Kirby Corp (KEX) 2005 Q2 法說會逐字稿

At this time I would like to welcome everyone to Kirby Corporation’s second quarter earnings conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the call over to Mr. Steve Holcomb, Vice President Investor Relations. Sir, you may begin.

Thank you for joining us this morning. With me today is Berdon Lawrence, Kirby’s Chairman; Joe Pyne, the President and Chief Executive Officer of Kirby; and Norman Nolen, our Executive Vice President and Chief Financial Officer.

During this conference call we may refer to certain non-GAAP or adjusted financial 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 are forward-looking statements. These statements reflect management’s reasonable judgment with respect to future events. forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those anticipated as a result of various factors. A list of these factors can be found in Kirby’s annual report on form 10-K for the year ended December 31, 2004, filed with the SEC. I will now turn the call over to Joe.

Thank you Steve. Let me add my welcome to those that are joining us today. In our press release yesterday afternoon we reported record 2005 second quarter results of $0.72 per share, earning $18.4 million on record revenues of almost $200 million. The results exceeded our published earnings guidance range of $0.65 to $0.70 per share. The $0.72 per share compares with net earnings the year before of $0.55 a share, again for the second quarter.

Our transportation volumes remained strong throughout the quarter with no real weakness noted in any of the markets that we serve. Of course operating conditions were much improved over the first quarter, with delay days significantly down, and in line with delay days for the 2004 second quarter.

Pricing continued to improve during the quarter, contracts renewed during the second quarter on average, this is in respect to the contracts that did renew during the quarter, on average 4% to 5%. During the second quarter again, spot rates continued to rise modestly and spot rates are generally above contract rates today.

Turning to the diesel engine service segment, their results for the quarter also showed improvement with increased service activity and direct parts sales in all their major markets except the nuclear powered generation market, with a lack of availability of parts from the manufacturer restricted sales in this area.

Our Gulf Coast market, which is principally driven by the oil service business, was much improved over 2004. we are also increasing our pricing for service and parts, which when combined with better labor utilization, is having a positive effect on operating margins in this business.

Our second quarter results also benefited from a net gain of $1.8 million or $1.1 million after tax, from the sale of some marine equipment. This was partially offset by a loss on early debt retirement of $1.1 million or approximately $700,000 after tax, caused by the issuance of $200 million of the new 2005 senior notes, and the early retirement of the same amount of notes, $200 million, that were issued in 2003. Norman’s going to come back to this in his discussion. The impact of these two transactions net approximately $0.01.6 a share.

Before I turn the call over to Norman for his review of the financial highlights of the quarter, I did want to mention that we are entering into a new joint venture that we’ll be talking about in the trade press in a few days. Kirby, along with Management Transportation Associates, has formed a new company called Marine Highways LLC, to develop and market a waterborne service to move both over the road containers, that’s essentially truck trailers. This is a small investment, intended to test the feasibility, and I mention again, test the feasibility of a water based transportation service for highway containers. I mention this now in the event that you read about it in the trade press.

We are in the very early stages of this project and cannot predict its success or even if it’s feasible at this time. What I will say is that water will continue to be the best alternative to the other congested surface modes of transportation, and that more cargo will move by water in the future as shippers are forced to look for alternatives. I’ll now turn the call over to Norman to talk about the financial highlights.

Thanks Joe. In addition to record second quarter and first six months earnings and earnings per share, Kirby generated record second quarter EBITDA of $46.8 million, a 20% increase over the second quarter of ’04. EBITDA for the first half was $86.4 million, a 22% increase over 2004.

Marine transportation revenues increased 15% over the second quarter and first half of 2004. However, during the same periods ton miles declined slightly. Our geographic product mix resulted in a higher proportion of shorter trips in the intercoastal canal versus longer trips in the river. We also experienced more delays caused by high activity in customer terminals, and we generated more revenues from barges used for product storage, which didn’t generate ton miles.

However, contract and spot market rate increases, term contract, fuel, labor, and PPI installations and product mix all contributed to the 15% increase in marine transportation revenues for the first quarter and first half of 2005.

Capital spending was $63.6 million for the first half, which included $35.3 million for new tank barges, and $28.3 million primarily for upgrading our existing fleet. In addition we purchased, in the second quarter, the Black Oil Product Fleet of American Commercial Lines, consisting of 10 black oil barges for $7 million.

We still expect to spend about $65 million for new tank barges this year, approximately $28 million will be for 230,000 barrels of additional capacity; with $37 million for replacement capacities. Our 2005 capital spending guidance remains in the $110 million to $120 million range.

Spending for barge replacement fluctuates from year to year due to the age and condition of barges. For the 2006 year we are revising our new tank barge construction expectations to $45 million, up from the previously reported $20 million to $25 million. Berdon will update you on the 2006 building program, as well as our recent purchase of the Black Oil Products Fleet of American Commercial Lines.

On May 31 we issued $200 million of unsecured floating rate senior notes with no principal repayments due until the maturity date in February 2013. the senior notes have an interest rate equal to LIBOR plus 0.5%. Proceeds from the new notes were used to repay $200 million of senior notes issued in 2003, which had an interest rate equal to LIBOR plus 1.2%. The new notes, with the reduced interest rate, will result in approximately $1.4 million of annual pre-tax interest rate savings at the current level outstanding.

Because of the early payoff of the 2003 notes, we expensed in the second quarter approximately $1.1 million of unamortized financing costs associated with those notes. Debt as of June 30 was $217.6 million or $1.1 million less than the December 31, 2004 balance. Our debt to capitalization ratio was 31.6%, down from 33.4% at the end of last year. Our average cost of debt was 6% for the first six months of 2005. About 69%, $150 million of our outstanding debt, is hedged against interest fluctuations with interest rates swaps. I’ll now turn the call over to Berdon for an update on our capital expenditure program for 2005 and 2006.

Thank you Norman. Our 2005 replacement construction program consists of 10 30,000 barrel capacity tank barges for use in the petrochemical and refined products markets, and seven black oil tank barges for use in the black oil products market.

These 17 tank barges are replacement barges for barges scheduled to be removed from service. The total construction price is approximately $37 million, subject to steel price fluctuations. We have taken delivery of the seven black oil barges, and six of the 10 clean barges. Delivery of the remaining four clean barges will be August 2005 through February 2006.

For 2005 we are also constructing 20 10,000 barrel capacity barges and one 30,000 barrel specialty barge, adding 230,000 barrels of additional capacity. The total construction price is approximately $28 million, subject again to steel price fluctuations. We took the delivery of two of the 10,000 barrel barges in July, and expect delivery of the remaining 19 barges from this August through December 2005.

Also we recently signed contracts for the construction of 23 30,000 barrel capacity barges for use in the petrochemical and refined products markets. These will be a combination of replacement barges and expansion barges, with a total construction price of approximately $45 million, subject to steel price fluctuations. Delivery of the 23 barges are scheduled throughout 2006, with the final barge scheduled for delivery in January 2007.

As Norman said, in June 2005 we purchased from American Commercial Lines their 10 black oil product barges for $7 million. We are currently operating five of the barges, and are evaluating whether to repair or scrap the other five. I’ll now turn the call back to Joe.

Thank you Berdon. Yesterday afternoon we announced our 2005 third quarter guidance of $0.65 to $0.70 per share. Our 2004 third quarter earnings were $0.53 a share. Our guidance anticipates continued strong petrochemical and black oil markets. We anticipate that we will participate less this summer in Midwest refined product movements because we’re operating fewer barges in this market, principally due to the retiring of single skin barges and a strong petrochemical market. We anticipate that we’ll see fertilizer movements begin in late August and September.

For the 2005 year we have increased our earnings per share guidance to a range of $2.50 to $2.60 per share, and depending on where you are in the range, 27% to 32% improvement when you compare it to our record setting performance in 2004 of $1.97 for the year. The hike in our 2005 guidance is based on our higher second quarter results and continued favorable outlook in the petrochemical and refining businesses for the remainder of 2005.

From our vantage point, we see an economy that is continuing to prosper. Our significant customers, the petrochemical companies, remain optimistic. The environment for some continued volume expansion and reasonable rate increases remains favorable. Operator we’re now ready to open the conference call for questions.

[OPERATOR INSTRUCTIONS] Your first question comes from John Barnes, with BB&T Capital.

Good morning guys. You indicated in your press release the decline in ton miles. You said--well one of the issues was a higher number of barges being used for storage, which generated revenue but no ton miles. Number one, do you expect that trend to continue? And number two, is this negatively impacting the turn, you know, the asset turn you’re getting out of your revenue equipment?

Don’t expect it to continue to the degree that we saw in the second quarter. That was principally driven by facility issues, tanks and terminals out of service, that kind of thing, some inventory adjustment issues, which for the most part fall away.

[Inaudible] your question, did it affect asset utilization, John? Give me that one again.

Yes, basically, I mean, is it impacting the number of turns you’re getting out of your equipment?

Well, it certainly would. But I don’t think that it would affect the bottom line, because you’re earning on the barge what we would hope to earn if it was in service. And, we’re able to adjust our power because of our carter exposure so that we can put those costs off, by just laying off boats.

So, if the barge is being used for storage instead of actually the movement of goods, you’re not necessarily taking a hit? You’re getting paid a similar day rate for use of that barge? It’s not a detention fee?

No, that’s right. That’s exactly right. You could argue that getting a daily rate for a barge in the poorer weather months is going to be more favorable, because all the risk is on the [inaudible]. And in the summer months, when the weather is good, having those barges available probably gives you a little more flexibility so you have the potential, I guess, to earn slightly more money. But, there are a lot of nuances in that.

OK. Yesterday we had a couple of railroads earnings and CSX specifically said chemical carloads on the rails were down in the second quarter. And they indicated that the inventory levels for the companies that they serve were higher than normal. You just made mention of an inventory adjustment that occurred in the second quarter. Are you nervous at all that inventory levels are above where they should be and you could get some reduced production out of the companies that you’re serving?

It depends on the chemical company that you talk to. CSX is going to see that just because of their regional focus a different and probably more narrow group of customers than a Kirby is going to see. Kirby is going to see a broader group of customers.

I think that most companies will admit that late last year inventories got a little high, and that, over the first half of the year, they focused on getting them more in balance. We’re hearing, from our customer base, that that, in fact, did happen in the first half and that we should see more normal inventory levels and volumes kind of into the second half.

Now, as for Kirby, we’re not sure we really saw any of that. We’ve kind of thought about that and we think that what’s happening is there is no slowdown in the economy, no significant decline in volumes. What you have are customers that are fine tuning their inventories. And that fine tuning may well be seen in other modes of transportation more than barging.

Now that’s certainly a reasonable theory. Whether or not it’s right I don’t know. But I can tell you that where the trucking companies and rail companies were reporting kind of lower utilization, our utilization remained very high through the quarter.

OK. The new guidance that you gave for full-year ’05, the 250 to 260, does that include the cost associated with the early debt retirement?

It does.

OK, so if I’m looking at that as a one-time item, you know, the earnings from operations should actually be a little bit higher, if I was to exclude that? And I guess the point I’m getting at guys is, I just want to make sure I’m understanding—-given the second quarter performance, given that the lower interest expense we’re going to see off of the new debt that you’ve issued, and what I would consider a very upbeat outlook on the second half of this year, I’m kind of curious as to why the number didn’t move higher than $0.05? You know, the range didn’t move up but $0.05. I mean, I can get more than that just out of the second quarter out performance.

Of course, the exposure in the third quarter is weather, principally tropical storms, hurricanes. You know, that’s kind of the judgment that you need to make. You know, you could argue for higher revenues. We think that 65 to 70 is about right, but you can certainly lay out the argument that we could do better than that.

OK, and then the last question and then I’ll turn it over; you know, record heat, Midwest [inaudible] impacted pretty hard. You know, they’re talking drought conditions. Are you seeing any of that? I mean, are you seeing any disruption to your movements right now?

Thanks for mentioning that because that’s the other concern. There are some low water conditions that are beginning to appear. When that happens, it does affect our ability to load our barges to the deepest possible draft. We end up loading barges a little shallower and you can incur some delays.

We’ll be watching that; it’s not critical yet, but if the drought continues then those conditions will appear a little later in the summer.

OK. Nice quarter and thanks for your time.

Our next question comes from Alex Brand, with Stephens.

Good morning. You know, you guys have sort of gradually ratcheted up your Cap Ex for additional barge builds and forgive me for having a little trouble keeping up there. Can you just talk about what you’re looking at now for net fleet additions in other words, factual growth, vs. replacement?

Well, for 2005 it’s 230,000 barrels. For 2006 it’s net about 15 barges. So, that would be 15 times 30,000, which is what, 450,000 barrels.

OK. Now, do you consider that just kind of sort of modest growing, with this sort of economy? I mean, Joe you’ve talked in the past about we’re not going to see the industry adding barges, net barge additions, until the returns justify it. Do the returns now begin to justify it?

Yes, and that’s right. Our expectation is, our returns are going to continue to improve and will justify the capital. Now, having said that, there really isn’t a lot of net capacity being added to the business. At least at this point, there are some significant limitations in current shipyards to building a lot of tank barges.

I don’t think any of us are naïve enough to believe that you can’t add shipyard capacity; you can if the price of a tank barge gets up, people will build them. We’ll watch that carefully. In the Kirby fleet, our replacement requirements, as we’re projecting going forward, are such that if we just sense that we have a little too much capacity, we’ll just stop building and let replacements catch up. And, they’ll catch up pretty quickly.

The other thing to remember is that we have a third of the industry capacity. And, adding barrels, based on our growth expectation, really represents about our share of the market growth anyway. I think you could still characterize it as being conservative. But you’re correct to point out that we’ve been very careful about adding capacity.

In fact, we haven’t added capacity in about 25 years. We’ve been the company that’s been taking capacity out, and that, when we add capacity, we believe the conditions are right to do that and that we’re going to get the kinds of returns that justify it.

OK. You talked in your remarks, Joe, about good volume growth essentially across the board. And, of course, it’s hard for us to tell what your volume growth looks like when your revenue ton miles are actually declining. Can you give us a little help in terms of, you know, you talked about price on contracts up 4% to 5%, but how much, on top of that 4% to 5% would you be getting in sort of your fuel recovery lag? And, how much is mix affecting that revenue per ton mile that we can calculate?

I wish we had a better measure. I think that’s one of our objectives is to continue to refine the information that we give you so that you can be a little more quantitative. Because, ton miles will move around, based on what we’ve said earlier and you summarized. It’s not the perfect measure.

With respect to fuel, fuel would’ve been slightly negative this quarter. We were in an environment where fuel was rising and we lag that. So, it would’ve been slightly depressive on earnings. In terms of volumes, we saw some significant volume increase in ’04. It was in the 4% to 5% range. In ’05, it’s more modest, but still growing. Some of that may be reflective of being modest, the overstocking in ’04 and chemical companies kind of adjusting their volumes in ’05.

But, as we look at kind of our fleet utilization, you know, our fleet utilization really is as strong in ’05 as it was in ’04. I don’t know if that’s helping you.

That does help. Just to follow on to that, shifting your business, if your mix is more shorter lengths and more canal oriented, I assume that’s good for utilization, and is that something that you think will be relatively permanent?

It will go both ways, Alex. But what it really says is most of the petrochemical business is down here. It says that the petrochemical business is supporting more capacity and that really does build to our strength. Our strength in the Gulf Coast, just given the number of barges we have down here and the power, and how we use power is favorable. As you look at our business geographically we’re stronger here, our margins are a little better here, than other geographical areas.

OK, great. Thanks a lot.

Chaz Jones with Morgan Keegan.

Some of my questions have been answered, but maybe if I could ask you one about the gain in the quarter. I was just curious if that was related to barges that were being sold, or other marine equipment, and should we kind of expect that kind of gain, moving forward?

No. What the gain principally was; was kind of a readjustment of horsepower. We have been horsepower long for a very long time, and unfortunately it’s been in the higher horsepower range, and what we really need is a little lower horsepower range. What we’re doing is adjusting the fleet to accommodate our business model today. So what you saw was the sale of four boats that is intended to go ahead and get those boats off the books and redeploy that capital somewhere else. But I don’t expect that to continue, I think that that, frankly, was a little unusual.

OK.

There’s always some selling, but I don’t think you’ll see selling to that extent.

Sure, I mean we certainly haven’t seen it to that level the last couple of years. Looking at that equity in earnings of your marine affiliates, nice turn around there sequentially. Is that more related to Dixie Offshore and/or Osprey?

It’s more related to Dixie Offshore. Osprey is such a small piece, I think I mentioned on the call last quarter that we continue to struggle with this offshore ship, we’re very focused on that and we think we’re making progress. But what you had on that equity income line was a –

Was it just higher utilization on those four vessels that are in that sub?

Yes, two things happened. One we got some equipment out of the shipyard and two; the transportation rate was adjusted in April to higher levels so the business itself is just a little more profitable.

OK. Have you guys given any thought to maybe putting any capacity on the dry cargo side? I mean certainly I think we’ve heard of some significant improvements there, particularly on the cold side. I know that’s not a business that you’ve been in, in the past. But I’m just curious on any comments or thoughts you might have on that.

This is on the inland side?

On the inland side, yes Joe.

Well that’s a very different business. We certainly look at it and talk about it. We’ve learned never to say never in this business, but it would take a very unique opportunity for us to plunge into that business.

Sure. I don’t know how much you want to talk about it, Joe, but just curious the Marine Highways LLC that you mentioned, the JV, is that something that is maybe able to be piggybacked at some of Osprey’s current locations, or is that going to be something completely separate?

Well the truth is we don’t know. It probably fits more the East Coast trade than the Gulf Coast trade, but there are some movements on the Gulf Coast that it would make sense. This is really to look at the market and understand the feasibility. This is something that if we concluded that the market was there, and it was feasible, and you could build the equipment, you’re talking earliest three to five years. The reason we mention it is we think it’s important that people get excited about Kirby’s strength, which is the inland tank parts business. These other things are interesting and could have some significant long-term potential, but short-term they’re developing.

OK, and then the last thing here, you know the stock has certainly been fairly strong here recently. Have you guys discussed the possibility of splitting the shares at some point?

We have, and we will continue to discuss it. That’s all really I can say about that.

Sure. That’s all I had, I appreciate the time guys.

Bill Baldwin with Baldwin Anthony Securities.

Joe, how many single skins are left in the fleet at the end of the quarter?

17 to 20. We can get you that number; it looks like it’s below 20.

Those are disappearing fast.

They’re going to be essentially gone by the end of 2007.

Thank you.

[OPERATOR INSTRUCTIONS]

David Yuschak with Sanders Morris.

I just remember two years ago everybody was concerned that chemicals were not coming back, that chemicals were going to be moved offshore. I’m just kind of curious as you look at your traffic here in the first half and what’s been happening in rails, is there more opportunity developing on the Gulf shore there because of the anticipation of LNG coming there and giving you some sources for feed stocks? Or are you taking market share? I’m just kind of curious, for an industry that was supposed to die two years ago you guys are doing all right.

Yes indeed, and we never bought into the business dying and still don’t buy into it. It’s changing, yes, certainly it’s changing. But there is continued growth there and growth well probably beyond our lifetime. We’re in the largest market in the world. We have a chemical plant infrastructure that is the largest in the world interconnected. Yes, feed stocks are up, but they’ve been able, for the most part, to pass the cost of those feed stocks on. With respect to the ethylene business, which is the business I think most people worry about, it has moved from a principally gas to ethane business to kind of a liquids cracking business, which frankly is better for a company like Kirby because of the co-products that are made when you crack liquids versus gas.

So are we gaining market share? Really hard to say. The message that transportation companies sent the first half of the year with some declining volumes in chemicals, again we think were just the chemical companies fine tuning their inventories and really weren’t a message about the economy. Time is going to tell, David, how much additional business water gets given the constraints of the other surface modes of transportation.

We think that we’re going to gain some market share principally because, you’re going to have a hard time putting the kinds of growth that’s expected through an already constrained service transportation system.

You mentioned earlier too about the chemicals customers’ base that you may be working with too that you’re not seeing that kind of impact. Is that going back again to the kind of things that are going wrong on the gulf coast, compared to, you know, other modes of transportation? I’m just thinking maybe there’s just a lot more opportunity developing in that region than maybe you folks thought?

Yes. The truth is, I don’t think we know.

American Commercialized is selling these black oil barges to you guys. Does that basically take them out of that market?

It does.

OK. Is their focus kind of up river compared to where you guys are then? And this will take them even more upriver than before?

Well, some of those barges were used in upriver blackball service. Yes, I think their focus has traditionally been dry cargo first, liquid second and principally on the river.

OK, so you just don’t see as much of them anymore as maybe you had in the past?

Well, we’re all so busy. We really don’t. I mean, sure, we’re in the market everyday, but everybody’s fleet is pretty fully utilized right now.

Help me with the [inaudible] capital budget, with the expansion of the new build. Do you have any kind of preliminary idea what the spending will be next year in Cap EX when you’re putting the maintenance in?

I don’t think that we’re prepared to give that number yet.

But, it’s $45 million right now for new build?

Yes, what are you assuming for the price of a barge, about $2 million?

Yes, $2.8 million [ph].

We said, OK, $45 million, right. If we said it, it must be right.

One other question on that $1.8 million gain, was that just a separate line item? That’s not included in the operating income.

It’s below the line, isn’t it?

Yes.

That’s not showing up in your operating [inaudible]….

It’s below the line, but--.

But not in your segments for marine transportation?

Yes, right, right.

I just wanted to make sure that that was under--.

It was carved out on the press release. The income statement on the press release was carved out.

Yes. Now, one of the things that, if you just kind of plug in some cash flows for next year [ph], depending on what your capital budget is, you’ve got a thing that the capital ratio is about 31 now, and I remember when you guys bought Hollywood, you were at 58. You know, it’s possible you could be 25%, 27% in debt to cap in the next year. So, you’re kind of getting over capitalized here, instead of under capitalized. I’m just kind of curious as to--strategic initiatives, I think, you know, this joint venture here you’ve got with Osprey and your highway initiative certainly is an interesting way to take a look at things, but what are your thoughts about redeploying that balance sheet to give you additional growth opportunities? I’m just trying to think strategically, what are the things investors could hope to see you guys do? Because, you know, you guys are going be a bank here pretty soon, if that debt to cap ratio gets any lower?

Well, we certainly don’t hope that, nor do we expect it. We think there’s opportunities in our core businesses to continue to grow. We’re very focused on that.

Our building program also absorbed some capital and I think that we’re very encouraged that the market, for the first time in a very long time actually supports additional capacity. We think that’s very positive. So, our intention isn’t to be a bank. Our intention is to be a marine transportation company, focused on the core businesses that we’ve identified that continues to grow.

Now having said that, we’re going to be patient about it. We’re going to continue to be prudent about kind of how we buy things. So, there may be periods where our debt to capitalization is down below where we want it. But, we think there’s plenty of opportunity out there to maintain the appropriate amount of leverage in the business going forward.

OK, then one last question. Joe, you mentioned earlier that the returns are starting to begin to justify redeploying capital back into this, as you indicated with your new barge expansion for even next year. And we’ve talked about operating margins in marine transportation, potentially, you know, given good conditions it could get to 20% or so. Is there anything in your current operations today that you see that there are kind of constraints to margins that, if they weren’t there, they could be higher than what you’re doing already?

Well, there are some business segments that aren’t where they need to be. But, we’re working to get them there. As you know, there’s always constraints, but we don’t think that, at least, you know, based on the businesses that we’re currently in, that to get to the level, you know, the 20% level we need to exit.

OK, so right now it’s just a matter of continuing to fine tune, take advantage of product, you know, and in this case, shifting product from upriver to the gulf and stuff like that is just more just kind of tweaking the model?

Yes, it’s having a healthy market, continuing to work hard on taking costs out, being more efficient, all those things, getting reasonable rate increases when you can.

And then just a real quick one, on that guidance for the third quarter, is that also considering whether, to be in that 65 to 70, is that what you’re saying?

There’s some weather exposure in there.

OK, so you do have some weather issues with your guidance? Good, thanks, gentlemen.

Our next question comes from Payton Roberts [ph], with Morgan Keegan.

Hi, thank you. I have no feel for what you think about shipping rates, where they’ve been, where they’re going and how leveraged your earnings are to them?

Well, what we have said is that the contract rates this year have increased 4% to 5% and that the spot rates continue to rise and generally are at levels above contract rates. We gave guidance for 2004 that was similar to that. Contract rate increases were a little lower, spot rate increases were a little higher. You can go back and look at what we said, or we’d be happy, if you call us, we’ll be happy to go through that with you.

In terms of how leveraged are we, with respect to rate increases, there’s certainly some cost in the business that continues to increase. But we’re getting more of the rate increases to the bottom line, than certainly we have in a long time.

In terms of volumes, again, we’ve given volume guidance that you can go back and it’s all in public information. Or, call Steve Holcomb, and he can walk you through it. All this is in public information that is out there.

Thank you.

Sure.

Gentlemen, at this time there are no further questions. Do you have any closing remarks?

We appreciate your interest in Kirby Corporation and for participating in our conference call. If you do have any additional questions or comments, please give me a call. My direct dial number is 713 435 1135. We wish you a good day.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation. You may now disconnect.