Kirby Corp (KEX) 2010 Q4 法說會逐字稿

Welcome to the Kirby Corporation 2010 fourth quarter and year earnings results conference call. My name is John and I'll be your operator for today's call. (Operator Instructions). I will now turn the call over to Mr. Steve Holcomb, Mr. Holcomb, you may begin.

Good morning. Thank you for joining us. With me today is Joe Pyne, Kirby's Chief Executive Officer, David Grzebinski, our Chief Financial Officer and Greg Binion, President of Kirby Inland Marine Transportation subsidiary. 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 web site at kirbyccorp.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 risks and uncertainties. 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 Annual Report on form 10-K for the year ended December 31, 2009, filed with the securities and exchange commission. I will now turn the call over to Joe Pyne.

Thank you, Steve. Late yesterday we reported net earnings for the 2010 fourth quarter of $0.59 per share, compared with the 2009 fourth quarter results of $0.54 per share. The 2009 fourth quarter included a $0.05 per share charge for shore staff reductions, a $0.02 per share charge for a goodwill impairment to one of our operating companies and a positive $0.02 per share net reduction in the allowance for doubtful accounts. For the year, for the 2010 year, we reported net earnings of $2.15 per share, compared with $2.34 per share for 2009. I'm going to let Greg Binion talk about the inland tank barge sector and I'll return after Greg's remarks and talk about the diesel engine business.

Thank you, Joe. And good morning to all. During the 2010 fourth quarter, Kirby Inland Marine tank barge fleet experienced high 80% utilization for the third consecutive quarter. This is higher than we expected at the first of this year, and higher than all comparable 2009 levels. During the fourth quarter, 67% of our revenue came from serving our petrochemical customer base.

Low price natural gas continued to provide the US petrochemical complex with a competitive advantage against most foreign producers. This [seed stock] advantage helped maintain US petrochemical production at high levels during the second half of 2010 and consequently the volume of basic chemicals that we transport between domestic processing plants into terminals for exportation remains sufficient to produce high 80% utilization of our petrochemical fleet during the fourth quarter.

Our black oil fleet, which produced 18% of our fourth quarter revenue also remained at high 80% utilization levels. Volumes were driven by shipments of refinery feed stocks and intermediates between domestic refineries and terminals supporting both normal and turnaround operations. And the continued export of heavy fuel oil. Revenue from our long-term contracts, that is contracts having one year in duration or longer, totaled 75% of our revenue. And the mix of time charter and affreightment business was 50/50.

Kirby's Inland Marine customers expressed increased optimism about their business during the second half of 2010 and this has continued thus far in 2011, as they are generally performing better financially. With respect to pricing, Kirby's term contract renewals bottomed out in the third quarter of 2009, and it remained generally flat throughout 2010. During the fourth quarter, we have been successful in some cases achieving some modest price increases, when contracts were renewed.

Additionally, our multi year contracts have escalators based on labor and PPI, Producer Price Index. Some of these contracts are adjusted each January. And while these adjustments were flat in January of 2010, in January of 2011, these annual escalators provided rate increases in the 1% to 2% range. BI pricing for the fourth quarter, which includes the price of fuel, was slightly positive when compared to the third quarter.

We continue to invest in our fleet in both in terms of new construction and upgrading existing barges and boats. This program is improved the reliability of the fleet, improved customer service, and has reduced the amount of shipyard costs and out of service days. David will provide you with some detail on additions and retirements to the fleet during the year in just a moment. First I will turn the call back to Joe to discuss the diesel engine services operations.

During the 2010 fourth quarter, our diesel engine segment benefited from several generator upgrade projects and strong parts in engine sales in its power generation market. In addition, the segment benefited from several overhauls in the inland marine transportation market. We continue to see weak service in direct part sales across the majority of our Gulf Coast oil service market, as customers continue to defer maintenance projects. Also continued to see some pricing pressure in our Gulf Coast operations as our competitors bid for reduced levels of service work and part sales.

With about 20% to 25% of the diesel engine service, historic revenues coming from the Gulf Coast oil service industry -- the moratorium on deep water drilling, new safety regulations, which are beginning to roll out, which will effect drilling operations and the delays that are continuing to occur, issuing offshore drilling permits. All of this affects this market. Now we do anticipate this market to slowly improve during 2011, as the industry kind of understands what they're facing with respect to new regulations and the administration begins to issue more drilling permits.

I'll come back at the end of the prepared remarks and talk about the outlook for both the quarter and the year, but now I want to turn the call over to David to talk about the financial side of the business.

Thank you, Joe. Good morning, everyone. Let me provide a few details on our financial results and capital spending plans. Kirby's marine transportation revenue was 7% above and operating income 3% below the 2009 fourth quarter. The segments operating margin was 21.2%, compared to 23.6% in the fourth quarter of 2009. With the 2010 year, the segments operating margin was 21.1%, compared to 23.6% in 2009.

The lower margins reflected the continued impact of lower term and spot contract pricing that rolled through in 2009 and the first part of 2010. The lower margins also reflect a 16% increase in fuel prices for the fourth quarter and 29% increase for the year. This was partially offset by the benefit of our cost reduction and efficiency initiatives that we implemented in 2009 and part of 2010.

As Greg mentioned, for the second half of 2010, term contracts stabilized and spot prices were up slightly. Being able to maintain a 20% plus operating margin in our marine transportation sector in this economic environment and through what we hope is the bottom of the cycle, reflects our success in reducing costs. And we've been able to maintain our focus on the customer, and our operating safety and efficiency, while achieving this cost reduction. In the diesel engine services business, revenue was 26% above and operating income 81% above last year's fourth quarter.

The 2009 fourth quarter operating income included $916,000 charge for staff reductions and a $471,000 increase for doubtful accounts. The operating margin was 12.8% this quarter, compared with 8.9% reported in 2009. The results reflect a continued strong power generation market through engine set upgrade projects and improved parts and engine sales, along with some strong maintenance programs for some of our inland marine customers.

As Joe mentioned, these positive markets were partially offset by the continued weak Gulf Coast oil services market, as customers continued to defer their maintenance projects. The 12.8% operating margin for the fourth quarter and the 10.6% margin for the year reflected the cost initiatives that we've taken. And the stronger power generation services market as well as the inland marine market.

Maintaining an operating margin above 10% and a service business, where 20% to 25% business of our historical revenue is tied to the Gulf Coast oil service market, reflects the emphasis we've placed on reducing costs and focusing on the stronger areas of the diesel engine services business. On a corporate side of things, we continue to generate significant cash during the 2010 fourth quarter. And for the year with EBITDA at $79 million for the quarter and $295 million for the year.

At December 31, we had $196 million of cash or cash equivalence and currently we have $209 million in cash. Our capital spending for 2010 totaled $137 million, which included $74 million for new tank barges and tow boats and $63 million primarily for capital upgrades to the existing fleet. During 2010, taking advantage of better shipyard prices, we took delivery of 53 new 10,000-barrel tank barges, four new 30,000-barrel barges, and five 10,000-barrel charter barges, and one, 30,000-barrel charter barge. Adding approximately 800,000 barrels of capacity.

However, during 2010, we retired 89 tank barges and returned 12 chartered tank barges. Thereby, reducing our overall capacity by approximately 1.6 million barrels. So net-net our capacity for the year declined 800,000 barrels. This decline is partly due to the timing of deliveries of capacity and the capacity will come back up some in 2011. I'll comment about that in a little more detail in a minute. As of December 31, we operated 825 tank barges with a capacity of 15.9 million barrels, compared with our peak tank barge count of 918, with a capacity of 17.5 million barrels in June of 2008.

A benefit of our recent capital spending is reduced average fleet age, as Greg mentioned earlier. At December 31st, 2007, the average age of our tank fleet was 24 years. Today the average age is 20.3 years, a significant decrease. This improvement in the average age of our tank barge fleet means that significant amounts spent annually on maintaining older barges will be reduced.

Moving to 2011 capital spending plans, we plan on building 40 new tank barges, with a capacity of about 1.1 million barrels. We also plan on continuing to retire older barges. Net-net we currently plan on adding approximately 300,000 barrels to our overall capacity through 2011. That would bring our total capacity back to 16.2 million barrels by the end of 2011. In addition to tank barges, we plan on building three 1800-horsepower tow boats for delivery in 2011 and 2012. Our capital spending guidance for 2011 is currently in the range of $170 million to $180 million.

That includes $100 million for the construction of forty tank barges and the three tow boats I just mentioned. All of that is based on current steel prices and projected delivery schedules. From June through the end of October, we repurchased 618,000 shares of Kirby stock, at an average price of $38.48. The shares were purchased through a combination of open-market purchases and through a stock trading plan entered into with a brokerage firm pursuant to rule 10 B51.

The 10 B51 program was applicable for second and third quarter and our year-end Kirby-imposed blackout periods during our press release periods. And effective January 31, at the end of the fourth quarter blackout period, we'll have approximately 1.7 million shares remaining under our existing share repurchase authorization. Finally in November of last year, November of 2010, we extended our $250 million revolving credit facility with the syndicate of the banks, by entering into an amended agreement.

The amendment extends the maturity of the facility from June 2011 to November of 2015. The facility provides for a variable interest rate, based on LIBOR and currently the company has no outstanding borrowings under this facility. That's all I have now, Joe, I'll turn it back to you.

Thank you, David. Yesterday we gave our 2011 first quarter guidance range of $0.57 to $0.62 per share. This compares to $0.46 per share reported in the 2010 first quarter, which included a $0.05 per share charge for early retirements, as well as some short staff reductions. For the quarter, we're forecasting that our overall equipment utilization levels will be consistent with the fourth quarter, in the mid to high 80% range. And the pricing would also stay in line with what we experienced in the fourth quarter.

Our guidance assumes that the US petrochemical production for both domestic use and exports will continue to remain strong based on continued low US natural gas prices. In addition, our guidance assumed the Gulf Coast [refinery] utilization will be about where it is today. That being said, the difference between the low end for the first quarter guidance of $0.57 per share and the high end of $0.62 per share is equipment utilization levels and delays caused by the severity of weather conditions experienced during the quarter.

Weather is always an issue during the quarter. During January we saw ice effecting navigation on both the Illinois river, as well as the upper reaches of the Ohio river. Both of these rivers remain open. The ice has impacted transit times. Along the lower river system, and on the canal, we can expect fog and winds to reduce our efficiency. It's too early to predict the severity of these weather conditions for the quarter, but we think we've captured them in the forecasted range we've given.

Both our low-end and high-end first quarter guidance assumes our diesel engine service operation will continue to see favorable power generation business, as well as favorable marine markets in the Midwest area. But we'll continue to face some challenges on the Gulf Coast. For our year guidance this year, the range is $2.35 to $2.55 per share. That's 9% to 19% above the $2.15 reported in 2010, depending on where you were in the range. The projected improvement both low and high end is based on the continued strength of the petrochemical industry, and continued favorable equipment utilization rates.

At the low end of the range, guidance assumes equipment utilization will track the fourth quarter utilization levels throughout the year and determine contracts pricing will improve somewhat, beginning in the second half of 2011. The high end of the range guidance assumes some continued modest improvement in equipment utilization, as the year progresses. Some industry wide tank barge capacity level reduction and modest improvements in term of spot contract pricing throughout the year. In the diesel engine segment, we look for a continued favorable power generation market and a slightly improved marine transportation market, and a slow recovery in the Gulf Coast oil service business, as 2011 progresses. But anticipate that that won't happen until the latter part of 2011.

As I stated in our third quarter conference call, Kirby and our industry challenge is now to move pricing. Based on the current strength of the petrochemical industry, and higher industry wide utilization levels, the environment for higher industry wide pricing is better. We saw some selected modest price increases on several contracts renewed during the quarter. Low natural gas prices, which is used as the key feed stock for the United States petrochemical industry, is indeed a game changer. The United States petrochemical industry is globally competitive and this global competitiveness appears sustainable. Sustainable natural gas prices at current or slightly above the levels that we're seeing, will ultimately provide the confidence that will lead to some capacity expansion, which will in turn drive up higher petrochemical volumes.

Long-term this is very positive for our business. As David noted, Kirby is in great financial shape. We have consistent strong free cash flow, a great balance sheet, little debt, favorable interest rates, and currently $109 million sitting on our balance sheet. We're in great position to acquire companies in both our marine transportation and our diesel engine service segments, build new equipment and continue to opportunistically purchase our stock, when that's appropriate. I want to come back and correct the guidance. The guidance that I gave you on the first quarter range is actually $0.56 to $0.61, not $0.57 to $0.62. But the annual guidance is the same.

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

Thank you. (Operator Instructions). Our first question comes from Ryan Mahoney from Stephens Inc. Please go ahead.

Hey, this is actually George Pickerel. How's it going, guys? Joe, thanks for the color on the pricing and the volume. Maybe my first question, if I could ask you to pull out the crystal ball and think about past cycles and what pricing and volumes did. And maybe give your thoughts on what -- on the velocity with which pricing and volume can increase this cycle. Is it going to be the older cycle, where it was kind of GDP. or inflation and not much more? Or given the fact that you've taken out capacity, could we have pricing snap back a little faster, maybe like it did in the mid-2000s?

Well, George, if you go back to the exit of the 2000 to 2003 recession, pricing was modest that first year out, 2004, in the kind of the 2% to 4% range. I think coming out of this, I wouldn't expect 2011 to be better than that. Now the thing that I think is potentially a little different this time around is the fleet's older, so more capacity just needs to go out, needs to be replaced. And the petrochemical business is globally more competitive than it was in 2004. Offsetting that I think is this lingering housing and unemployment situation in the US. So, yeah, the crystal ball is, indeed, very foggy. But in our 2011 forecast, we're really forecasting a more modest recovery versus a more vigorous one.

Okay. So for my follow-up, let me kind of ask this. You touched on the volumes and Dave gave the amount of barrels you're increasing capacity. If volumes are higher or lower than you think, do you have the ability and you mentioned the fleet's old. Do you have the ability to not scrap a lot of your vessels and actually have more capacity available? And conversely, would you be willing to scrap more and not add any capacity if need be?

Yeah. Well, we do have the ability to hold barges into service. It's just a function of how much money you're willing to put into them to enable that barge to continue to load cargo. And if capacity were to tighten, you probably would do some of that, just to meet your customers' requirements. With respect to retiring, what we have said about reducing our fleet is that we're willing to do our share, but we don't want to, in the process of taking equipment out, also jeopardize our market position. What we think is going to happen is you're going to see volumes improve, you're going to see capacity, you're going to see slight reductions we think in capacity, as the fleet balances. And when that happens, as the whole industry fleet tightens up, you're going to see some pricing power. But we think that's going to happen, kind of over time, it's not going to happen in any one quarter.

Fair enough. Makes sense. And thank you for the time.

Our next question comes from the Alex Brand from Sun Trust Robinson. Please go ahead.

Hey, guys. How are you doing?

Hi. How are you doing, Alex?

Okay.. I guess, Joe, can I ask you, with so much of your optimism based around the net gas feed stock advantage that the US currently enjoys, and I guess recent upward moves in net gas, prices haven't affected that. Do you have a feel for what 's the tipping point? What would gas prices have to do that would impact the barge industry or the petrochemical industry's volumes enough that that wouldn't be a big driver of your business?

Yeah. If, what is the price that natural gas has to rise to before -- is that the question, Alex?

I guess. I guess. I'm just trying to understand -- that seems like the primary point of optimism for your outlook. And I just want to have a good feel for what might change that.

Right. Right. It's also -- yeah, it's the price and it is the difference between the price of natural gas and crude oil. What gives the US the advantage is low natural gas prices and high crude oil prices. And if that were to narrow to the point where you have kind of traditional ratios between gas and crude oil, then the US would lose some of its worldwide advantage. It certainly would -- you'd see the advantage it has over Europe today diminish somewhat. But I think that people expect gas to rise. Somewhere between $4.50 to $6. And that range is still a good range for the competitiveness of the US petrochemical business.

Okay.

Is that the kind of color you're looking for?

That was perfect. For a follow-up question, sort of along the same lines of optimism. It seems like your first quarter guidance is relatively bullish. You call it $0.60. If I were to extrapolate normal seasonality, seems like your full-year guidance is a little more cautious. Am I thinking about that the right way? Or is there something in the first quarter with diesel engine that maybe I'm not thinking of, can you help me with that?

Yeah. Diesel engine business is going to be stronger in the first quarter than it is going through the year. And that's just the timing of some maintenance projects. So that's part of it. Yes I would tell you that I don't think it's that bullish. You know, one of the traditional things you'd see with Kirby's earnings in the first quarter were a greater effect of weather delays and that's partially offset by the high time charter part of our business that we have. And you don't have quite the volatility in the first quarter that you had traditionally seen. That may be part of what you're thinking about.

Okay. I appreciate the time.

Our next question comes from John Barnes from RBC Capital Markets. Please go ahead.

Hey, good morning guys. Nice quarter. Joe, a little bit on the CapEx outlook. You know, I guess going back to George's question, if you saw an uptick, a more material uptick in volumes and improvement in utilization, you know how quickly could you place orders and more importantly take delivery of additional barges if the market kind of dictated versus trying to stretch out the age of what you've got?

John, I'm going to let Greg Binion field that question.

Hi, John. It appears from our perspective at this point in time that the 2011 order book and most of the traditional shipyard building facilities is really pretty full. So that response for additional new builds would either have to go to kind of yards that generally don't participate in that service or to have to be pushed out into 2012.

Yeah. The only order that we don't have a good feel for would be Jeffboat.

Okay. All right. And then in terms of pricing, you know beyond just getting the uptick, the couple percentage point uptick as you said on some contracts here recently. Can you talk a little bit about shippers, you know, appetite for longer term commitments and just what you're seeing in terms of contract length. And then kind of day rate versus just a contractual rate kind of splitting your business now.

Hey, John, again this is Greg. Setting aside specialty business, looking at normal atmospheric black oil and clean petrochemical movements, we think that the appropriate length for current term is about one year. And that's what we're seeing the bulk of our renewables as we go forward in -- as we look back in 2010. And in terms of the percentage of spot and time -- excuse me, of affreightment and time charter mix, what we think is that during 2010, that's really normalized and gotten back to regular sustainable levels, based on our customers' current needs. So that we don't think there's going to be a large shift in the percentage of those two contract types as we go forward.

Okay. Thanks for your time, guys.

Our next question comes from Kevin Sterling from BB&T Capital Markets. Please go ahead.

Good morning, gentlemen.

Good morning, Kevin.

Joe, going back to the industry supply issue of barges. How much excess supply do you think there is in the industry today and could we see equilibrium in 2012? And I guess along those lines, what will be the key driver to reduce supply?

Yes. Well, I think the key driver is rates and age. If -- our comments on 2011 capacity addition, six months ago, were really a little different than they are today. Six months ago we would have said that there would be minimal building occur in 2011, with the majority of it us. What changed is 100% bonus depreciation. So you have operators that have taken advantage of that. So you have moved the total number of new barges expected for delivery in 2011 up.

Now having said that, the fleet is getting older and it's our thought that most of the capacity that you'll see added in 2011 is going to be directly equal to capacity that's coming out, but had the surge in shipyard pricing not occurred, I would have expected a reduction in capacity in 2011, where today I just don't know. Intuitively I think you're going to see a reduction, but we'll just have to wait to -- until we know more.

Okay. Thank you. And one more question. You know, the volumes come back and as you kind of think about your volumes and your business, will you have to add any more personnel or do you think you can handle a spike in volumes without layering on any material costs?

Yes. We have sized our short staff to accommodate the current projected fleet, which is in the 16.2 million to 16.4 million-barrel range. Now what you have to bring back is some charter power, so you'll see a charter power costs up a little bit as you add boats. But with respect to the G&A that we have at the Kirby level, both corporate and operating G&A, we don't expect that you'll need to add any G&A there.

Okay. Thanks for your time today.

Thank you.

Our next question comes from Ken Hoexter from Merrill Lynch. Please go ahead.

Hi, everyone. It's Scott Webber in for Ken. Joe, you mentioned in the past the potential for growing through acquisition. Is the industry backdrop improving to the extent that it makes it increasingly unlikely that you see some attractive assets become available? Has your change in outlook at all changed anything that you might have been targeting in the past?

Who your target moves around a lot. But I actually think that the environment remains still very good, nobody wants to sell at the bottom. And you know I think we're off the bottom. I think there are going to be opportunities. And I think that with our balance sheet and being patient, we'll be able to take advantage of frankly a number of attractive opportunities. So I'm not discouraged frankly at all. I'm actually slightly encouraged about what we think is out there.

Hey, Joe. It's Ken Hoexter as well. Can you just talk about in terms of utilization, you know you're up in the, you're talking in the 80s now. What was the market environment like the last time you moved into the 90s. I guess because that's going to determine the path on pricing, right. You talked about how it was still a little -- you felt things were going well, but that was putting kind of an overhang on pricing for the industry. So what's it going to take in the industry? Or what happened last time when you really saw that tightening?

Yes. Well to get to a real pricing power, the industry utilization needs to be at those levels. But the last time it was there, we saw pricing at pretty consistently into the high single digits. You got into the low to mid-90s.

Right. So what was -- what I'm asking more on the environment, that pushed it there. Was it just you saw -- was it just the demand was climbing that rapidly, that pushed it into the 90s?

Yes, it was the volumes. Volumes which -- you can see that in the real business, too, Ken, which I know that you follow. The rail loadings 2006, '07, '08, well certainly 2006 and 2007 were pretty high. 2008 they began to taper off. But frankly what happened in 2008, is there were so many system inefficiencies and charters concerned about their ability to cover requirements, had taken so many time charters, that the market remained strong through three quarters of 2008, based on really fundamentals that were occurring the year before.

Great. Joe, thanks for the time. Appreciate it.

You're welcome.

Our next question comes from Jimmy Gibert from Iberia Capital Partners. Please go ahead.

Hey, Joe. How are you?

Hi, Jimmy.

I understand that some of your competitors might have gotten a big boost from the B.P. oil spill, with a lot of equipment being booked up to help in that cleanup effort. Now that that's kind of gone away, do you feel like that might push some of those competitors a little closer to maybe wanting sell? Or has that been a factor at all?

Well, I think that B.P. was a windfall. And now it's gone. So you're back dealing with the stark realities of the market. And your perspective adjusts to kind of what the market is going forward. And you make judgments based on investments or even your appetite to be in the business, based on that. So I'm glad that B.P. is over for a host of reasons. One of which is the one I just mentioned. Yeah, we'll just have to see. I think as I said earlier, that we're not discouraged. We think there are opportunities and we're in a great position to pursue them.

Okay. And I may have missed this. But do you guys break out your contracted business by time charter versus affreightment? And are you starting to see more interest from customers in booking these sort of take-or-pay contracts?

Hey, Jimmy, this is Greg.

Hey, Greg.

The mix of time charter versus affreightment business is about 50/50. And that appears to be pretty stable at the moment.

Okay. Thanks a lot, guys. Appreciate it.

Our next question comes from Mike Baudendistel from Stifel Nicolaus.

Thanks for taking my question. Wanted to get a little bit into the diesel engine business, trying to get at whether or not the improvement in the quarter was sustainable. You talked about the pipeline being somewhat strong in the first quarter of 2011 Is there also, do you have a pipeline of products over the next few quarters that leads you to think that the diesel -- the volumes in diesel engine business will be better than they have been -- better than the past few quarters?

Yes, that's a good question. And I'm actually glad you asked it. I think that to truly measure how the diesel engine business is doing, you have to look at it, not by quarters, but over the year, because you do have some quarters that have projects that will benefit that quarter and not be seen in the next quarter. The fourth quarter of 2010 is a pretty good example. We had some projects for several East Coast utilities in our power generation, part of that business that helped that quarter. As we look at 2011, we have a number of projects in the marine engine market, principally in the Midwest area, where those that are principally river carriers, use the closure of the upper Mississippi river as the principal grain river as a good time to do their maintenance.

And what they're trying to do is get ahead of the opening of the river and the opportunity to move grain. And we anticipate that the first quarter for that segment is actually going to be our best quarter because of this. Now what we're hopeful is that as the year progresses, that the oil service business on the Gulf Coast is going to show some improvement. But you are -- you can't look at any one quarter in that business and predict the year because of what I just mentioned.

That's great color. Thank you. My other question is on the marine side of the business. The 12% increase in ton miles from the year-ago quarter and the decline in revenue per ton mile. Is any of that impacted by a change of the length of hall that might make those changes a little bit higher than they would appear otherwise?

Yeah, it is. But I'm going to let Greg give you a little more color on that.

Yes, the length of the trip is certainly a factor. Our trips were longer in 2010 than they were in 2009. Really driven by improved volumes on the finished chemicals going upriver, along with agricultural products. Additionally, in 2010, we saw improved utilization of our time charter equipment, fleet by our customers. So that also increased ton miles.

Thanks for the time.

Our next question comes from Steve O'Hara from Sidoti & Company. Please go ahead.

Yeah, Hi. Most of my questions have been answered at this point. I'm wondering in terms of any acquisitions that you guys might make, what's your -- other than cash, would you finance any portion or obviously I'm sure that depends on size and maybe you could talk about the size of any possible acquisitions you might be willing to make?

You say finance any portion, you mean borrow money?

Yes.

Well, we're going to use our cash first obviously. And you know depending on the size of the acquisition, we would finance it. Yes.

Okay.

I can add a little bit to that. I mean, we've got the $250 million revolver, which is undrawn. That has an accordion feature that can add another $75 million. So we've got $200 million in cash that we can use. And then another $3.25 million that we can pull down on the revolver. If we needed something in excess of that, we could certainly go to a private place in the market or term-loan type stuff or even issue public debt.

Okay.

We have a lot of capacity.

Yeah, we have plenty of capacity.

Okay. And I mean have you talked in the past about size of potential acquisitions that you might be willing to make?

Well, no. But the largest acquisition that we have made to date was $325 million. And we certainly have the capability of making acquisitions larger than that.

Okay. All right. Thank you very much.

You're welcome.

We have no further questions at this time.

We appreciate your interest in Kirby Corporation and participating in our call. If you have any additional questions, please give me a call, this is Steve Holcomb. My direct dial number 713-435-1135 and we wish you a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.