end market exposure and in particular, the power gen ecosystem. Overall, the company expects segment revenues to be flat to slightly up for the full year with operating margins in the mid-to-high single digits. To conclude, we're off to a solid start in 2026 and have a favorable outlook for the remainder of the year. With a strong balance sheet and solid free cash flow, we continue to allocate capital in a disciplined manner, balancing share repurchases with opportunistic investments and acquisitions. Overall, we expect solid financial performance this year as is reflected in our decision to increase full year EPS guidance, and we see supportive fundamentals driving continued earnings growth beyond 2026 and well into '27 and '28. Operator, this concludes our prepared remarks. Christian, Raj and I are now prepared to take questions.

Operator, Operator

Our first question comes from Greg Lewis from BTIG. With a strong balance sheet and solid free cash flow, we continue to allocate capital in a disciplined manner, balancing share repurchases with opportunistic investments and acquisitions. Overall, we expect solid financial performance this year, as reflected in our decision to increase full-year EPS guidance, and we see supportive fundamentals driving continued earnings growth beyond 2026 and well into 2027 and 2028. Operator, this concludes our prepared remarks. Christian, Raj and I are now prepared to take questions.

Gregory Lewis, Analyst (BTIG)

Congrats on a good quarter. Question around the inland barge business. Clearly, it seems like things are strengthening. What I'm kind of curious about is what is driving that incremental tightness? It looks like Venezuelan barrels are up over the last couple of months. Crack spreads are obviously higher, so refiners are making more money. Are we seeing actual incremental volumes? Or is it just everybody else is making more money?

David W. Grzebinski, Chief Executive Officer

Yes. Greg, thanks for the question. Throughout the quarter, we started January as a continuation of what we were seeing in the fourth quarter. Venezuelan crude was starting to come in, and we started to see that as a positive impact. So we started in January pretty strong. Then crack spreads started to gap out and refinery volumes just got really tight. So it built throughout the quarter. It's actually more volumes moving. Also, we're very pleased to see more chemical activity. Some chemical companies' supply chains were disrupted in the Middle East, and there's more volumes moving here in the U.S. because of that. It's been very constructive. We were happy to see it. And the good news is it's continued. We're seeing momentum actually build a little bit right now.

Gregory Lewis, Analyst (BTIG)

Okay. Great. And then I did have a question, and you kind of called it out about engine availability to keep driving the power gen market higher. Is there any way to think about Kirby's or KDS' visibility around lead times from the OEMs about engine availability? I'm trying to understand clearly—we've raised guidance and we're confident we'll be getting them—but what's the visibility around being able to get engines and turn them around and put them in customers' hands?

David W. Grzebinski, Chief Executive Officer

Yes. We have good visibility through '27. In certain OEMs we're sold out through '27. So we have a good idea; a lot of it's in the backlog. Some of it we know we've got sales for. The good news here is the engine OEMs are flat out. They're running hard. They're all trying to increase capacity. They're sold out to '29, most of them. So we feel really good about our allocation. We're considered one of the premier system integrators out there, and we continue to get good allocation. It's just really tight. That's the good news—it's very tight. Everybody wants the engines. The fun thing for us is it's not just standby diesel applications anymore. It's behind-the-meter. And we love the behind-the-meter work. It's more sophisticated. It's highly engineered. We have a great offering in it. It stemmed really with our e-frac offering, but we have a good set of engineering capabilities in behind-the-meter 24/7 power. The great thing about that is the equipment that is going to run will have a repair and parts replacement cycle that will come in the outer years. So it's all about good demand that's shifting engine deliveries, and we see that lasting for quite some time. These behind-the-meter contracts that some of our customers are having, some of them go for seven to, in one case, we know of a 15-year contract. So the co-locators and hyperscalers are not using behind-the-meter power as bridging anymore. This is becoming prime. So we're pretty excited about the way it looks. And when we look at our backlog, behind-the-meter is now eclipsing just standby diesel generation.

Gregory Lewis, Analyst (BTIG)

Which means a lot more service.

Raj Kumar, Executive Vice President & Chief Financial Officer

I was just going to add, Greg, with behind-the-meter, as we've always talked about it, the margins are better than the backup stuff. David referenced the service revenue—that's going to be even better margins.

Gregory Lewis, Analyst (BTIG)

And Raj, not to paint you in a corner, but any sense you can disclose about—when we say better, is it single basis points or tens of basis points?

Raj Kumar, Executive Vice President & Chief Financial Officer

So it's—this is how I'll describe it. On the behind-the-meter on the prime side, you're probably looking at low double-digit margins. And when I talked about the service revenue, that's—you're looking at about a couple of years out, that's probably going to be north of that.

Operator, Operator

Our next question comes from the line of Ben Mohr from Citi.

Benjamin Mohr Mok, Analyst (Citi)

Congrats on the great results and also the raise. Just wanted to piggyback on Greg's first question there, looking at the drivers from crack spread widening, petchem exports, Venezuela heavy crude imports that you mentioned and possibly the Valero fire, bypass moves. Just wanted to get a sense of those contributors. Can you tell us how you were able to raise your EPS target range but maintain your revenue and margin targets? And maybe talk to some of those contributors on what's driving the guide raise while maintaining the revenue and margin ranges.

David W. Grzebinski, Chief Executive Officer

Ben, thanks for the question. The revenue and margin guidance is a range, and this just moved it up to the higher end of that range. The more important thing on the inland side is the supply and demand dynamic. I'm going to let Christian give you some color there because that's really what's driving this, the raise and also it portends really well for '27 and '28. Christian, why don't you give them some color on supply and demand?

Christian O'Neil, President & Chief Operating Officer

Yes. Thank you, David. What we see right now is a tremendous amount of momentum that started building in March. We've already referred to the conflict in the Middle East and what that's done to crack spreads and to an awakening in petrochemical margins and activity. Beyond that, the supply side is still in great shape. There were only 66 barges built last year. We think maybe 70 on the books for this year. That's replacement capacity. We don't see anybody measurably growing the fleet. And some of that building is for a shipper's internal moves, and they're going to retire some older equipment. So we feel really good about the supply setup. Barges are still very expensive—it's still about $4.5 million to build a typical plain vanilla clean 30,000-barrel tank barge. We see capital discipline in the market. So supply is in a great spot. Beyond the petchem momentum and the refining margins, we see some other nuanced things on the horizon. The Calcasieu lock will shut down daytime hours only in May, and that's going to be another tailwind for us. That will unfortunately cause some congestion on the Intercoastal Canal, but that is the highest-traffic lock in the inland waterway system, and we'll add a day transit either east or west when that goes down. So it's a very constructive setup for inland as well as coastal, and we're feeling really good about the momentum we have right now.

Benjamin Mohr Mok, Analyst (Citi)

That sounds great. You mentioned that it portends well for '27 and '28. If inland and coastal margins are roughly 20% and power gen roughly 5% to 10% today, where could they go in a strong market?

David W. Grzebinski, Chief Executive Officer

Last really up cycle before people started building, we got to about 27% margins for a quarter or so on the inland side. I think it will be slow and steady; we won't pop there next year. It will take a couple of years, but I certainly believe that we'll go above the last cycle peaks on inland margins. I think on the coastal side, it probably won't get that high—the cost structure is a little different—but it certainly can move into the mid-20s in terms of margin. As Christian referenced, there's just no building. It doesn't make sense to build right now. The cost of new barges and the cost of new boats is very expensive. Rates need to be a good 40% above where they are right now to justify new builds. So we look at a slow and steady ramp into '27 and '28. It's hard to predict exactly when we'll get to peak margins. I would add, in the last couple of years, we had a maintenance bubble. These barges have a five-year maintenance cycle. So starting at the end of '27 and the beginning of '28, we're going to have another maintenance cycle. So things could get pretty sporty in '28. On power gen margins, as Raj talked about, behind-the-meter power systems have a higher margin than just standby diesel. I'd like to see our KDS business get to high single digits and ultimately into the low double digits. That will take some time. It is very mix sensitive. As you've seen, our margins were down a little bit sequentially because of mix, but it should be building. Then when you get to out years, there's the service component that's going to start kicking in. These behind-the-meter, running 24/7 engines are going to need serious maintenance after about three to four years of heavy running.

Benjamin Mohr Mok, Analyst (Citi)

Really appreciate that. Long-winded is always great. Maybe one last question: last quarter you said power gen backlog grew 30% year-over-year and guided power gen revenue to grow 10% to 20% with the bottleneck coming from OEMs. Any updates on those numbers—the 30% backlog growth and the 10% to 20% revenue guide?

David W. Grzebinski, Chief Executive Officer

I mentioned backlog before; we don't want to announce backlog every quarter, but I gave a range you could drive a truck through—I said $500 million to $1 billion backlog. We may have to update that because we're going to go at the top end of that range, but we're not ready to do that just yet. But it continues to grow, is what I would say. Book-to-bill is well above 1. Things look really positive in the space.

Operator, Operator

Our next question comes from the line of Ken Hoexter from Bank of America. Adam Roszkowski on for Ken Hoexter.

Adam Roszkowski, Analyst (Bank of America)

Adam Roszkowski on for Ken Hoexter. To start, maybe remind us what portion of the inland book is going to reprice in Q2, Q3, Q4? And anything you're seeing on early renewals—so flat to slightly up, trending better? Any thoughts there?

David W. Grzebinski, Chief Executive Officer

Sure, Adam. Christian and I'll tag team this a bit. As we've indicated in the past, term renewals are very fourth-quarter heavy. About 40% of the term portfolio reprices in the fourth quarter. Term contracts are about 65% of our revenue right now with the remainder spot. Christian, do you want to talk more about the pricing dynamic and how term and spot roll?

Christian O'Neil, President & Chief Operating Officer

You asked about the flow through Q2 and Q3 for renewals. Excuse me—about renewals, as I said, 40% of the term contracts are in the fourth quarter. The remaining 60% is spread between the other three quarters, with the third quarter probably heavier than the first and second. In our prepared remarks, we said term pricing so far was flat to up just slightly. The good news is that spot pricing is a good 10% above term pricing, maybe even more. That's a healthy market when spot usually leads term, both on the way up and on the way down. So we're constructive about how term contracts should renew throughout the remainder of the year, but the fourth quarter is the bigger piece.

Adam Roszkowski, Analyst (Bank of America)

Glad to have you back, Christian. On the recent strength, you mentioned improved conditions in petrochem markets, stronger refinery utilization, Venezuelan impacts, and some Middle Eastern activity. Is there any sense of what is being driven by which—how much is driven by incremental Venezuelan impacts or Middle Eastern activity? Any broad thoughts?

Christian O'Neil, President & Chief Operating Officer

It's hard to exactly put a number on it. We do see moves from refineries that are processing Venezuelan crude, creating more intermediates and heavies. We have seen some refiners term up equipment with thermal capability to move the heavier residual barrel. So we definitely have seen the impact, but it's hard to peg the exact amount of Venezuelan crude going through refineries on any given day. We see more volumes, more intermediates, and more heavies. A couple of other demand anecdotes: with the release of the SPR and Venezuelan crude coming into the Gulf of Mexico, the traditional crude pipeline capacity that moves crude around the Gulf has been overwhelmed. So we have seen incremental crude oil barge movements as a result of pipeline capacity being oversubscribed at this point. Probably not something that goes on in perpetuity, but it's an interesting demand driver tied to Venezuelan crude.

David W. Grzebinski, Chief Executive Officer

If you look at WTI and Brent, the spread has opened back up. Generally, when the spread between WTI and Brent starts to gap out, we start to see incremental U.S. crude moves. So we watch that. If you're looking for crude moves for us on the inland waterways, look at that spread and you'll get a feel for the direction.

Adam Roszkowski, Analyst (Bank of America)

That's helpful. One last follow-up: the Jones Act waiver was recently extended for another 90 days. It seems like this isn't impacting fundamentals in a major way at this time. Any thoughts on near- or medium-term impacts if this is extended further?

David W. Grzebinski, Chief Executive Officer

In the near term, impacts are almost nonexistent on the inland side—there's really no foreign tonnage that can come into the inland waterways. Inland is about 80% of our Marine segment, so we feel pretty good about that. The blue water side is different—MR tankers and foreign tonnage can come in and trade, and we have seen some come in. We're booked up on the blue water side; those contracts run about a year. If waivers go beyond that, we could start to see some impact. We've seen some non-Jones Act moves in the market; I would characterize some of them as arbitrage related where traders make money rather than serving military readiness. We watch it closely. We're not concerned if it's short term, but if it starts to extend past a year, it could have some impact. We would prefer targeted waivers rather than a blanket waiver.

Christian O'Neil, President & Chief Operating Officer

I personally have seen no impact on the price of gasoline as a result of the waiver. But I have many captains concerned—the waiver can create unintended consequences. It can have a chilling effect on the merchant mariner workforce, which is a real strength of this country, and can affect our ability to recruit and retain. There are units on the West Coast and other places that have lost jobs to foreign flag tonnage. So while the administration has good intentions regarding military readiness, we would prefer targeted waivers rather than blanket waivers. Sorry—I can get on a soapbox on this topic. I'll get off and get back to the call.

Operator, Operator

Our next question comes from the line of Scott Group from Wolfe Research.

Scott Group, Analyst (Wolfe Research)

So helpful color on spot. I just have a couple of follow-ups. Where is spot trending on a year-over-year basis? And that 10-point spread of spot over contract—where did that trough happen last year when things were challenging? When a couple of years ago, when things were really good in terms of pricing, where was that spread? I want to put some context around this double-digit spread.

David W. Grzebinski, Chief Executive Officer

Scott, 10% is a healthy gap above term. When it really gets sporty, it's more like 10% to 15%. When it's going down, spot is below term. Last year, the gap was more like 5% to 10%—maybe 7.5% on average. Right now, we're at least 10% and probably growing a bit. Christian can add more color.

Christian O'Neil, President & Chief Operating Officer

The recent momentum as of March and what we're seeing—the pace at which we're pushing spot rates and achieving that—is clipping pretty good. David pegged it at 10% and it's probably headed to 15% in the not-too-distant future.

Scott Group, Analyst (Wolfe Research)

Okay. That's helpful. Maybe a little update on the M&A environment. You did some tuck-in barge acquisitions. Do you think that'll continue? Is that more likely than doing something larger? Any overall thoughts on barge acquisitions?

David W. Grzebinski, Chief Executive Officer

We like acquisitions in our core businesses, particularly inland. Our ability to integrate them is powerful—this latest tuck-in was integrated within four hours. We love those inland transactions and we're always looking at them. We still have about 25 competitors out there. We'd be happy to buy any one of them. But we remain very capital disciplined, and there's always a bid-offer spread. Predicting a larger deal is difficult. We certainly have the balance sheet capacity—our debt-to-EBITDA is probably 1.1 to 1.2—so we have plenty of capacity. Raj increased our revolver to $750 million. We're always open-minded to acquisitions, but it's hard to predict. On capital deployment, if we can't put free cash to work in a good acquisition, you'll see us buy back our stock. We like our stock where it's at and we're happy to deploy free cash that way. We prefer acquisitions, particularly in the inland space, but any of our core businesses are of interest. It's just hard to predict.

Scott Group, Analyst (Wolfe Research)

One last thing—any color around the magnitude of coastal margin pressure in Q2, or overall margin expectations for the quarter?

David W. Grzebinski, Chief Executive Officer

Our coastal margins in the first quarter were a bit better. One of the big units moved from the first quarter into the second quarter, and as you know, these big units can cost about $60,000 a day when they're out of service, so that can be impactful. I don't have precise guidance for coastal margins for the quarter.

Raj Kumar, Executive Vice President & Chief Financial Officer

It depends on the shipyard and how long it's going to last. We try to manage the duration of shipyard work closely and do a very good job. We had good progress last year where in the Q2-Q3 time frame we were able to get out of the shipyard quicker than expected. We'll see how Q2 goes, but that's what we're going to do. We control what we can control.

Operator, Operator

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Matt Kerin for closing remarks.

Matthew Kerin, Investor Relations

Thank you, James, and everyone on the call for participating in our call today. If you have any additional questions or comments, please feel free to contact me. Thank you, and have a good day.

Operator, Operator

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.