Welcome to the Kirby Corporation 2014 Fourth Quarter Earnings Conference Call. My name is Helen, and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Sterling Adlakha. Sterling, you may begin.

Thanks Helen, and thank you all for joining us this morning. With me today are Joe Pyne, Kirby's Chairman; David Grzebinski, Kirby's President and Chief Executive Officer; and Andy Smith, Kirby's 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 risk 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 Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission. I will now turn the call over to Joe.

Thank you. Thank you Sterling, and good morning. Yesterday afternoon, we announced our fourth quarter earnings of $1.19 per share. That compares with $1.13 per share reported for the 2013 fourth quarter, and is at the upper end of the revised guidance range we provided in December of $1.10 to $1.20 per share. For the year, we achieved our fourth consecutive year of record earnings of $4.93 per share compared with $4.44 per share in 2013. Our 2013 results also included a $0.20 per share benefit from reducing the earn out liability associated with the acquisition of United Holdings. During the 2014 fourth quarter, our marine transportation inland and coastal tank barge fleets experienced healthy levels of demand across all markets and high equipment utilization levels. In the coastal market, pricing increases remain good. In the inland market despite some pressure on spot prices, we continued to be very busy. As I stated on our guidance call in December a steep decline in energy prices over the past three months is frankly good for the economy and should translate into more petrochemical and refined product demands and volumes which we will be able to move. US petrochemical business continues to remain globally advantaged, which has spurned an unprecedented level of new plant construction. We expect to see substantial increases in domestic petrochemical production over the next several years from these new petrochemical facilities. In the crude oil and condensate markets, lower oil prices could lead to a decline in volumes. Customers continue to view the real or perceived loss of this volume as a reason to resist [inland] marine price increases, particularly since prices are already at historically high levels. Heightened uncertainty has also given some carriers pause when attempting to achieve higher pricing particularly for equipment in the spot…

Thank you, Joe, and good morning everyone. In the Marine Transportation segment during the fourth quarter, our inland Marine business continued its overall strong performance with equipment utilization in the 90% to 95% range. We did experience some adverse weather conditions along the Gulf Coast that impacted our fourth quarter performance. Long-term inland Marine Transportation contracts, those contracts with a term of one year or longer, contributed to 80% of the revenue for the fourth quarter, with 55% attributable to time charters and 45% affreightment contracts. Pricing on the inland marine transportation term contracts that renewed in the fourth quarter increased on average at low single digit levels when compared with 2013 fourth-quarter. However, as Joe mentioned pricing momentum slowed towards the end of the quarter due to the drop in crude oil prices. Consequently in the latter part of the fourth quarter and into the first quarter of this year pricing has been flat and spot contracts, which include the price of fuel, have narrowed towards term contract rates. Moving onto our coastal marine transportation sector, equipment utilization remained in the 90% to 95% range. During the fourth quarter, approximately 85% of coastal revenues were under term contracts compared with approximately 75% for the 2013 fourth-quarter. Demand for the coastal marine transportation of refined products, black oil, and petrochemicals remained very strong. With respect to coastal marine transportation pricing, term contracts that renewed during the fourth quarter increased in the mid single-digit range when compared with the 2013 fourth quarter. Spot contracts continued to improve sequentially during the fourth quarter and remained above term contract rates. In our Diesel Engine Services segment, our marine diesel and power generation markets experienced stable demand. The land-based diesel engine services market benefited from strong demand for new parts and equipment prior to the steep decline in oil prices that began to accelerate in late November. We continue to expect market headwinds in this business with oil prices below $50 per barrel, but as Joe mentioned, the EBITDA contribution from this business remains relatively small in relation to our total EBITDA. During the fourth quarter, we also took advantage of a significant pull-back in the price of our stock to initiate a share repurchase program. Since beginning the buyback program in mid-December we have repurchased $100 million worth of stock or approximately 1.3 million shares at an average price of around $79 a share. You will also note that in our press release last night we announced that our board has approved the addition of 2 million shares to our existing authorization, which brings our current unused authorization to 3,685,000 shares. I will now turn the call over to Andy to provide some financial details and I will come back to discuss our outlook.

Thanks David, and good morning. In the 2014 fourth quarter, Marine Transportation segment revenue declined 1% and operating income declined 3% as compared with the 2013 fourth quarter. The inland sector contributed approximately 70% of marine transportation revenue in the fourth quarter, with the coastal sector contributing approximately 30%. Our inland sector generated a fourth quarter operating margin in the mid to high 20% range, and the coastal sector generated an operating margin in the mid-teens. Overall, the Marine Transportation segment's fourth quarter operating margin was 24.3% compared with 24.8% for the 2013 fourth quarter. The decline in the Marine Transportation segment revenue in the fourth quarter as compared to the prior year was primarily due to a 13% decline in the average cost of marine diesel fuel. The cost of fuel was passed on to our customers through our contracts but is included in our revenue. Both revenue and operating margins were negatively impacted by the change of a bunkering contract, which we mentioned on our third quarter conference call, as well as poor operating conditions that restricted inland barge movements along the Gulf Intracoastal waterway. As a reminder, approximately 75% of our inland marine revenue is generated from operations along the Gulf Coast, so delays in this area of our business tend to have a more significant effect on our results. In our offshore market, we experienced a seasonally normal decline associated with the cessation of winter operations in Alaska. Overall inland marine delayed days were down 11% as compared with the 2013 fourth-quarter. Better weather and good [log] conditions on the Mississippi River and tributary systems led to the decline in delayed days and a 16% year-over-year increase in ton miles, which as inland revenue was little changed from the prior year drove a 15% decline in…

Thank you, Andy. In our press release, we announced our 2015 first quarter guidance of $1.05 to $1.15 per share. This compares with $1.09 per share earned in 2014 first quarter. For the 2015 year, we issued guidance of $4.50 to $4.70 per share compared with $4.93 earned this year in 2014 – last year in 2014. Our first quarter guidance assumes normal seasonal operating conditions in our marine transportation markets, and continued strong coastal market dynamics with higher term and spot contract pricing. In our inland markets, our guidance assumes that utilization will remain in the 90% to 95% range and that there maybe some potential price weakness as the year progresses. We have seen spot prices come down to contract levels and on occasion or two dip below those levels. Consequently, we are being cautious with our 2015 price expectations. for our diesel engine services group in our land based business given the crude oil environment and announced oil fuel capital spending reductions we expect to see a significant year-over-year decline as well as sequential declines in earnings throughout the year. We remain focused on servicing our customers, executing on the backlog we have and on cutting cost. Both our fourth quarter and full year guidance assumes our diesel engine services marine and power generation markets will remain stable. The difference between the low end and high end of our guidance range is related to the activity level in the land-based diesel engine services business and our ability to execute on those projects and backlog as well as how utilization and pricing trends in the inland marine transportation market progress. While our 2015 earnings guidance is lower than 2014 we expect our cash flow to remain strong. As Andy mentioned, our 2015 guidance includes an increase in pension expense, which as we know moves around year-to-year and increases in depreciation and amortization, which are non-cash charges. So depending on working capital levels, our operating cash flow may exceed 2014 – our operating cash flow in 2015 may exceed 2014 levels, which combined with lower Capex could provide additional free cash flow for potential acquisitions and other opportunities as well as share purchases. In summary, as Joe mentioned, 2014 was our fourth consecutive year of record earnings at Kirby. Our balance sheet is strong and our debt to total cap ratio is 24%, and as I mentioned we expect our cash flow to continue to grow in 2015. As such, we remain very well positioned should any market weakness or disruption open up good investment opportunities including acquisitions and share repurchases. Operator that concludes our prepared remarks. We are now ready to take questions.

Thank you. (Operator instructions) The first question is from Kelly Dougherty with Macquarie. Please go ahead.

Good morning guys. Just a few questions on pricing because it seems to me that it is really more pricing as opposed to volume that seems to be your biggest concern for this year if I’m hearing that right, so I just wanted to see what you mean when you mentioned I think in the release that customers are testing rate levels, are they trying to renegotiate current contracts or is that just applicable to contracts that are up for renewal, and just what you mean by an expectation for modest pricing pressure in inland, I think you were previously talking about kind of inflationary levels, I’m just wondering if you are thinking that prices are actually going to decline, so I just wanted to see what was built into the base case of guidance?

Good morning Kelly. No, they are not trying to open up existing term contracts. This is, it is spot pricing. They are testing rates in spot pricing mostly and then as term contracts come up for renewal there is a testing that is going on there as well. In this environment, it is – nobody wants to push pricing on the carrier side and of course the shippers are always looking to test prices. They do it all the time, but in this environment it makes it particularly difficult. So in our guidance we have assumed that pricing will come under pressure. We haven’t given a specific percentage that we might see it go down, but we do expect some pressure throughout the year as pricing is tested.

Okay, thanks –

The lower end of the range you might assume some reduction in prices.

Okay, thank you. and then on the inland side – on the coastal side, I mean you talked about a mid-single digit increase that seems to be a little bit lower than what you were talking about before, I know fuel is factored into the expectation somewhere, but I think that is kind of an ex-fuel number, can you just talk about that a little bit?

That is an ex-fuel number. It’s a large – it’s – the rule of large number is here, pricing has been going up and we are still getting good, strong increases. It is just the percentage has dropped a little bit. So it is down from, high single digits to mid-single digits, but we have been saying it is mid-to-high single digits, now it is more like mid single digits.

So kind of the uncertainty in the – somebody once classified the industry is kind of an holding pattern to us right now, that is really inland focused, it is that is not impacting what you are seeing on the coastal pricing side of things?

Correct.

Okay and then just on the same topic, we have heard these comments about sluggish demand, you mentioned on the pre-announcement that you were seeing – you weren’t seeing really volume impacted, just wondering if operating levels have gotten back to normal again, if customers have started to resume orders or if not, what we need to see to get things back on track from a volume perspective?

Chemical volumes in the amount of product we’re moving now is flowing more normally now. But, there are still some dark congestion issues in some of the high traffic areas like Corpus Christi in Houston, but it’s flowing better than it had been in the fourth quarter.

Thanks guys, I’ll jump back in the queue.

Thanks Kelly.

The next question is from Jack Atkins with Stephens.

Good morning guys, thanks for the time. Just sort of starting here guys, I guess, you talked to David several points in your prepared comments about opportunities for potential M&A, could you maybe speak to, are you seeing the dislocations in the marketplace creating M&A opportunities already and are you may be seeing what the targets are asking for and what you’re going to pay may become closer to being align with expectations?

Well, in any time business starts to get a little more challenging, people reassess whether they want to be in the business. It wouldn’t be prudent for me to comment on any specific acquisitions, but as you’ve seen with us over the years, when things get a little rough is when we’re able to take advantage of our strong sheet and put it work and we look forward to potential opportunities.

Okay that makes a lot of sense and yes, you guys have been very active in the past using downturns like this. So, I guess, you’re shifting gears and thinking about the inland marine side of the business, given the lack of pricing traction, I know you guys talked in the past about potential inflationary pressures. Just from your labor force, how should we think about inland marine operating margins trending in 2015?

Yes. I think, you’ll see the margins come down a little bit in 2015, with pricing flat to maybe even down a little bit. With labor inflation pressures and then as you heard Andy say that we’ve got some pension headwinds here too that will help push margins down a little bit. But, we’re going to work on our cost which is what we can control, but you will see a little margin compression.

Okay. And then, last quick one from me on the region side, could you maybe talk to the cost leverage you could pull there to keep the profitability a little bit more align with your expectations given the lagging demand?

Yes. Well, paradoxically we’re still pretty busy in Oklahoma working on our backlog, but we’ll look at our cost structure as we work through that I would just say this, if you think about kind of breakeven levels, our breakeven levels should improve this cycle produces less cycle. Based on cost containment in the way we’re working through things.

Okay that’s helpful David, thanks very much.

Your next question is from Jon Chappell with Evercore.

Thanks, good morning guys.

Good morning, Jon.

David, just trying to get a little bit of a sense of this magnitude of the role over land-based diesel engine services, the commentary in the press release there wasn’t too much description about servicing customers working at cost, but then you talked about kind of a decline as the year progresses. Are we going back to kind of 13 levels where there are a couple of quarters that are estimates of negative profits, are we talking better on breakeven as we get to the back half of this year?

Yes Jon, this is Andy. What we’ll do coming out of year end is we’ll continue to execute against our backlog and I think what you’ll see as the year progresses at least what we’re seeing today is that you will see profitability coming out of the land-based side, take down a little bit in the first quarter, little bit more in the second quarter and then we’re expecting it to be a very minimal contributor to earnings in the third and fourth quarter, but we don’t expect to go negative.

Alright that’s good insight. And then, from my follow up, Joe said in his comments that crude and condensates only 6% of your inland barge capacities tied up there and all of that is contracted. On the coastal side how much of the business is related to crude and condensates and I know it’s tough to say because the CapEx spending cuts are just starting to be enacted, but how does your guidance range kind of think about the potential for you as production to slow in the second half of the year as the CapEx cuts going to affect?

Yes. No, on the coastal side, we’re less than 15% of our capacities including the condensates and you’ll recall that we’re highly levered to refine products in coast line business and with the lower gasoline, diesel and jet fuel prices that will stimulate some demand. So, actually we’re more excited about what’s going on coast wise because of that dynamic as the economy improves and as the lower prices stimulate demand. So, we’re not concerned about the crude on the coastal side you could see some of the Bakken moves up and the northeast slowdown, but frankly if they start bringing in Brent that will - they will have to lighter off of the ships coming into these coast which will be different type of barge demand. We’re not too concerned about that it is in our thinking Jon, so we have kind of factored that in, but it’s a dynamic thing so it’s not a precise thing.

And Jon, let me just add one other comment, with respect to that part of the business we’ve the largest asphalt fleet active in the U.S. and lower crude oil significantly expansibility of municipalities and states to buy asphalt, you can buy a lot more for your budgeted dollar. So, we think that business is going to be better this year.

Alright that’s right insight. And I’m sorry, just Andy if you could just repeat the operating margin range that you gave for the inland marine, you said, I think it was high teens for coastal, I just missed the inland barge?

Mid high teen. I mean, I’m sorry, mid to high 20% range.

Alright, got it, okay thanks a lot guys, I appreciate your help.

Thanks Jon.

The next question is from Gregory Lewis with Credit Suisse.

Hi, thank you and good morning. David just real quick if you could provide a little bit of color on here, you mentioned that currently Kirby has 39 barges for delivery in 2015. Do you have any sense for what percentage of the 2015 order book that is across the industry?

It’s about 25% of the order book. We think the order books somewhere between the 160 to 180 barges for 2015 which is kind of flattish with what it was, yes, flattish with what it was in - for the last four or so months. And by the way that order book is mostly 10,000 barrel units not 30,000. So, from a capacity add it’s not that as significant as if it were 30.

Okay, great. And then, just shifting gears to the buyback, clearly that’s something with the recent increase it’s something that you’re seriously considering expanding I guess this year, when we think about the buyback, it is to do, does the compact of the company approach that the company approached on an asset basis analysis, I mean how should we think about Kirby trying to find value in implementing the buyback, I would imagine at certain point it makes sense to do on another points it probably makes sense to just hold off?

Yes. Well, Greg you know that we are very long term focused and we look at cash flow that's the way we invest whether we are looking at capital spending or acquisitions and quite frankly Kirby is like an acquisition right. We look at discounted cash flow method and when we see value we act on it. At these price levels these kinds of multiples are what we pay for acquisitions. So, it's been attractive, but again it's a very long term focus. We look at cash flow and that pretty much tells us when and where to put our capital to work.

Okay guys. Thank you very much.

Thanks Greg.

Your next question is from John Barnes with RBC Capital Markets.

Hi, good morning guys. If I go back to kind of the ’08, ’09 timeframe when you saw some disruption in pricing, your company was able to kind of tap the brace in terms of capacity and kind of prop the industry up a little bit from a pricing perspective given your market share and the number of vessels you control, was that still a possibility if you saw pricing begin to weaken a little bit more in the inland side during the year than expected, would you be willing or are you capable of doing so again?

John, this is Joe, this actually is a little different. 2008, 2009 you had a collapse in volume. We don't have a collapse in volume, what we have is just a lot of uncertainty that is having both carriers and shipper reassess price levels. Remember that pricing right now is at historical highs. So taking a lot of equipment out probably doesn’t make a lot of sense now. In 2008 and 2009, we had I think 917 barges at the top of that period and what we did was we actually took about 100 barges out of service. We scrapped them or sold them in the alternative service. That's going to be more difficult now, the fleets younger and utilization levels are much higher. I think 2008, utilization at one point got down below 80%, today we are looking at utilization mid 90s.

Okay, that's great color, thank you. And then, secondly in terms of the M&A side of the business, well skip that, you already mentioned that, more importantly again from capacity standpoint, the number of barges in the industry kind of moved over to crude oil service, and I am really interested in maybe the number of barges that have been sold in MLP, how easy is it for that equipment to get pulled out of that service if you see a decline in kind of the oil volume and in condensate volume, how easy is it for that equipment especially in the MLP side to kind of re-enter to say the petrochemical business and cause a disruption in terms of maybe too much capacity?

Yes, some of the barges could be cleaned up. There is a cost of cleaning the barge and redeploying it into clean service. We have seen a very small bit of that so far. But, we will see, there is still lot of volume out there and the volume coming out of the Eagle Ford is still pretty strong. It's the Canadian war and not a lot of Bakken was moving on the river anyway, but the Canadian has become less competitive. So it can be done, you can move some of that crude out of some of those barges out of crude service and put them in a clean service but there is a cost. I would also say in the MLP in particular if they - a lot of the chemicals, the vast majority of the chemicals don't qualify. So, they would have some resistance there to do that they wouldn't be able to do it, at some point it becomes non qualifying income and would put their MLP at risk.

Okay, yes that makes sense. And then lastly, just on the shipyard, I guess Trinity has already moved one of their lines from I think liquid back to dry. So, there already seem to be maybe some limitation in 15 in terms of just tank deliveries or liquid deliveries versus dry deliveries. Have you seen any further actions at the shipyards or within the order books and you guys took advantage obviously of a competitor they got little bit out of their tips last year. Have you seen any of that kind of activity within the order books as well?

Yes, on the order book, we just have not seen it grow which is very positive. I think this volatility and uncertainty has put the brakes on new orders. We really, usually as time goes on you see the order books sell up a little bit and some carriers taking some slots at shipyards, but frankly we just haven’t seen that the order books been flat as I said earlier for about four months. So, from our perspective that’s a positive.

Very good, thanks for your time, I appreciate it.

Thanks John.

The next question is from Ken Hoexter with Merrill Lynch.

Great. Good morning, hi Joe, Dave and Andy. If we could just follow up on John’s question, in terms of adding the 4,000 barrels, is there a thought given the crude fringe up on maybe pulling back on some of that ordering, is that committed contractual on the barge. I’m just wondering what your variability on your own order book is?

No that’s committed, we contracted for that last year in 2014, so it’s under contract, so we wouldn’t pullback on it. We’ve need for those barges, we’re putting them to work as they come out. Again, we’re still very busy, but we’ll see how the year progresses.

Andy, on the buyback is there a timeframe on the 3 million plus second tranche here after the initial 100 million?

No. No, we don’t have any timeframe, we’ll evaluate that going forward.

So, it’s not like you’re committing to doing that within the next year or any particular period it’s just an open-ended plan?

Yes, exactly it’s open-ended.

Okay. And then, Joe maybe just some thoughts given the rapid pullback on the oil prices here, you talked about uncertainty, you talked on the first question was asking about kind of pricing and it seem like you were intimating that it still the customers are having these debates, are you actually seeing any pullback at this point on the volume and commitments for that or is it still just the uncertainty that the customers are facing?

No pullback on the volume, I mean, the volumes are going to be what they are, they drive utilization rates and utilization rates are still high. You could see going forward in the year as capital expenditure comes rapidly down in the oil field, volumes decline with that. Having said that with respect to Kirby, we think that we’re moving the volumes that are sustainable both on river volumes and our canal volumes are from fields that are very competitive even at these prices. So, we’re not so much worried about it in our fleet. There are other fleets that move volumes from less competitive areas they may be affected, but I frankly think it’s too early to tell what’s going to happen.

Great. And just a last quick one. You mentioned the land-based customers and diesel engine services remain strong and marine, I’m sorry, is pulling back in marine has remained stable. Is there a transition there where the marine customers could feel a little concerned on the market and they comeback or is that more tied to your utilization within the fleet?

Are you talking about marine diesel engine services?

Diesel engine services, yes sir?

Yes. No, on the marine and power generation side things are pretty stable and then ebbs and flows, I mean, these are lot of [Tobo] companies and that type of thing which are continuing to work. But we talked about this in past cycles that on the marine diesel engine repair side there is about 25% of that that is oil service related. So that maybe impacted a little bit, frankly some of that is in our guidance for 2015 that it may be impacted. It is the lift both and supply both that could be impacted.

Wonderful, appreciate the time and thought, thanks.

Alright, thanks.

The next question is from Steve Sherowski with Goldman Sachs.

Hi, good morning. You mentioned roughly 6% of your inland capacity is dedicated to crude and condensate transportation, I was just wondering is that a fairly representative of the industry as a whole and I’m just trying to gauge what the potential is for equipment switching from crude or condensate transportation into refined products that you had mentioned before?

It depends on whose fleets it’s in, in our fleet it’s 6% in other fleets it’s higher. It’s difficult to estimate what the total percentage is of crude in the inland’s business. Crude is a relatively new movement and now the bulk of what’s moved is going to be refined products, chemicals and fertilizers are traditional business. But, there is equipment out there that is going to be displaced, some of it’s already been displaced, it’s being absorbed given the high utilization levels and we’ll just have to see.

Got it, thanks. And then, just as a quick follow up, the BIS recently provided some clarification on what qualifies as condensate that’s allowable for export. Just how do you think about that and the potential impact on your coastal business, your coastal segment?

Actually, we think it maybe a slight positive because it's just more volumes, its more volumes get produced and more volumes get moved, the likelihood of us touching it increases. So, if it comes into a condensate spilt, for example, we may touch some of the math that comes out of the condensate splitter, we may take it from the splitter to an export terminal for example. So, it's generally the more volumes it move, the better for our business, so we are not necessarily opposed to exports of crude or condensate.

Got you, understood. And are most of those movements coming out of Corpus Christi into the Huston refinery market?

Yes. Corpus Christi is a hub for a lot of the – well most of the Eagle Ford and a good portion of the Permian. So, it comes to Corpus and then it gets over to the Huston and Port Arthur and even over to Louisianan market by water.

Okay. That's it for me. Thank you.

Yes, thanks Steve.

The next question is from Kevin Sterling with BB&T Capital Markets.

Thank you, good morning gentlemen. Dave and Joe, you guys talked about your utilization in the annual markets being strong and I think, you think they’re going to remain strong and it sounds like really because you haven’t seen the drop off in volumes this cycle, we saw in last cycle and thinking about that right, but I am also thinking when I hear your price and commentary and customers maybe shifting some of their trade patterns could we see a little utilization weakness later in this year or do you think just the real kind of increase, the volume increase in petrochemical side will continue to drop utilization?

Yes. It's difficult to say, but in the last cycle, in the ’08, ’09 that was an economic contraction and the volumes really dropped. So, here and as Joe said that at one point they got down below 80% utilization, I think one quarter but we haven’t seen that. We are still in the 90s very utilized. So the pricing pressure is coming more from uncertainty, than anything else. It's not volume driven. But again, the bottom end of our range does contemplate some negative price.

Okay, thank you David. My last question here, moving to the diesel side of the business, as oil field service has currently tightened their belts, are you seeing some interest in your reman business versus new OEM equipment given the variable cost differential or is it still too early to tell given the huge drop we have seen in oil?

It's still a little early to tell but it's interesting. Some of the customers that don't have a lot of spare capacity and if they are running the maintenance becomes more critical and we are getting more, I wouldn't say a lot more, but there is interest in reman, reman does make capital sense, right, I mean, it saves you a lot of money and if you are short on equipment, you got a frac spread unit running which may have 20 pumping units on it and one or two of those fail, you don't want to buy new equipment in this environment. So, we are hopeful but it's too early to tell. I wouldn't factor a lot of growth in this current environment, but maintenance dollars could go up though.

Okay, got you. Thanks so much for your time this morning.

Thanks Kevin.

The next question is from John Engstrom with Stifel.

Good morning, gentlemen. Thank you very much for your time. I was interested in hearing a bit about sort of the spot and contract split across the inland and coastal segments and then kind of within each of those quadrants if you could talk about the fuel cost impacts and how that’s kind of constructive within each of the contracts?

Yes sure. On the inland side we are 80% contracted, 20% spot and the coast-wise it's about 85% contract, 15% spot. Fuel John, we work to make all of our businesses fuel neutral. So, fuels are pass through whether it's in a term contract or core spot pricing is embedded at the current fuel price. So, fuel we are trying to be neutral in. what you do see is since it’s a pass through though it does move revenue around a little bit as fuel prices fall. But since it's a pass through, there is no real net income impact.

Okay, fantastic that's very helpful. So then, I guess, when you talk about pricing pressure we are really talking core pricing and that's sort of net of any sort of fuel influence because that doesn't really impact you either?

That's correct.

Fantastic. And then, just one last question, just to rehash the acquisition topic. I am wondering sort of how aggressively are you guys sourcing acquisitions, talking to possible acquires and things of that sort and then any kind of sort of evaluation metrics you would be looking for within your targets? Thank you.

Yes, John we are always talking to various companies. You never know when an acquisition can present itself, but we in the inland side there is 40 different companies and we have relationships and know the principles that all those companies in, they know the Kirby is a logical buyer. So, we stay in touch whether something is actionable or not, we remain to be seen, but typically when there is some volatility and there is some downward pressure is, is when things start to get interesting. In terms of metrics, we do everything kind of what the discounted cash flow approach looking at whether we can earn 12% after tax return on our investment. That typically means that we are able to - or we would get things in the 5x to 7x EBITDA, sometimes it goes north of 7x EBITDA, there is a lot of synergies, but that's the typical metrics range. But again, we don't look at as a multiple EBITDA, we look at it in terms of discounted cash flow.

Okay, thank you very much for your time.

Thanks John.

The next question is from David Beard with Iberia Capital.

Good morning, gentlemen. I was just hoping to get maybe a little more guidance on or a little more color really on the diesel engine, land services, assumptions behind your guidance and I know you guys don't typically talk about rig count or capital spending. But just trying to get a sense of have you really drown in the kitchen sink in terms of U.S. spending this year and your guidance just on that land base component or using a 20% or 30% decline in U.S. capital spending. Just some color there to try to get a sense of what's in your guidance would be real helpful? Thanks.

Yes, David. We look at the survey as everybody else does and we are anticipating capital spending cuts of 30% and it could even be worse than that. Also the land base rig count, I have seen anywhere from 600 down to 850 down. We are probably closer to the later number. We think it's going to be pretty sloppy this year. That said, it's hard for us to see that we don't get some rebound at some point down the road, but who knows to predict in crude oil prices is a tough thing to do.

Yes, and I would probably agree with you on all three of your comments and that’s very helpful. Thank you.

Thanks David.

Our next question is a follow up from Kelly Dougherty with Macquarie.

Hi. Thanks, I just want to follow up on the utilization. Is that 90% and 95% outlook driven more by a confidence spend and volume remaining robust or really the ability to retire some of the older barges if need be and then how do you see your utilization for the entire industry right now and maybe as we progress throughout the year because I imagine there are some people that have barges that are lot older that yours and have you seen any accelerated retirement at least at this point?

Yes. No, we got a little feedback here, sorry Kelly. That 90% to 95% doesn’t factor any retirement that’s what we think we’ll use going forward. As Joe mentioned, we don’t have a lot of older equipment to retire, we have done a pretty good job lowering the age of our fleet. We do think the industry is about the same utilization. As to their retirement plans it’s hard to predict but a number of carriers have some very old equipment and we would expect that that equipment would come out if things get tougher.

Okay, great. Thank you.

Thanks Kelly.

We have no further questions at this time, I would like to turn the call back over to Sterling for closing remarks.

We appreciate your interest in Kirby Corporation and for participating in our call. If you have additional questions or comments you can reach me directly at 713-435-1101. Thank you and have a nice day.

Thank you. Ladies and gentlemen, this concludes today's conference, thank you for participating. You may now disconnect.