Welcome to the Kirby Corporation 2015 Second Quarter Earnings Conference Call. My name is Hilda and I will be your operator for today. 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 like to turn the call over to Sterling Adlakha. Sterling, you may begin.

Thanks Hilda, and thanks everyone on the call 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 newly redesigned website at kirbycorp.com in the Investor Relations section under financial highlights. 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 risk factors can be found in Kirby’s Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission. I will now turn the call over to Joe.

Thank you, Sterling and good morning. Yesterday afternoon we announced second quarter earnings of $1.04 per share. In the middle of our published range of $0.95 to $1.10 per share. That compares to a $1.31 per share reported for the second quarter last year. During the 2015 second quarter, marine transportation tank barge fleet experienced consistent levels of demand and high equipment utilization. In the inland tank barge market utilization remained in the 90% to 95% range. We experienced good customer demand for equipment during the quarter; however worries about future crude oil volumes and some market uncertainty continued to make it difficult to secure better pricing on contract renewals. In the coastal market, utilization also remained in the 90% to 95% range and price increases were in the mid single-digit percentage range. As expected, we had a number of vessels in the shipyard during the quarter which impacted both our revenues and our earnings. With respect to the Diesel Engine Service segment, revenue and operating income both declined significantly and our land based market we continue to work through a very challenging environment that shows little signs of improvement at least this year. In marine and power generation engine business continues to perform well but has been affected by weaknesses in the Gulf of Mexico oil service market. Before I turn the call over to David, let me make some overall observations on the current environment. The lower oil prices we are seeing they will be with us for a while. While lower crude prices are not particularly helpful in our diesel engine business released parts of our diesel engine business particularly the part and service equipment used in the oil service business and may affect some future movements – it is more term positive for both the American consumer and global business and all the products they consumer. Lower feed stock prices help them. It also helps many of our other customers such as chemical, petro chemical plants and gasoline refinery customers. Our strong balance sheet will certainly position for opportunities whether it’s an acquisition or building equipment for our requirement. I’ll now turn the call over to David.

Thank you, Joe and good morning. In the marine transportation segment, as Joe indicated during the second quarter, our inland marine barge demand was stable and equipment utilization in the 90% to 95% range. Long-term inland marine transportation contracts, those contracts over a year or longer contributed 80% of revenue for the 2015 second quarter with 55% attributable to time charters and 45% from contracts of a freight. Pricing on the inland marine transportation term contracts that renewed during the second quarter was down in the low single digits. Spot contract rates are above contract pricing. In our coast to marine transportation sector, equipment utilization remained in the 90% to 95% range, during the second quarter approximately 85% of the coastal revenues were under term contracts unchanged from a year ago levels. Demand for coast-wide transportation of refined products, black oil and petrochemicals remained consistent with the first quarter. With respect to coastal marine transportation pricing term contracts that renewed during the second quarter increased in the mid single digit percent range. In our diesel engine services segment, our marine diesel and power generation markets experienced stable demand in most regions of country, but there continues to be weakness in the supply vessel and offshore rig market in the Gulf of Mexico. Our land-based Diesel Engine Services market remains challenging, demand for serviced parts and distribution was relatively stable during the quarter but at reduced levels relative to 2014. During the 2015 second quarter we continued to execute on our share repurchase authorization buying approximately 530,000 shares for approximately $41 million or $76.99 per share. We continue to repurchase shares in the month of July with purchases that totaled 477,000 shares at an average price of $76.20. July’s purchases brought the repurchases since our first quarter call on April 30, to just over a million shares. Since we started repurchasing shares in late 2014 we have repurchased approximately 4.3% of our outstanding shares. Currently our unused repurchase authorization is 2.5 million shares. Will now turn the call over to Andy to provide some detailed financial information before I come back with a discussion of the outlook.

Thank you, David, and good morning. In the 2015 second quarter, marine transportation segment revenue declined 7% and operating income declined 16% as compared with the 2014 second quarter. The decline in revenue in the second quarter as compared to the prior year was primarily due to a 36% decline in the average cost of marine diesel fuel. The marine transportation segments operating margin was 22.8% compared with 25.4% from the 2014 second quarter. The inland sector contributed approximately 70% of marine transportation revenue with the coastal sector contributing 30%. Inland marine operating conditions were challenging during the quarter due to high water conditions and lot closures in the river system as well as high cross currents at several places on the Gulf coast. Despite these challenges, the inland sector generated an operating margin in the mid 20% range. The second quarter results for inland marine also reflected the anticipated year-over-year negative impact of $0.03 per share for higher pension expense, reflecting actuarial changes to mortality table and a lower discount rate. In the coastal sector we experienced a heavy shipyard cycle in the second quarter as mentioned on our April conference call. With the 36% decline in fuel prices and a number of vessels in the shipyard, revenue in the coastal sector declined. Pricing on contracts renewing during the quarter continued to improve as David mentioned. Higher maintenance expense during the quarter ongoing impacts from higher wages, higher deferred dry dock amortization and increase and depreciation expense led to a year-over-year decline in the coastal sector operating margin which was in the mid-teens. Also impacting the coastal operating margin was the hiring of new crew members for training and preparations ahead of the delivery of our new 185,000 ATBs. During the 2015 first half, we took delivery of 35…

Thank you, Andy. In our press release, we announced our third quarter guidance of $0.95 to $1.10 per share and for the full year 2015 we slightly narrowed our guidance to $4.10 to $4.35 per share. With respect to the inland market, our third quarter guidance reflects the assumed effects related to high water conditions and two separate closures of the Illinois River that we experienced in July, all of which are somewhat unusual for this point in the summer. We are assuming normal seasonal weather patterns for the remainder of the quarter and that utilization remains in the 90% to 95% range. With respect to inland pricing, we expect a similar trend as in the second quarter. Although contract pricing has been impacted by uncertainty related to future barge movements of crude and condensate, since the second half of 2014 we believe the number of barges moving crude has fallen 30% to 40% and the industry has absorbed these barges and is still operating in the 90% to 95% range. In the coastal market supply and demand remains imbalance which is supporting higher pricing on term contracts. The decline in crude oil prices is not having the same impact on contract pricing in the coastal market that we have seen in the inland market, though some impact from lower crude prices is possible demand for refined products the sectors biggest product trade continues to be quite strong. This is reflected in some recent macro economic statistics including new record highs for refinery operating rates and total miles driven. The coastal transportation portion of our business will be impacted by continued shipyard activity in the third quarter. For our diesel engine services segment, and our land based sector, we expect the market to remain challenging for the remainder of the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We have a question from Gregory Lewis from Credit Suisse.

Yes, thank you and good morning.

Good morning, Greg.

David, as we think about the inland and the coastal businesses, I mean both seem like utilization continues to be firm but it seems like on the inland side at least pricing continues to remain under pressure due to a slowdown and it sounds like in the crude business. And I guess I’m just trying to understand why the same driver of crude is helping you drive the coastal business higher. So if you could just sort of – it seems like the weakness in one isn’t affecting the other.

Yes dear I think it’s the way crude – moved around but clearly this is overhand on inland side is being absorbed. As you’ve heard it’s almost half of what it was year ago, we’ve been absorbing the barges. So perhaps this pricing overhang that we’re seeing with contract pricing mitigates itself with time. But on the coast wise business as you recall the larger moves there are refined products and you can look at refinery utilization, it’s running maxed out, demand – we’re seeing demand end user demand for refined products is growing I think vehicle miles driven is now at an all time high. We’ve had five months in a row I think of strong uptick. So the move around of the coastal business is still pretty robust. Now in our business it’s regional moves on the water for the coast-wise business and that isn’t been displaced by some of the pipelines that you’ve seen in the inland sector that have come on. So things are – its’ just a little bit different market if you will, right.

Okay, great. And then just as I think as we think about your ball parks and stock, generally it sounds like you are always weighing the ability to buy back stock and look at acquisitions. Has anything changed on the acquisition front in the last couple – in over the last quarter, is it kind of the same, do we get the sense that with the weakness in the commodity price there is potentially an opportunity in the medium term for acquisitions to start to service we kind of in this holding pattern?

Yes as you know it’s difficult to predict acquisitions but I’ll just say this choppier it is the more difficult it is, the more likely you are able to get an acquisition at a reasonable price. So, this period is probably more positive than it’s been in the last several years because we’ve had – made a very strong upward price moving market. But it’s – we may need more pain before we could get acquisitions but we’ll see – it’s just so hard to predict we are always talking to somebody and there is always possibilities but we are going to stay disciplined and see where that goes. Meanwhile we’ve got the ability to buy back our stock which clearly you saw we found attractive during the second quarter.

Absolutely. Okay, hey thank you very much and have a good summer guys.

Thanks, Greg.

We have a question from John Chappell from Evercore.

Thank you. Good morning guys.

Good morning, John.

David thanks for the commentary and a little bit more transparency on the pricing side. I guess so we are just still trying to figure out is just the piece of the pricing pressure in inland. So is it possible to kind of compare as that 30% to 40% of the crude oil barges have entered the market, what the tone is and maybe what the piece of contract declines look like relative to three months ago and six months ago?

Well, six months ago we were still flat on pricing. So three months it’s about the same as it was three months ago. It’s a little paradoxical because we are seeing contract, excuse me spot prices above contract prices and we’re essentially 90% to 95% utilized in the industry. So it’s contract prices should be going up right now. It’s this hangover, it’s a bit of an anomaly and Joe will tell his 35 to 40 years in this business is not seamless. Joe, you want to make…

I’ll just comment on that for everybody. It’s surprising to us that contract prices are going down while spot prices are slightly up from where they were let’s say two months ago. And the gap seems to be widening, so why is that? And I think to get pricing momentum on contract renewals you need two things. You need equipment utilization to be at levels where they are today, but to sort of need -- the belief that the market is going to continue to improve and support those continued utilization levels. What’s action here is the belief that the market going to continue to improve. Having said that, as David pointed out we’ve had a lot of returns into other products of equipment that was dedicated crude oil and that equipment has been absorbed, and I frankly think will continue to absorbed. And what you have in the market are operators that really don’t like spot exposure either because they’re not equipped from an organizational perspective to work in a more dynamic market that are looking at rates that are still pretty acceptable, and they’re committing their equipment for the next year at those rates. I think that once the market believes that the return of crude oil equipment is stabilized and its being absorbed I think then you’ll see some pricing momentum going the other way.

That’s very helpful. From a follow-up, I just wanted to ask about the shipyards little bit and the capacity. What’s the delivery schedule look like today in this kind of overhang type environment relative to the last couple of years? With steel prices down, are the shipyards becoming more aggressive on their marketing as they are concern that even in a kind of softer price environment there maybe a rush to build and modernize the fleet?

Yes. The shipyard build for 2015 is down probably on the order of a 100 barges from what it had been last year. And most of those barges have been delivered. I know we’ve taken – we had I think 39 barges on schedule for delivery this year. We’ve already taken hold, but I think four of them. And so the industry has taken much of the new build equipment already. And as I said, it’s down this year quite a bit probably 30% lower this than it was last year. And 2016 we haven’t heard much at all about 2016’s order book, but that’s -- that generally doesn’t happen until late summer, early fall anyway. So that’s a positive. This market has maybe slowdown some of the building and so we’re pretty optimistic about that on the supply side of the equation.

Great. Thanks a lot Dave and thank you Joe.

Thanks, John.

Our next question comes from Jack Atkins from Stephens.

Good morning, guys. Thanks for the time. So I guess David, when we think about spot pricing being above contractual pricing, typically that’s a good forward indicator of where contractual pricing is going to go. And then we call it 12 to maybe 15, 18 months away from an influx of volumes from this petrochemical expansion here in the United States. So, I guess as you look out over the course in the next year, year and a half, I mean at what point do you think your customers are going to – want to start locking in capacity for what would likely become a much more -- a much tighter market over the next couple of years?

That’s a good question. Short answer is we don’t know. But clearly our customers have seen a big change in commodity price and they are adjusting, they are thinking too, right. It everybody’s kind of resetting what’s going on with the commodity prices and trying to adjust their thinking about sourcing and what not. So that could be part of what’s going on in terms of reluctance to term up things in the short term. Also there’s a view that maybe there is more equipment available later. Once as these crude barges, the barges moving crude and condensate continue to shrink and that overhang goes away, it will become increasingly more obvious that we’re going to stay tight. And as you say, we’ve got this petrochemical potential that’s out there in a year or two that could add additional demand. But it’s hard to pinpoint the timing, Jack, but directionally I think what you’re saying is right, demands going to continue to grow and sooner or later the barges that are no longer going to move crude are going to be – will reach in equilibrium. I think you always move some crude by barges, but it’s just at what level.

And David, just to add to your comments, I mean, you all having conversations with customers about their future requirements, those conversations that have been ongoing for I think the last quarter or two, but there more to come. It’s not that you’re not talking to people, you’re talking to people about their requirements. But the requirements are far enough in the future that they are not willing to begin to commit to equipment.

Okay. That makes sense. And then, David, I guess, when you think about the Jones Act tanker market, it seems like the build rates in the Jones Act tanker market are actually pretty significant over the next couple of years. Would you guys are willing to share sort of your thoughts on the potential impact that could have to your coastal barging business. It seems like those are two very different types of assets, but we’d curious to know if you think that could be – could impact what you guys are doing there?

You’re correct, Jack. There are two very different types of assets. Our barges, we go from 30,000 barrels up to 185,000 barrel in size and our barges in the tankers, MR tankers are 330,000 barrel. So it quite a bit different in size and the access that the tankers versus the barges have in terms of customers, docks and unloading and tankage facilities. So, by in large the barge business, the coast-wise barge business is regional in nature. So we could be on the East Coast going from Delaware Valley up to the New York area or West Coast Washington, between Washington and San Francisco for example, and in the Gulf Coast could be as simple as Houston to New Orleans or Corpus to Houston, very regional in nature. The MR tankers, they’re ships their build to go faster and carry large volumes. So their move – they are most economic moves are the long haul moves for example, Corpus Christi to the East Coast to one of the refineries up in the Delaware Valley, where typically we wouldn’t play in that type of move, so it’s a different market, you are right, there are number of MR tankers coming out in the next year or two, but it is a completely different market.

Okay, great. Thank you, David. And one quick housekeeping item. Andy I noticed that taxes in the marine segment other than on income took a step, could you maybe help us sort of dig into what’s striving that and also what’s the go forward share count we should be using?

Yes. The taxes went up, if the waterways use tax which would went into effect in April which it ends up on our taxes other than income line, but that’s a pass-through. So, it did go up, but that’s – it’s not a profitability issue.

Okay.

One share count going forward for the year we’re projecting sort of the share count will be a 55 million number.

Okay. Thank you, guys.

Yes.

Thanks, Jack.

We have a question from John Barnes from RBC Capital Markets.

Hey, thanks for taking my question. Dave, going back to your comments on the shipyard, just one point of clarification, when you said the shipyard for 2015 was down 100 barges, you were talking entirely on the liquid side, correct?

Yes. That’s the liquid inland barge though.

Okay. Very good. Thank you. Couple of things here. Number one, you talked about acquisitions on the marine side of the business, obviously you guys do a pretty good job of buying at the trough, I would argue that the land based diesel business is clearly getting close to a trough. Could you talk a little bit about maybe an appetite there for potential acquisitions maybe try to grow that business a little bit through acquisition and scale it up even given the volatility it’s in?

Yes. I think on that business as we’ve seen its very volatile and before we do any consolidating moves and I’m not sure we would in that space, we want to get to where our cost are most more variable and where we can scale that business up and down quicker. And until we are comfortable with that I think we would stay away from acquisitions in that land based pressure pumping business. That said, we’re working on facilities and our scalability in that business, not right sizing, because it sounds wrong, but more enhancing our scale up and down as demand moves around there.

Okay. All right. Very good. And then, maybe going of the back of a prior question, talking about the outlook on the Petrochem side, you guys elaborated to it with the lower feedstock cost and being in that positive for your customer base, you’ve got these shipyards producing less this year. You’ve got the industry taking or potentially retiring more than their taking, you guys are even talking about being down slightly on a total capacity amount this year. I know it’s modest, but as you view maybe some slowdown in capacity growth versus what’s coming on the volume side from this petrochemical build out. How long do you think the industry could be at a capacity deficit? And how long would it take – what do you think is the likelihood of kind of a timing of correcting that? Is it a multiyear period in order to catch backup if they get behind or is it something that could be can be righted relatively quickly?

Yes, I think the shipyards have proven that they can ramp up and build capacity. I would just say that this chemical build out is long term in nature. These plants are going come on starting late next year and through 2020, and so hopefully we don’t overbuild in anticipation of that and the addition of these chemical plants is ratable enough where the market will be rational and supply and demand will stay in good balance. We’re pretty tight now, so its -- I think this pause that we have is good because it sets up the next upside for pricing which could start, it’s hard to predict but certainly the onset of these new chemical plants could help facilitate that next step up in the long-term pricing cycle.

Okay. All right. And then lastly, on the share buyback, we saw in the quarter, debt levels were slightly elevated, debt to cap is up a little bit. You still have obviously a tremendous amount of run rate on that metric alone. It seems to us like maybe some of that incurrence of debt was even partly to fund – the buyback, given where the stock is, the fact that you’ve kind of dip you toe in on buyback activity, do you – are you comfortable levering up the company to be more aggressive with that if it does take a longer to find maybe some acquisition targets on the marine side, I mean, how comfortable are you in maybe taking on some debt given where it seems to us like the stock price today maybe your own stock is the most appealing investment at this point?

Clearly, we’ve got a lot of balance sheet capacity and no problem using that balance sheet. So far you saw the statistics Andy gave in the second quarter. Our debt was actually down $11 million from the first quarter. Now in July we bought back a nice slug of stocks that took it back up a little bit. But typically in our cash flow generation cycle the second half is the strongest in terms of cash flow. So we’ve got plenty of cash flow as you saw we like our stock where it was priced and we always have that option. We’re not going to force out exactly when we’re going to do, but clearly we’re not shy about using our balance sheet.

Very good. Thanks for the time, Dave. Appreciate it.

Thank you, John.

We have a question from Kelly Dougherty from Macquarie.

Good morning, guys. Thanks for taking the question. Apologies to keep harping on this pricing thing, but just I think you’ve mentioned previously that the contract with your largest inland customers did really come up for renewal in 2015. And I know it’s really but you can help us think about how much of that revenue does come up for renewal in 2016? And if you’ve had any early talks with those customers either or they maybe trying to revisit at early because you see what’s pricing happening now or have they given you kind of any indication of whether thinking about for next year. Just trying to get a sense of whether you expect pricing to kind of stabilize and flatten into 2016 or maybe move higher or maybe it just too early to make a directional call even?

It’s too early to make a directional call in 2016, but we stay high tight like we are, it could be positive. I would say every customers are little different and every contract is little different and your approach each one a little different in terms of talking about, but we’re talking to our customer all the time. So when we have contract renewals we’re talking about how that’s going to look and talking with them about their future needs. As they change their needs change all the time. So it’s not a bright line kind walk in the door, okay, now it’s the contract, it’s more of a process, as you would expect we got long term relationships with these customers that are really just codified by that contract. These are relationships of helping them and providing them a service. So it’s not a bright line item. But we do to your point, we have some renewals coming up in 2016 and 2017. We’re already in discussions with customers about how that might.

Is there a concern that, correct me if I’m wrong, I don’t think any kind of the big ones renewed in 2015, is there a concern that there’s going kind of to be catch up for -- I don’t if you want to put it this way, but what they miss on downside in 2015 or these contract renewals kind of really just of kind of typically revolve around whatever the market is looking like at the time that you’re being doing them?

Let me try this. Most of our long term contracts that are multiyear in nature, well, all them have escalators. So, by in large the contracts kind of keep up with what the market pricing is, so there’s not usually a big – you can have some catch or give back in any one renewal but its generally not a huge remarking of price.

Okay. That’s helpful. Just as you think about next year. And then I guess as a follow-up, given some of the uncertainty on the pricing side, have you started to see higher than normal retirement just through the industry of older barges that maybe were kept in service just because pricing was so good for so long. Anyway quantify maybe that the overall impact on capacity and is that what we’ve seen helping keep utilization higher than maybe it would be given where the pricing looks to be going?

It’s hard to tell what’s been retired and what’s not being marketed. We get a sense for that annually when they inform -- does a little industry survey and we get a sense for what’s been retired. It’s very difficult for us to determine kind of on a real time basis what’s been retired or what’s kind of laid up waiting for retirement. We do know our retirements and we’re retiring as per our kind of schedule. I would imagine that retirements will be up this year versus where they’ve been the last three years. But we don’t real time data on that, Kelly.

Okay, right. Just one related to that if I can, is there any way to think about your utilization is obviously remained very high, any sense you have or what the industrial overall might be closer to what the industrial utilization levels might be?

We think they are similar. We think they are in the same range that we are.

Okay, great. Thanks very much guys.

Thank you, Kelly.

We have a question from [Indiscernible] from Wells Fargo.

Good morning. You touched upon this briefly and mentioned this during your last call that your cutting cost, reducing staffing in the DES unit. To what extend is that cost rationalization complete and what is the potential of further cut cost on either DES or the inland transportation business units?

Thanks, Donald. We took out over 40% of our manufacturing labor kind of early in the year. We’ve been taking out more cost, but it’s been more of not a broad based to kind of reduction in force. It’s been more attrition related as well as is consolidating some functions. We’re going to continue to look for opportunities like that. What you don’t want to do is to get rid of really high skilled mechanic labor for example to use that as an example and not be able to respond to the customer needs when business starts to pick back up. If there is skill set that you, a core skill set that you got to have. So it’s a balance. I would say we’re in that kind of balance phase keep looking for ways to take out cost rather than wholesale kind of reductions enforce. On the inland side again we were constantly looking at our cost structure and taking cost out where we can and where it make sense.

And with that, I mean, generally the age at which you look to scrap, and as you mentioned during your last question that really you’re still on schedule, are you beginning to look at maybe a slightly lesser age at which you use scrap time or generally you’re consistent with where you always been?

No. It’s typically on an inland barge, it around 35 years on average, 30 to 35 years when start to scrap it. We do everything kind of on a case by case basis. You look at the condition of on older barge. You look at what its earnings opportunities are, what it like cost to the extent it life through another shipyard. And frankly we do what a DCF calculation and make sure we can earn back our capital if we expand on extending the life. And you got to believe that rationality exit throughout. So if the cost of extending it can’t get paid back, you’ll see more retirements and I think you may see more retirements here given this pricing environment we’ve recently had.

Right. And just one last follow-up on the dry docking, I mean, dry docking cost generally gone down as you’re seeing steel prices come in or they’re relatively consistent?

Clearly there’s a steel component, you’ve seen steel prices down 20%, 25%, so that’s usually a pass-through from the shipyards, that’s reflected in when we go into replace steel and whatnot we could kind of to prevailing steel prices and obviously when we build new construction particularly on these four ATVs we’re building there are steel escalators and de-escalators and they’re based on how steel prices move and the procurement schedule which the shipyard has. So yes, as prices come down and shipyards with steel price but the labor component and others I think are pretty consistent, I don’t think they’ve change materially.

All right. Appreciate the color gentlemen. Have a good summer.

Thank you, Donald.

We have a question from Steve Sherowski from Goldman Sachs.

Hi, good morning. Apologies if I miss this earlier. But are there inland barges that are still on crude and condensate or [Indiscernible] industry level. Give any sense of what percentage is in light versus heavy crude service and I’m just trying to get a better sense of how of the existing capacity can still be relatively and expensively repurpose to serve different product types?

I don’t have a definitive percentage, the Eagle Ford crude is wider, some of the Marcellus and Utica crude is lighter, so that’s probably good portion of the barges. So those barges could be cleaned up fairly easily. I think the heavier crude is coming from Canada and stuff, those are little harder to clean up. But in terms of a percentage I don’t have a percentage for you, but I would say that –its reasonably fungible to clean those barges up and put them back into service.

Got you. Okay. And then looking at longer term I know there is large Bakken pipeline and development that would deliver crude into Netherlands and East Texas and that continue to be talk about cap line being reversed which will deliver crude into the Louisiana Gulf Coast refining market. I know that your crude volumes in the inland segment are now pretty small, I’m just trying to get a better understanding of what the risk or even potential opportunities as this poses to your coastal business and so these locations that represent a fairly large water point, delivery points and recognize its more Louisiana than East Texas?

I’m not sure, it would be much of risk and most of the inland moves from the upper river down to the Gulf Coast have gone away anyway with the Flanagan South and Seaway pipelines, and Bakken, more Bakken down to the Gulf Coast would put more liquids into the refineries down there which the more liquids you have generally that means more barges movements. Now in the coast-wise, if the Bakken doesn’t go by unit trend to the East Coast for example to the Hudson, you may see some of those moves change. There are some barges moves that come down from all beneath down into the New York refinery area or all the way down to the Delaware Valley area. But those refineries going to have to source crude from somewhere and if it doesn’t come from the Bakken down the Hudson for example, even if it comes in from abroad on print on a tanker those tankers can get into most of those docks and you’ll have barges that are lightering the crude and taking into to those facilities. So I don’t know if I’ve answered your question, but not particularly worried about risks with that new pipeline that you’re asking about. There can always be transportation shifts that happen because of those new pipelines, sometimes it difficult to think exactly how everything will shift around.

Got you. That’s helpful. Thank you.

Thanks, Steve.

Our next question comes from Ken Hoexter from Merrill Lynch.

Great. Good morning, Dave. Andy, If you can talk a bit about ton miles were down 3%, ton miles per barge drop 7%, yet utilization was in 90%, 95%, can you stress that a bit is that a mix shift or maybe talk about what’s going on there and if that’s impacting pricing as well?

No. That really hasn’t impacted pricing, it just a mix shift. And – as you know those sort of revenue per ton mile can sort of move around quite a bit. Some of it have to do – in ton miles specifically some of it has to do with delays and weather and again where everything is working, but it’s really is the mix shift.

So, just a couple of rapid fire ones, but the barges you mentioned that remaining crude I think Dave you mentioned 40% have swapped over or ready, can you talk about how much you think are still are left on the crude trading and could come back in?

Sure. We think late last year we’re around 550 barges. I think right now we think it’s – again we don’t have perfect information here, as you know, this is an our estimate, but we think its somewhere between 325, maybe 2, 3, 53, 75 still in crude service.

Okay. And then…

That’s to call it 350, but I don’t think all those barges would ever come out completely out of crude service. But that’s the order of magnitude of the number of barges remaining.

Thanks for that. And Andy on the coastal, can you walk through the impact of dry docking for the quarter, was it about $16 million of revenues and what’s to come in the third quarter?

You maybe talking about the shipyard.

Sorry, yes.

In terms of revenue, the revenue, the revenue was probably off, I wouldn’t say it was $16 million. It was probably little less than that. And going forward into the third quarter it will probably be a pretty similar looking story. A lot of the revenue decline that you’re seeing in the coast-wise business was due to the fuel effect. There is a little bit of dry docking in there, but in general, dry docking probably ended up sort of following down at the bottom line. I would say it was probably during the quarter it was $2 million to $3 million number in terms of shipyards.

Wonderful, helpful. And I guess for a bigger picture follow-up. I guess, if your ton miles don’t make the difference and that was a mix changes you answer it before, yet utilization still 90%, 95% on the inland. Why do you see pricing coming down mid single-digit, is it more -- I just want to understand that going back to said originally. Is it more just the perception of the – whether if the crude barges coming in or the perception of excess capacity versus what you’re actually seeing if utilization stays in that range, just because of utilization doesn’t move what forces that pricing move down, usually when utilization comes down, that’s when you free up on the pricing side?

Yes. I think, Ken, it’s the combination of a number of things, one as Joe mentioned, the perception of the customers that may more availability later, one. Two, it could be – if you’re a just using an example, MLP and you’ve just got -- just had 15 crude barges return to you and MLP wants steady kind predictable cash flow, that just say, hey look, let’s just take a discount, we’re still at a pretty good rate. Let’s just take a discount, put them to work for another year or it could same token it could be private individual who says, well, that’s still a pretty good rate. I’m not going to fight it. I don’t have a sales force out there pushing barges and helping customer’s everyday, it still supports my lifestyle, I’ll just take a little haircut and put them away for a year. So there’s a lot of that dynamic going on as these crude barges are return, so it’s put kind of a downward pressure on contract prices. But when the customers start to look for barges, kind of one-off and they find that the market pretty tight and that’s why spot prices are going up. So it’s got a – they’re going to come together at some point.

Hey, Ken, real quick, just to clarify my comment as well. Those shipyard numbers that I gave you were sort of incremental to last year, so that’s kind of over and above what we’ve seen in the past.

Thanks for the time, guys. Appreciate the insights.

We have a question from Kevin Sterling from BB&T Capital Markets.

Good morning. Thank you gentlemen for your time. And David and Joe, really do appreciate all the color you gave on pricing, it’s very helpful and particular Joe with all your experience, but can I – I don’t want to be the dead horse here, but I’d like to ask the pricing question take a different angle and go it a different way. Do you think the recent increase we’ve seen in spot pricing, do you think some of that might be weather related particular with high water, opening [ph] toes, et cetera may have temporarily pushed up spot pricing or do you think that spot pricing increase we’re seeing now is little more sustainable. So just like to get your insights and kind of maybe what’s been driving spot pricing higher or has it been weather related?

That’s a good question. Certainly some of that happens because as weather and lock delays and the Illinois is closed, it does put some artificial demand, artificial is probably the wrong word, but it does reduce the barge availability which makes the market tighter, so there is some of that. But as summer goes on, summer is always better than the winter in terms of the impacts of weather and you still stay pretty busy, it’s good. But to your point July was a rough weather month and that did help tighten up the market a little bit, but I would still say that the demand is out there for barges and it still pretty tight.

Kevin, I’m just from a historical perspective, you typically see utilization deteriorate during the summer, but it doesn’t affect your earnings because you are operating so much more efficiently. So you kind of go into the summer utilization ticks down a little bit, then you get it before it takes up a little bit and the earnings you are about the same and the reason they are about the same is really efficiency versus kind of the rate impact of increased utilization, increased utilization typically drives rates up. This summer has been a pretty messy summer in terms of delays, but as you get into the fall it – I think that the natural delays of kind of tougher weather will continue to keep utilization pretty high.

Got you, thank you Joe and David that’s very, very helpful. And let me come at it a different way to on the contract side of pricing. And correct me if I’m wrong, and I’m not mistaken most of the new equipment that had been built and put into crude trade were 30,000 barrel barges and as those have been repurposed in putting to other trades while its more barges but effectively it’s a lot more capacity on a per barrel basis, so is that kind of impacting shippers sentiment as we look and see, yes it’s more barges but on a per barrel basis it’s a lot more capacity on a per barrel basis. Is that having some impact on the contract pricing being weak?

Well I don’t think it’s so much the shipper’s sentiment. I think the shipper is just taking advantage of operators who are willing to give them equipment at lower rates because the rates are still pretty good and they just don’t want to fight, they are much more dynamics spot market. The – I think what’s encouraging is the point that David keeps making and that is that you had all this equipment in crude oil service and suddenly we are getting it back but utilization is still in the 90% to 95% range, so it’s being absorbed.

Got you, okay thank you so much and have a great day and by the way I like the functionality and effects of the newly redesigned website looks great.

Yes so that’s just for sterling [ph].

It was, yes, he did a very good job of that.

I think you are expressing a widely held sentiment there, Kevin. Operator, I think that’s all the time we have.

Thank you, sir. At this time I would like to turn the call back over to you for any closing remarks.

We appreciate your interest in Kirby Corporation and 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. We thank you for participating. You may now disconnect.