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Kirby Corporation's CEO Announces Revisions To Q2 2012 Guidance - Guidance Call Transcript

With respect to K-Sea, now Kirby Offshore Marine, their market will improve and as it does, rates and earnings will get better. Yes, we’re disappointed in the additional maintenance we will be incurring to bring this equipment up to our standards, but we will get this behind us. When we bought K-Sea, it was a public company and the need to maintain strict confidentiality than we have experienced with other, non-public acquisitions, and the equipment inspection window was much shorter. We relied on maintenance records and discussion with K-Sea management to determine the condition of the fleet and the assessment of the adequacy of its maintenance program. Based on post-acquisition shipyards and performance issues with the equipment, we concluded that we needed to invest more in the equipment.

This is what happened. I’m not offering it as an excuse. We made a business judgment error which turned out to be wrong. The tank barge business is about servicing customers reliably and safely with equipment which can consistently meet the customer’s vetting requirements. Well-maintained equipment pays for itself through higher utilization rates because equipment is out of service less for unplanned maintenance events and the customer wants to use it more because it’s reliable and safe. This is the model which we have successfully employed in our inland business. This is the model we will employ in the offshore business going forward.

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