Kirby Corp (KEX) 2003 Q1 法說會逐字稿

Welcome to the Kirby Corporation first quarter earnings release conference call. I would like to inform all participants this conference is being recorded. If you have any objections, you may disconnect at this time. I would like to introduce Mr. Steve Fulcrum, Vice President of Investor Relations. Sir, you may begin.

Good morning. Thank you for joining us. With me today is Berdon Lawrence, Chairman, Joseph Pyne, President and CFO, and Norman Nolen, our Executive Vice President and Chief Financial Officer. During this conference call, we may refer to certain non-GAAP measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is available on our website at WWW.KIRBYCORP.com in the Investor Relations section under non-GAAP financial data.

Statements contained in this conference call with respect to the future or forward-looking statements. These statements reflect management's reasonable judgment with respect to future events. Forward looking statements involve risk and uncertainties. Actual results could differ materially from those anticipated as a result of various factors. The rest of these risk factors can be found in Kirby's annual report from 10-K for the year ended December 31, 2002, filed with the SEC.

I will now turn the call over to Joe.

Thank you, Steve. In our press release this morning, we reported our 2003 1st quarter results of 28 cents per share. Earning 6.9 million on revenues of 148.2 million. Reported earnings were in line with our revised earnings guidance of 26 to 30 cents per share. Announced on March 18th. During the 1st quarter, upriver petric chemicals were above their levels from the 1st quarter last year. The sea river -- being Exxon Mobil, being when we purchased sea river on January 15, 2003. Excluding the sea river volumes, our up river petric chemicals were stronger than they were in the 4th quarter last year. Black oil volumes also increased. Driven by the addition of Coastal Towing in October of 2002. The additional movements of both residual oil used as a substitute for natural gas for boiler fuel and cap cracker peek stocks for production of mostly refined products. Refined products volumes of the end of the quarter soft, but strengthened in March. Fertilizer was down all quarter, prince my because of the high cost of the feed stock for the fertilizer that we carry, natural gas. We do expect some improvement in the 2nd quarter of fertilizer movements.

The 1st quarter is historically our poorest earnings quarter. Weather is a major factor. We incurred delays from fog, storms, ice, the high and low water during the quarter. Also affecting this quarter was the repair of the major lock, located on the Gulf intercoastal waterway. And runaway diesel fuel prices.

But all this means is that we weren't very efficient this quarter. We went slower, we incurred more delays, we used more horsepower to move the cargo we typically moved with less horsepower, and we paid more for fuel. However, on the positive side, our business levels were actually pretty good and stronger than last year.

We estimate that the higher diesel fuel prices reduced our 1st quarter earnings by approximately 5 cents a share. The average price per gallon of diesel fuel consumed during the quarter was $1.03, but in certain places, particularly up river, we were paying well over $1.20. During the 1st quarter of 2002, the average price per gallon of fuel consumed was 58 cents. And when you compare that with the $1.03 we paid in the 1st quarter of 2003, that's a significant increase. During the 2nd quarter of last year, our average cost was 72 cents. During the 3rd it was 73. And the 4th quarter last year, we paid on average, 82 cents per gallon. While we have fuel escalation clauses in all our term contracts, with the price of fuel continuing to escalate throughout the quarter, we weren't able to catch up. Fuel escalation clauses allow for increases and decreases in fuel prices to be passed through to the customer. Although it's not an immediate pass through, there is -- depending on the contract, a 30- to 90-day delay before contracts are adjusted for fuel costs.

With respect to spot pricing in the stock market. The market dictates whether fuel costs can be recovered from the shipper. In the 1st quarter, the beginning of the quarter, stock prices did not allow for recovery of fuel increases. However, stock prices are now up, allowing us to recover our fuel costs incurred. And also, fuel costs are down from their recent highs.

Turning to our diesel engine service business, this business was continued to be effective by a weak oil service market, principally in the Gulf coast area, and poor midwest dry cargo barge markets. This weakness was offset by stronger east coast marine power generation, and the industrial markets. Allowing this segment to report slightly higher revenues and operating profits, when compared to the same period last year.

I'll come back and talk about the outlook for the 2003 2nd quarter and for the year. And Berdon is going to address our construction program, barge construction program for both 2003 and 2004.

But first, let me turn it over to Norman to discuss the financial highlights for the quarter.

Thank you, Joe. Capital spending before acquisitions for the 2003 1st quarter was 18.8 million, of its 3.8 million was for new barge construction. We also spent 35.6 million for the acquisition of 48 tank barges and 7 tow boats from Exxon Sea River in January. Depreciation for the first quarter was 12.2 million, which was up a little from the 11.5 million in the first quarter of 2002 due mainly to the equipment that we acquired from Dow and Coastal Towing in 2002, and Sea River in 2003. Depreciation/amortization for the 2003 year is expected to be approximately 55 million. Interest expense for the 1st quarter of 2003, was 3 1/2 million. Slightly below the 1st quarter of 2002. Our average debt increased but it was offset by lower interest rates.

We funded a 250 million ten year floating private issue debt inventory in February and used the proceeds to pay off most of our bank-to-bank debt.. We hedged floating rate risk on the private placement debt with interest rate swaps that had a maturity of 1-to-three years. Our all in average interest rates for the 1st quarter 4.8%. Capitalization ratio increased from 43.6% at March 31 '02 to 4.7% at March 31, '03, due primarily to the barge and tow boats purchase from Dow and Exxon Sea River. Total purchase price which was $77.5 million.

I'll now turn the call over to Berdon.

Thank you, Norman. I'd like to update you on our ongoing tank barge construction program.

During the 2003 1st quarter, we took delivery of two 30,000 barrel capacity black oil barges of a total cost of approximately 3.6 million. We paid for one of the barges in the 1st quarter and the 2nd barge was paid for in April. We also have a contract for the construction of six 30,000 barrel capacity tank barges for use in the petro chemical and refind products markets, with a delivery time frame scheduled over a six-month period starting in April, 2003. The total purchase price of these six barges is approximately $8.9 million. We also plan to build 6 more clean 30,000 barrel barges next year.

In October 2002, we entered into a large management agreement with Coastal Towing to manage their 54 remaining active black oil barges. When we entered into this agreement, both Kirby and Coastal recognized that many of Coastal's fleets under management would need to be replaced within a five-year period. Under our agreement, Coastal has the right to maintain the capacity percentage represented by their 54 barges by building replacement barges as their barges are retired. In the next three years, well will need to replace the capacity represented by 44 barges that are retiring. Kirby owns 13 of these barges and 31 are owned by Coastal. Because some of the retiring barges are smaller than the barges we are replacing, than we will not replace the 44 retiring barges, barge for barge. We are currently under discussions with Coastal about whether they intend to exercise their right to replace their capacity. If they choose not to exercise their right to replace all or part of their capacity, Kirby intends to build that capacity that Coastal chooses not to build. This, of course, would be additive to both earnings and operating cashflow if Kirby replaces the capacity that coastal chooses not to replace.

The black oil market is a market that we believe will continue to do well. Given current market conditions, it is our intention to build barges that will maintain our current market share in this important market.

I'll now turn the call back over to Joe, who will talk about Kirby's 2003 2nd quarter and full-year outlook.

Thank you, Berdon. This morning we announced our 2003 2nd quarter earnings guidance of 44 to 48 cents per share. This compares to the 2002 2nd quarter earnings of 36 cents per share. For the 2003 year, we lowered our earnings guidance by 10 cents to 165 to 175 per share, compared with 2002 earnings before the impairment charge of $1.64 per share. This remains a cautious view, but given the uncertainty in the U.S. economy and our lower 1st quarter earnings, we think it's appropriate and prudent.

Dispute lowering our earnings guidance for the year, we are surprisingly busy. There are a number of reasons for increased volumes, such as lower feed stock costs, low inventories of refined products in the midwest, and high natural gas prices that encourages the black oil business, although it slightly discourages the fertilizer business. It does not appear to be anything that suggests that the economy is getting stronger. Perhaps other than our volume increases. If our volume trend continues, we continue at this level, we may be able to move our guidance up for the year, but for now, we're not prepared to suggest that the economy is getting any stronger, and we are predicting in these numbers some slowing in our business levels as we go into the summer.

Looking specifically at the 2nd quarter, navigating delays that we experienced this last quarter, and the lock repairs should be for the most part behind us. We anticipate diesel fuel prices to flatten out during the 2nd quarter, and some additional costs extended from the high fuel prices in the 1st quarter will be recovered. In the 2nd quarter. We're currently paying in a range of 90 to 95 cents a gallon for diesel fuel.

Operator, we're now ready to open the conference call up to questions.

At this time, we are ready to begin the formal question-and-answer session. If you would like to ask a question, you may press star one on your phone. You will be announced prior to asking your question. To withdraw your question, you may press star two. Once again, to ask a question, please press star one on your phone.

Our first question is from David Yasha. Sir, you may ask your question.

First, on the quarter, guys, the acquisitions you made -- you know, in the 1st quarter, and late in the 4th quarter, bringing those on and then having them be smacked with diesel costs as well as weather-related issues, and also, probably wanting to make sure that those new assets you're bringing on, you were going to have some good positive first impressions with the customers that those barges are going to take the business too. Was that a pretty good burden to be faced with in addition to just having to face that with your existing business before the acquisitions?

Well, you certainly want to service any new piece of business that you have well, and we did put a lot of additional horsepower into the business in the first quarter to comply with scheduling issues and to make sure we were servicing our accounts appropriately. That couple with higher fuel costs and just lower trip times impacted the first quarter in a significant way. Revenue was up about 15%, and margins were significantly down. As the weather improves, our lock is now back in business and as we recover our fuel costs, we think that that's going to fall to the bottom line, hence the much better performance predicted in the 2nd quarter versus the 1st quarter.

It kind of suggests that because of volumes -- even the volumes are probably better than what I thought they were even with the acquisitions, the acquisitions under extra barges almost really mean -- I mean, would kind of suggest -- that business did -- where acquisitions tend to be accretive, that probably would have been a drag on if you?

Well, we think that the Coastal acquisition and the Sea River acquisitions are both good acquisitions that will be the additive to earnings. And as we look at how we projected them versus how they performed, they're at least as good as the projection. You know, Berdon and I were commenting about this the other day, that the fog delays on the canal were as significant as we've seen them in a long time.

And also, the lock is the most heavily traveled lock on the interester coastal. It's not like it's some outlying lock, it's the busiest lock that we go through.

It was a difficult quarter. Now, having said that, we are busy, the fleet is pretty well utilized. Stock rates are climbing, they're up about 10% over the previous quarter. If that trend continues, you know, we're going to be in great shape. The weather is getting better, the lock is back up. There's another lock that's going down, but it will have less of an impact on us, and I think it's only down for about three weeks. That happens on a fairly routine basis. On both the river system and the canal.

So we think that things, you know, overall are positive. Now, making us cautious is the fact that there really isn't any kind of national indicator that's suggesting that the economy's getting stronger. We say somewhat facetiously, other than our volumes, but we think that it's appropriate to be cautious this year. Maybe if the economy improves, I think we're going to be in good shape.

Are the refined products in March, is that a little earlier pickup than what you generally see?

Yeah, it started a little earlier. You generally see late March/April, but this year the midwest inventories are low in terms of a kind of -- if you look at volumes, same period last year, volumes are 6 to 8 million barrels when you look at gasoline volumes and 2 oil volumes of inventories of volumes. 6 to 8 million barrels lower than they were same period last year, and that creates a demand for barging the gasoline up into the midwest. And that demand is going to be there until the volume is right. We think we're going to have a strong gasoline season this year.

Is it fair to say, because of the volumes you achieved this quarter, given what's happening in the economy, and in other places, and other barge marine operators that you may be gaining market share to sustain it for the rest of the year?

It's hard to say. It's very difficult to say so early in the year.

Are you picking up newer business from customers that maybe they're just adding --

Actually, we're very busy with our existing customers.

Okay.

Our existing customers are busier than they were last year, that's consuming more of our capacity.

Okay. Well, I'll turn it back to the operator and que back up again. Thanks.

Our next question is from Natasha Boyden. Ma'am, you may ask your questions.

Welcome back, Natasha.

Thank you, I appreciate that. I have a couple of questions. You mentioned the black oil market was doing pretty well. And I was just wondering, what kind of market share do you have at the moment with the new acquisitions.

Well, when combined with the Coastal fleet, it's high 20% market share.

Okay. And what -- I know that you were sort of sifting around the business and what they contributed to the overall line. What is black oil now as kind of the percentage of your overall revenue.

The good way -- I'll give you all of them, because they are different. About 20% is black oil, the largest will continue to be chemical, petric check chemical, that's about 65%. Fertilizer is down, down to about 5%. And refined products is also down, down to about 10%.

Is this say mix that you're comfortable with?

Yeah, that's the mix that we think we're going to see in 2003.

Okay. And in terms of just -- you said 20% of the black oil market. Is there any more -- do you expect to gain more market share of that? Where do you think you could be in a few years?

It's hard to say. I mean, frankly what we're trying to do is hang on to the market share we have. Hence Berdon's comments on building. But we -- you know, we think that that's -- Berdon you may want to weigh-in here. We think that's a good market. It's a market that Hollywood had been in for a very long time.

We've been in that business for 30 years, so we're very familiar with the black oil business, and we think we have an opportunity to really have a first class fleet, and we know the customers and we think we can do a real good job in that area.

Great. I'm just wondering if you could expound a little bit on the diesel engine services, kind of what the drivers were behind that, obviously looks like you did a little better year over year?

Yeah. Well, let me start with the areas that are continuing to not perform as well as they have historically done. The oil service business is still down. On as with positive note, though, all oil service customers do believe the second half of the year is going to be better than the first half, so we should see some improvement there if they're right.

The other area is the river dry cargo business. That's the midwest operation of Kirby engine systems, it services the barge market. That market still is under some pressure, and customers continue to defer maintenance. Where it's been strong has been on the east coast, where strong movements, principally of refined products have helped it. The industrial side of that business is also pretty strong. We overhaul and provide parts to power generation systems. We work on industrial gears. The short line industrial railroad business has also been stronger than it has in the past couch el years.

Okay. Great. Do you expect these areas to be strong over the coming year, or are you seeing any kind of pressure on the market?

Well, our forecast has these areas continuing to maintain their levels, and if there's an upside, it's going to be as the oil service business gets better, and as some things change in the midwest market. But we're reasonably optimistic about the diesel engine business. That's a -- the strong kind of ratable business. It's predictable. We have been able to grow that business, as you know, and hope to continue to do that, so -- we think it's a good business that has some more opportunity in it.

Great. Okay. Thank you very much.

Our next question is from Bill Baldwin, sir, you may ask your question.

Okay. Good morning. 2 or 3 questions here, Joe. Looking at the 1st quarter, could you kind of describe where your contract rates were and spot rates were year-over-year and where you are now on those rates year-over-year.

Yeah. Year-over-year, spot rates 1st quarter 2002 were actually a little better than kind of midyear. They fell midyear. And again, to come back in the 4th quarter. If you look at -- this isn't so much year-over-year, but 4th quarter to 1st quarter, they're up about 10%.

Now, with respect to contracts, we're still kind of rolling those over as they expire. You can't do that forever. We need to roll them over with some increase because costs continued to increase. But what's encouraging is that the trend on spot rates is up, and that's what you need to have to get the contract base increases.

Are your rates currently above your contract rates?

Yeah, they are.

And that wasn't necessarily the case for the whole 1st quarter, was it?

Of 2002?

Of 2003?

Well, you know, it certainly wasn't the case kind of midyear last year, but, you know, somewhere in the 4th quarter I think you began -- you can always pick a rate and find that it's lower. So you have to look at this holisticly, but holistically, I would say that spot rates were slightly above contract rates.

So the contracts, I guess, looking at the 2nd half of the year, could be rolling over at some what have a higher rate than they currently are?

Yeah, but with this caution, you know, you -- everybody's watching the economy and looking for something that's positive -- positive news. And there isn't a lot there. You know, other than our volumes -- and I also noticed that UPS's volumes were up too, which is, you know, maybe some what of a leading indicator. But you don't get this -- you don't get the strong sense that the -- you know, the economy is moving in a positive sustainable direction, and given that, we look at our volumes and we say, okay, they're being driven by a number of things that may be somewhat delinked from the direction of the economy, and you -- we may see going into the summer some of the intensity of the volumes come off.

Right.

If that happens, my guess is, that you're going to be pleased just kind of hanging on to your contract pricing as it expires.

Right.

If on the other hand it continues, then I think you may have some leverage to move them up a little bit.

Okay. A couple more quick items, Joe. Can you at all put any parameters around what you think the inefficiencies in the 1st quarter cost you?

In terms of dollars/cents per share?

However you want to describe it.

Well, we were forecasting 36 to 40 cents. We turned in 28. We say that 5 cents is fuel related. You know, so that's 33, so some where between 3 and 7 cents.

Okay. And lastly. If you or Berdon care to speculate, based upon the acquisitions you've made of these additional barges and tow boats and so forth, you know, in a normal operating environment, let's say, what kind of improved efficiencies do you think come from better horsepower management as a result of these coastal and sea river acquisitions, looking out over the next year to 18 months?

Yeah, that's -- there aren't as many efficiencies in the Coastal/Sea River acquisitions as there were in -- when we put Hollywood and Kirby together. This is the reason. With respect to Sea River, we already had four of the seven boats that we purchased from Sea River in a towing alliance, so they were already integrated with Kirby prior to the acquisition, had been, in fact, the last three or four years.

With Coastal, you're dealing with black oil equipment, which is a separate market. And you don't generally mix black oil and clean barges. So they're -- you're not going to get the same efficiencies as if you just, you know, had a barge fleet and you were melding it into our other clean fleet.

Now, having said that, we bought 13 boats from Coastal. We didn't buy all their equipment. So as their business levels expand, we are able to use some of our excess power moving that equipment. So that helps a little bit in that it takes excess power that Kirby owned and throws it into the system. I think the real savings are less operating and more G & A savings, that when you add that equipment, you don't add incrementally the G & A, you would on a stand alone basis.

But let me rephrase it, then. Just looking at your operations in general, do you see continued opportunities for improved efficiencies in your horsepower management going out over the next several years?

We hope so, but we've done a lot in that area, Bill.

I know you have, I know you have --

Yeah.

I just --

I think this -- you know, this Company's got, on any given day, 15 to 20 teams looking at cost saving and efficiency projects. We're very focused on that. I can tell you that every quarter we make presentations to our Board with respect to potential cost savings and efficiency projects. And that we're out, you know, talking to our people on a bottom's up basis, how can we squeeze costs out of this business. How can we make this company more efficient? How can we turn our toes quicker? With respect to horsepower, we discuss horsepower on a weekly basis, on a monthly basis. We look at metrics that measure how efficient we are, we're very focused on it.

Thank you very much.

Sure.

Our next question is from Mark Highwell. Sir, you may ask your question.

Good morning. Two questions. One is, does the security consciousness in and new rules affect your expenses and is it expected to have any impact on your expenses in the future?

It depends somewhat on the level of security that's imposed in our case by the coast guard. There are some levels that require us to post security guards at some of our shore side facilities, and that's a -- you know, a cost that we incur, I don't think it's material or that material. With respect to just general security, most of the security that we have seen thus far has been facility imposed, meaning that the various refineries and plant that is we go to have increased facility requirements that limit our access into the plant, make it less convenient to have supplies moved through the plant to us, crew changing, that kind of thing. As you look at the security requirements that are being contemplated, and I guess actually our -- now codified regulations -- or about to be codified in regulation, there are some requirements for security plans that we'll have some incremental costs attached to them. But again, I don't think they're going to be that material.

We're mostly a domestic shipper, in that we see most of the focus rightfully so, being focused on the international, ships coming in from all over the world.

Secondly, I wonder if you could give us an idea of your current thinking on the balance sheet issues, what -- if you undergo -- if you undertake the larger projection of your building program, how would you look to finance that? What is your current view on your ideal debt-to-equity ratio, and please include also any comments you have about under what conditions you would get active in your share repurchase again.

Okay. Let me start and we'll let Norman and Berdon kind of fill in the blanks. The building program that we would contemplate, we think can be done very easily at a free cashflow. Our historic precashflow is, you know, between 40 and 50 million dollars and we don't contemplate the building program that would consume that. Frankly, almost on -- in any year, where you would go over that is an acquisition that, of course, would be the earnings additive.

And the other thing I'll just -- a point that Berdon made that I want to stress again, that is that at least in terms of the black oil equipment, most of those barges belong to Coastal Towing. They may or may not choose to replace that capacity. If they choose to replace their capacity, it's their cash, not ours, that they're using. If they choose not to replace that capacity, then -- and we replace it, it's additive to both earnings and cashflow.

That's new business.

Yeah, that's new business. In terms of kind of overall financial objectives, we want to maintain our investment grade rating, and we intend to do that. We don't intend to do anything that compromises that. That's very important to us. We actually say that our debt total cap market is around 50%. That seems high, but as Norman points out with some frequency, this company has very, very steady cashflow, so we can tolerate higher levels. We're actually lower than that right now, our debt-to-total cap is 47%. Let me let Norman kind of fill in the blanks --

We also did a pretty significant restructuring of our capital structure in February where we -- I mentioned we placed $250 million of a 10-year bullet private placement note. And this freed up all of our revolving credit. We have a officially unused $150 million revolving credit outstanding right now. So for the temporary, we have more than adequate bank facilities to cover these kind of building needs. One of the characteristics of an inland barge company is that even the good times, the bad times, the cashflow is pretty steady. So we're contemplating here should not be any kind of a strain on our resources.

And I guess my last question was, under what conditions would you consider getting active with your share repurchase?

Yeah. We're -- I'm sorry, we're -- well, let me say that we think that using precashflow to repurchase stock is a good thing. We're -- we've repurchased about 10 million of our shares since 1995. And having said that, we're an opportunistic buyer of our stock. We don't buy -- we don't just go into the market and buy at any level. We look at where the stock's trading and if we think it's a good volume -- value, and we don't have alternative uses such as acquisitions and our balance sheet's in good shape, we'll step into the market and buy.

You're kind of leaving the impression that the stocks -- this would be a first for CEO in my experience. Your stock's a little high?

No, I'm not saying that.

Okay. I just wanted to --

Remember that in 2002 we made four acquisitions, and, you know, those acquisitions, of course, were cash. And we think as we look at the uses of cash, that acquisitions that meet our investment returns, that continue to consolidate our business are really the best use of that cash. And then we look at, you know, that being first, then we look at, you know, paying down debt or buying back stock. Now, there are levels that the stock can get to that, you know, if you buy the stock -- we don't think we're there. But we're certainly not suggesting that our stock's overvalued.

Thanks for a conscientious job, guys.

Thank you.

Our last question is from David Yasha. Go ahead, sir.

You mentioned it devalued profits that could slow things for you, what in particular are you referring to?

Let me expand on what could be driving our volumes. We went through a period of high natural gas and crude oil prices. Those are the feed stocks or petric D chemical customers. Those prices are down now, which make that customer feel a little bit better about building some inventory. I think the commitment in this business is still to maintain low inventories, but you certainly don't want to build any inventory when you believe that you're feed stock costs are going to come down. So that may be part of the explanation for stronger volumes. Other things that are driving it are inventory issues in the midwest with respect to the refined products market. The relative price of natural gas, encourages the use of residual oil as fuel versus natural gas, in industries that can in fact switch. And all these things create a -- and we're speculating here, David, because I think that what you want is kind of our best view of what's happening to us.

How come -- go ahead.

When I say delink -- I don't know if I used that word, but it's -- what truly drives this business -- and there are anomalies that drive it but anomalies go away, is a healthy productive economy. And what we see is an economy that's pretty flat right now, and if it remains flat, then, you know -- yeah, I can see maybe volumes coming down a little bit.

This just depends upon like you mentioned earlier, chemicals are improving and stable stock prices and stable gas prices. If you get that, refined products will probably always be a good business. And it will probably be a good business this summer just because of the inventory levels.

I think we're taking a conservative look as we go forward.

Well, there's nothing wrong with that, given this kind of economy?

Yeah.

Chemicals did well in the 1st quarter. Just a couple other real quick ones, the capacity on the volume -- revolver right now, your debt is 250 on that terminal, isn't it?

Right.

And you have about 295 on the quarter for debt?

Yes, we have a terminal still outstanding.

So that's the term loan difference there. And nothing used on the revolver, so you have approximately 150 on the revolver?

Right.

The other term loan comes due --

November '04.

Okay. And -- The capital spending this year, what's that going to be?

Between 55 and 60, excluding any new Cap Ex that Berdon was talking about.

So you get the term loan out plus the revolver, are you sitting with cash right now? Because you're not going to pay these things down and no revolver to pay down?

We can't pay anything down for the year, but we'll probably use most of that.

Did you end up the quarter with cash?

No.

But you could possibly end up producing cash if you're not going to pay that stuff down?

We could.

And one other thing on acquisitions, you guys, from the size of the fleets you've got and the capabilities you've got there, in this business, size does matter. And in -- there's a lot of spaces out there where, you know, size is awfully small, can't utilize it, and maybe even the coastal relations have a hint at it, that I don't have the capacity, I need somebody to partner up with. Doesn't that suggest there's probably a lot more acquisition capability or capacity out there, just because owners are looking at their business, saying I don't have the critical size, mass. I mean, you're there, because -- you can pick up the load because you happen to be there, versus the other guys that take his tug boat down the road to get it. It would seem to me that acquisitions can be more abundant in this kind of environment, particularly what was gone through the last 12 months.

Yeah, I think that's probably right, David. We think the business is going to continue to consolidate for the reasons that you gave.

Now, does that suggest that the pricing is more favorable here, because of some frustrations over the last 12 months with owners?

You have to wait and see.

Yeah. It's hard to say.

Well, that's always the ace that you hold back at the card table when you come to negotiate.

You have to wait and see.

Okay. That's all I've got right now,. Thanks.

Thank you, David.

Sir, at this time there are no further questions.

Thank you for joining us this morning. If you have any additional questions or comments, please give me a call. My direct dial number is 713-435-1135. We bid you a good day.