Kirby 10Q 2023 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023

 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 1-7615

KIRBY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada

74-1884980

(I.R.S. Employer Identification No.)

(State or other jurisdiction of incorporation or organization)

55 Waugh Drive, Suite 1000

Houston, TX

77007

(Address of principal executive offices)

(Zip Code)

713-435-1000

(Registrant’s telephone number, including area code)

No Change

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	KEX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer		Accelerated filer	
Non-accelerated filer		Smaller reporting company	
		Emerging growth company	

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of November 3, 2023, 59.1 million shares of the Registrant’s $0.10 par value per share common stock were outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED BALANCE SHEETS

(Unaudited)


	September 30, 2023			December 31, 2022
	($ in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	42,116		$	80,577
Accounts receivable:
Trade – less allowance for doubtful accounts		514,631			483,406
Other		53,936			114,556
Inventories – net		505,506			461,848
Prepaid expenses and other current assets		79,382			71,372
Total current assets		1,195,571			1,211,759

Property and equipment		5,710,443			5,452,143
Accumulated depreciation		(1,928,319	)		(1,818,681	)
Property and equipment – net		3,782,124			3,633,462

Operating lease right-of-use assets		155,098			154,507
Goodwill		438,748			438,748
Other intangibles, net		45,058			51,463
Other assets		66,281			64,985
Total assets	$	5,682,880		$	5,554,924

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank notes payable	$	9,608		$	3,292
Income taxes payable		2,247			323
Accounts payable		258,126			278,081
Accrued liabilities		199,124			204,752
Current portion of operating lease liabilities		32,170			36,444
Deferred revenues		134,577			119,305
Total current liabilities		635,852			642,197

Long-term debt, net – less current portion		1,058,248			1,076,326
Deferred income taxes		672,711			625,884
Operating lease liabilities – less current portion		142,237			142,140
Other long-term liabilities		15,750			23,209
Total long-term liabilities		1,888,946			1,867,559

Contingencies and commitments		—			—

Equity:
Kirby stockholders’ equity:
Common stock, $0.10 par value per share. Authorized 120 million shares, issued 65.5 million shares		6,547			6,547
Additional paid-in capital		861,928			859,345
Accumulated other comprehensive income – net		19,078			16,853
Retained earnings		2,629,759			2,468,730
Treasury stock – at cost, 6.2 million shares at September 30, 2023 and 5.6 million at December 31, 2022		(360,420	)		(308,598	)
Total Kirby stockholders’ equity		3,156,892			3,042,877
Noncontrolling interests		1,190			2,291
Total equity		3,158,082			3,045,168
Total liabilities and equity	$	5,682,880		$	5,554,924

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF EARNINGS

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	($ in thousands, except per share amounts)
Revenues:
Marine transportation	$	429,885		$	433,040		$	1,269,342		$	1,194,231
Distribution and services		334,887			312,803			1,023,122			860,358
Total revenues		764,772			745,843			2,292,464			2,054,589

Costs and expenses:
Costs of sales and operating expenses		530,541			552,392			1,618,690			1,526,872
Selling, general and administrative		79,125			75,381			250,870			221,721
Taxes, other than on income		9,666			9,121			28,610			28,332
Depreciation and amortization		53,445			50,419			156,251			150,498
Gain on disposition of assets		(1,528	)		(377	)		(4,230	)		(7,971	)
Total costs and expenses		671,249			686,936			2,050,191			1,919,452

Operating income		93,523			58,907			242,273			135,137
Other income		1,589			3,805			9,296			11,853
Interest expense		(13,386	)		(11,755	)		(38,893	)		(32,598	)

Earnings before taxes on income		81,726			50,957			212,676			114,392
Provision for taxes on income		(18,722	)		(11,713	)		(51,733	)		(28,956	)

Net earnings		63,004			39,244			160,943			85,436
Net (earnings) loss attributable to noncontrolling interests		(40	)		(153	)		86			(454	)

Net earnings attributable to Kirby	$	62,964		$	39,091		$	161,029		$	84,982

Net earnings per share attributable to Kirby common stockholders:
Basic	$	1.06		$	0.65		$	2.70		$	1.41
Diluted	$	1.05		$	0.65		$	2.68		$	1.41

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023		2022
	($ in thousands)
Net earnings	$	63,004		$	39,244		$	160,943	$	85,436

Other comprehensive income, net of taxes:
Pension and postretirement benefits		(61	)		9,110			1,152		13,254
Foreign currency translation adjustments		143			(608	)		1,073		(743	)
Total other comprehensive income, net of taxes		82			8,502			2,225		12,511

Total comprehensive income, net of taxes		63,086			47,746			163,168		97,947
Net (earnings) loss attributable to noncontrolling interests		(40	)		(153	)		86		(454	)

Comprehensive income attributable to Kirby	$	63,046		$	47,593		$	163,254	$	97,493

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended September 30,
	2023			2022
	($ in thousands)
Cash flows from operating activities:
Net earnings	$	160,943		$	85,436
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation and amortization		156,251			150,498
Provision for deferred income taxes		46,441			25,986
Amortization of share-based compensation		12,310			11,448
Amortization of major maintenance costs		21,050			21,677
Other		(8,001	)		(7,608	)
Decrease in cash flows resulting from changes in operating assets and liabilities, net		(64,767	)		(126,252	)
Net cash provided by operating activities		324,227			161,185

Cash flows from investing activities:
Capital expenditures		(274,963	)		(120,263	)
Acquisitions of businesses and marine equipment		(37,500	)		(3,900	)
Proceeds from disposition of assets		21,846			32,904
Net cash used in investing activities		(290,617	)		(91,259	)

Cash flows from financing activities:
Borrowings on bank credit facilities, net		100,316			21,664
Borrowings on long-term debt		240,000			250,000
Payments on long-term debt		(350,000	)		(315,000	)
Payment of debt issuance costs		(1,237	)		(1,538	)
Proceeds from exercise of stock options		3,431			3,885
Payments related to tax withholding for share-based compensation		(3,598	)		(3,193	)
Treasury stock purchases		(60,910	)		(22,901	)
Return of investment to noncontrolling interest and other		(73	)		(665	)
Net cash used in financing activities		(72,071	)		(67,748	)
Increase (decrease) in cash and cash equivalents		(38,461	)		2,178

Cash and cash equivalents, beginning of year		80,577			34,813
Cash and cash equivalents, end of period	$	42,116		$	36,991

Supplemental disclosures of cash flow information:
Cash paid (received) during the period:
Interest paid	$	45,276		$	39,754
Income taxes paid (refunded), net	$	(67,118	)	$	2,097
Operating cash outflow from operating leases	$	33,266		$	33,412
Non-cash investing activity:
Capital expenditures included in accounts payable	$	(2,305	)	$	(8,508	)
Right-of-use assets obtained in exchange for lease obligations	$	32,652		$	14,329

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


								Accumulated
					Additional			Other
	Common Stock				Paid-in-			Comprehensive		Retained		Treasury Stock						Noncontrolling
	Shares		Amount		Capital			Income, Net		Earnings		Shares			Amount			Interests			Total
	(in thousands)
Balance at June 30, 2023		65,472	$	6,547	$	857,965		$	18,996	$	2,566,795		(5,946	)	$	(339,659	)	$	2,165		$	3,112,809
Stock option exercises		—		—		574			—		—		48			2,739			—			3,313
Issuance of stock for equity awards, net of forfeitures		—		—		(9	)		—		—		—			9			—			—
Tax withholdings on equity award vesting		—		—		—			—		—		—			(2	)		—			(2	)
Amortization of unearned share-based compensation		—		—		3,398			—		—		—			—			—			3,398
Treasury stock purchases		—		—		—			—		—		(291	)		(23,310	)		—			(23,310	)
Excise taxes on treasury stock purchases		—		—		—			—		—		—			(197	)		—			(197	)
Total comprehensive income, net of taxes		—		—		—			82		62,964		—			—			40			63,086
Return of investment to noncontrolling interests		—		—		—			—		—		—			—			(1,015	)		(1,015	)
Balance at September 30, 2023		65,472	$	6,547	$	861,928		$	19,078	$	2,629,759		(6,189	)	$	(360,420	)	$	1,190		$	3,158,082


							Accumulated
					Additional		Other
	Common Stock				Paid-in-		Comprehensive			Retained		Treasury Stock						Noncontrolling
	Shares		Amount		Capital		Income, Net			Earnings		Shares			Amount			Interests			Total
	(in thousands)
Balance at June 30, 2022		65,472	$	6,547	$	854,781	$	(21,957	)	$	2,392,330		(5,501	)	$	(304,314	)	$	2,357		$	2,929,744
Amortization of unearned share-based compensation		—		—		2,893		—			—		—			—			—			2,893
Treasury stock purchases		—		—		—		—			—		(76	)		(4,816	)		—			(4,816	)
Total comprehensive income, net of taxes		—		—		—		8,502			39,091		—			—			153			47,746
Return of investment to noncontrolling interests		—		—		—		—			—		—			—			(204	)		(204	)
Balance at September 30, 2022		65,472	$	6,547	$	857,674	$	(13,455	)	$	2,431,421		(5,577	)	$	(309,130	)	$	2,306		$	2,975,363

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


					Additional			Accumulated Other
	Common Stock				Paid-in-			Comprehensive		Retained		Treasury Stock						Noncontrolling
	Shares		Amount		Capital			Income, Net		Earnings		Shares			Amount			Interests			Total
	(in thousands)
Balance at December 31, 2022		65,472	$	6,547	$	859,345		$	16,853	$	2,468,730		(5,565	)	$	(308,598	)	$	2,291		$	3,045,168
Stock option exercises		—		—		357			—		—		61			3,074			—			3,431
Issuance of stock for equity awards, net of forfeitures		—		—		(10,084	)		—		—		182			10,084			—			—
Tax withholdings on equity award vesting		—		—		—			—		—		(55	)		(3,598	)		—			(3,598	)
Amortization of share-based compensation		—		—		12,310			—		—		—			—			—			12,310
Treasury stock purchases		—		—		—			—		—		(812	)		(60,910	)		—			(60,910	)
Excise taxes on treasury stock purchases		—		—		—			—		—		—			(472	)		—			(472	)
Total comprehensive income, net of taxes		—		—		—			2,225		161,029		—			—			(86	)		163,168
Return of investment to noncontrolling interests		—		—		—			—		—		—			—			(1,015	)		(1,015	)
Balance at September 30, 2023		65,472	$	6,547	$	861,928		$	19,078	$	2,629,759	$	(6,189	)	$	(360,420	)	$	1,190		$	3,158,082


					Additional			Accumulated Other
	Common Stock				Paid-in-			Comprehensive			Retained		Treasury Stock						Noncontrolling
	Shares		Amount		Capital			Income, Net			Earnings		Shares			Amount			Interests			Total
	(in thousands)
Balance at December 31, 2021		65,472	$	6,547	$	854,512		$	(25,966	)	$	2,346,439		(5,361	)	$	(295,208	)	$	2,458		$	2,888,782
Stock option exercises		—		—		691			—			—		58			3,194			—			3,885
Issuance of stock for equity awards, net of forfeitures		—		—		(8,977	)		—			—		162			8,977			—			—
Tax withholdings on equity award vesting		—		—		—			—			—		(50	)		(3,192	)		—			(3,192	)
Amortization of share-based compensation		—		—		11,448			—			—		—			—			—			11,448
Treasury stock purchases		—		—		—			—			—		(386	)		(22,901	)		—			(22,901	)
Total comprehensive income, net of taxes		—		—		—			12,511			84,982		—			—			454			97,947
Return of investment to noncontrolling interests		—		—		—			—			—		—			—			(606	)		(606	)
Balance at September 30, 2022		65,472	$	6,547	$	857,674		$	(13,455	)	$	2,431,421		(5,577	)	$	(309,130	)	$	2,306		$	2,975,363

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

(1) Basis for Preparation of the Condensed Financial Statements

The condensed financial statements included herein have been prepared by Kirby Corporation and its consolidated subsidiaries (“Kirby” or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including significant accounting policies normally included in annual financial statements, have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain reclassifications have been made to reflect the current presentation of financial information.

(2) Acquisitions

On July 14, 2023, the Company purchased 23 inland tank barges with a total capacity of 265,000 barrels from an undisclosed seller for $37 million in cash. The 23 tank barges transport petrochemicals and refined products on the Mississippi River System and the Gulf Intracoastal Waterway. The average age of the 23 barges was 14 years.

The Company purchased four inland tank barges from a leasing company for $0.5 million in cash during the 2023 third quarter. The Company had been leasing the barges prior to the purchase.

On March 31, 2022, the Company paid $3.9 million in cash to purchase assets of a gearbox repair company in the distribution and services segment. Assets acquired consisted primarily of property and equipment.

(3) Revenues

The following table sets forth the Company’s revenues by major source (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Marine transportation segment:
Inland transportation	$	353,635	$	345,052	$	1,043,330	$	939,910
Coastal transportation		76,250		87,988		226,012		254,321
	$	429,885	$	433,040	$	1,269,342	$	1,194,231
Distribution and services segment:
Commercial and industrial	$	211,485	$	165,361	$	581,275	$	474,515
Oil and gas		123,402		147,442		441,847		385,843
	$	334,887	$	312,803	$	1,023,122	$	860,358

Contract liabilities represent advance consideration received from customers, and are recognized as revenue over time as the related performance obligation is satisfied. Revenues recognized during the nine months ended September 30, 2023 and 2022 that were included in the opening contract liability balances were $76.8 million and $54.6 million, respectively. The Company presents all contract liabilities within the deferred revenues financial statement caption on the balance sheets. The Company did not have any contract assets at September 30, 2023 or December 31, 2022. The Company applies the practical expedient that allows non-disclosure of information about remaining performance obligations that have original expected durations of one year or less.

(4) Segment Data

The Company’s operations are aggregated into two reportable business segments as follows:

Marine Transportation Segment (“KMT”) — Provides marine transportation by United States flagged vessels principally of liquid cargoes throughout the United States inland waterway system, along all three United States coasts, and, to a lesser extent, in United States coastal transportation of dry-bulk cargoes. The principal products transported include petrochemicals, black oil, refined petroleum products, and agricultural chemicals.

Distribution and Services Segment (“KDS”) — Provides after-market services and genuine replacement parts for engines, transmissions, reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers.

The Company’s two reportable business segments are managed separately based on fundamental differences in their operations. The Company evaluates the performance of its segments based on the contributions to operating income of the respective segments, before income taxes, interest, gains or losses on disposition of assets, other nonoperating income, noncontrolling interests, accounting changes, and nonrecurring items. Intersegment revenues, based on market-based pricing, of KDS from KMT of $9.9 million and $29.6 million for the three months and nine months ended September 30, 2023, respectively, and $8.0 million and $21.9 million for the three and nine months ended September 30, 2022, respectively, as well as the related intersegment profit of $1.0 million and $3.0 million for the three months and nine months ended September 30, 2023, respectively, and $0.8 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, have been eliminated from the tables below.

The following tables set forth the Company’s revenues and profit or loss by reportable segment and total assets (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenues:
Marine transportation	$	429,885		$	433,040		$	1,269,342		$	1,194,231
Distribution and services		334,887			312,803			1,023,122			860,358
	$	764,772		$	745,843		$	2,292,464		$	2,054,589
Segment profit:
Marine transportation	$	63,467		$	41,713		$	170,754		$	89,465
Distribution and services		33,194			22,268			85,828			49,976
Other		(14,935	)		(13,024	)		(43,906	)		(25,049	)
	$	81,726		$	50,957		$	212,676		$	114,392


	September 30, 2023		December 31, 2022
Total assets:
Marine transportation	$	4,379,866	$	4,285,647
Distribution and services		1,180,067		1,041,841
Other		122,947		227,436
	$	5,682,880	$	5,554,924

The following table presents the details of “Other” segment loss (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
General corporate expenses	$	(4,666	)	$	(5,451	)	$	(18,539	)	$	(12,275	)
Gain on disposition of assets		1,528			377			4,230			7,971
Interest expense		(13,386	)		(11,755	)		(38,893	)		(32,598	)
Other income		1,589			3,805			9,296			11,853
	$	(14,935	)	$	(13,024	)	$	(43,906	)	$	(25,049	)

The following table presents the details of “Other” total assets (in thousands):


	September 30, 2023		December 31, 2022
General corporate assets	$	120,620	$	225,265
Investment in affiliates		2,327		2,171
	$	122,947	$	227,436

(5) Long-Term Debt

The following table presents the carrying value and fair value (determined using inputs characteristic of a Level 2 fair value measurement) of debt outstanding (in thousands):


	September 30, 2023					December 31, 2022
	Carrying Value			Fair Value		Carrying Value			Fair Value
Revolving Credit Facility due July 29, 2027 (a)	$	94,000		$	94,000	$	—		$	—
Term Loan due July 29, 2027 (a)		170,000			170,000		170,000			170,000
3.29% senior notes due February 27, 2023		—			—		350,000			352,275
4.2% senior notes due March 1, 2028		500,000			451,293		500,000			477,660
3.46% senior notes due January 19, 2033		60,000			45,631		60,000			42,647
3.51% senior notes due January 19, 2033		240,000			183,351		—			—
Credit line due June 30, 2024		—			—		—			—
Bank notes payable		9,608			9,608		3,292			3,292
		1,073,608			953,883		1,083,292			1,045,874
Unamortized debt discounts and issuance costs (b)		(5,752	)		—		(3,674	)		—
	$	1,067,856		$	953,883	$	1,079,618		$	1,045,874

(a)

Variable interest rate of 6.8% at September 30, 2023.

(b)

Excludes $1.8 million attributable to the 2027 Revolving Credit Facility included in other assets at December 31, 2022.

The following table presents borrowings and payments under the bank credit facilities (in thousands):


	Nine Months Ended September 30,
	2023			2022
Borrowings on bank credit facilities	$	379,760		$	171,884
Payments on bank credit facilities		(279,444	)		(150,220	)
	$	100,316		$	21,664

At the beginning of 2022, the Company had an amended and restated credit agreement (the “2024 Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, that allowed for an $850 million unsecured revolving credit facility (the “2024 Revolving Credit Facility”) and an unsecured term loan (the “2024 Term Loan”) with a maturity date of March 27, 2024. The 2024 Term Loan was prepayable, in whole or in part, without penalty.

On July 29, 2022, the Company entered into a new credit agreement (the “2027 Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank that allows for a $500 million unsecured revolving credit facility (the “2027 Revolving Credit Facility”) and a $250 million unsecured term loan (the “2027 Term Loan”) with a maturity date of July 29, 2027. The 2027 Credit Agreement replaced the 2024 Credit Agreement. In conjunction with entering into the 2027 Credit Agreement, on July 29, 2022, the Company borrowed $35 million under the 2027 Revolving Credit Facility and $250 million under the 2027 Term Loan to repay borrowings under the 2024 Term Loan. In the fourth quarter of 2022, the Company repaid $80.0 million under the 2027 Term Loan prior to scheduled maturities. As a result, no repayments are required until June 30, 2025. Outstanding letters of credit under the 2027 Revolving Credit Facility were $0.1 million and available borrowing capacity was $405.9 million as of September 30, 2023.

The 2027 Term Loan is repayable in quarterly installments, with no repayments until June 30, 2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable upon maturity, assuming no prepayment. The 2027 Term Loan is prepayable, in whole or in part, without penalty. The 2027 Credit Agreement provides for a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) or a base rate calculated with reference to the prime rate quoted by The Wall Street Journal, the Federal Reserve Bank of New York Rate plus 0.5%, or the adjusted SOFR rate for a one month interest period plus 1.0%, among other factors (the “Alternate Base Rate”). The interest rate varies with the Company’s credit rating and is currently 137.5 basis points over SOFR or 37.5 basis points over the Alternate Base Rate. The 2027 Credit Agreement contains certain financial covenants including an interest coverage ratio and debt-to-capitalization ratio. In addition to financial covenants, the 2027 Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates, and changes in lines of business. The 2027 Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness, among other events. Borrowings under the 2027 Credit Agreement may be used for general corporate purposes including acquisitions. The 2027 Revolving Credit Facility includes a $25 million commitment which may be used for standby letters of credit.

On February 3, 2022, the Company entered into a note purchase agreement for the issuance of $300 million of unsecured senior notes with a group of institutional investors, consisting of $60 million of 3.46% series A notes (“Series A Notes”) and $240 million of 3.51% series B notes (“Series B Notes”), each due January 19, 2033 (collectively, the “2033 Notes”). The Series A Notes were issued on October 20, 2022, and the Series B Notes were issued on January 19, 2023. No principal payments will be required until maturity. Beginning in 2023, interest payments of $5.3 million will be due semi-annually on January 19 and July 19 of each year, with the exception of the first payment on January 19, 2023, which was $0.5 million. The 2033 Notes are unsecured and rank equally in right of payment with the Company's other unsecured senior indebtedness. The 2033 Notes contain certain covenants on the part of the Company, including an interest coverage covenant, a debt-to-capitalization covenant, and covenants relating to liens, asset sales and mergers, among others. The 2033 Notes also specify certain events of default, upon the occurrence of which the maturity of the notes may be accelerated, including failure to pay principal and interest, violation of covenants or default on other indebtedness, among others. The 3.29% unsecured senior notes due February 27, 2023 (the “2023 Notes”) were repaid using a combination of the proceeds from the issuance of the 2033 Notes and availability under the 2027 Revolving Credit Facility.

The Company has a $10 million line of credit (“Credit Line”) with Bank of America, N.A. (“Bank of America”) for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2024. Outstanding letters of credit under the $10 million credit line were $7.3 million and available borrowing capacity was $2.7 million as of September 30, 2023.

(6) Leases

The Company currently leases various facilities and equipment under cancelable and noncancelable operating leases. The accounting for the Company’s leases may require judgments, which include determining whether a contract contains a lease, allocating the consideration between lease and non-lease components, and determining the incremental borrowing rates. Leases with an initial noncancelable term of 12 months or less are not recorded on the balance sheet and related lease expense is recognized on a straight-line basis over the lease term. The Company has also elected to combine lease and non-lease components on all classes of leased assets, except for leased towing vessels, for which the Company estimates approximately 70% of the costs relate to service costs and other non-lease components. Variable lease costs relate primarily to real estate executory costs (i.e. taxes, insurance and maintenance).

Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year were as follows (in thousands):


	September 30, 2023			December 31, 2022
2023	$	9,909		$	41,227
2024		35,206			32,716
2025		26,222			24,807
2026		24,556			21,467
2027		22,453			19,253
Thereafter		97,780			95,582
Total lease payments		216,126			235,052
Less: imputed interest		(41,719	)		(56,468	)
Operating lease liabilities	$	174,407		$	178,584

The following table summarizes lease costs (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Operating lease cost	$	10,481		$	10,058		$	31,711		$	31,512
Variable lease cost		388			462			1,836			1,327
Short-term lease cost		8,167			7,567			23,597			18,296
Sublease income		(791	)		(69	)		(2,432	)		(206	)
	$	18,245		$	18,018		$	54,712		$	50,929

The following table summarizes other supplemental information about the Company’s operating leases:


	September 30, 2023			December 31, 2022
Weighted average discount rate		4.4	%		4.1	%
Weighted average remaining lease term	9 years			9 years

(7) Stock Award Plans

The compensation cost that has been charged against earnings for the Company’s stock award plans and the income tax benefit recognized in the statement of earnings for stock awards were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Compensation cost	$	3,398	$	2,893	$	12,310	$	11,448
Income tax benefit	$	747	$	581	$	2,994	$	2,881

During the nine months ended September 30, 2023, the Company granted 184,375 restricted stock units (“RSUs”) to selected officers and other key employees under the employee stock award plan, the majority of which vest ratably over five years and 31,526 shares of restricted stock to nonemployees directors of the Company under the director stock plan, the majority of which vest six months after the date of grant.

(8) Taxes on Income

At December 31, 2022, the Company had a federal income tax receivable of $70.4 million included in Accounts Receivable – Other on the balance sheet. During the first quarter of 2023, the Internal Revenue Service (“IRS”) communicated to the Company that it had completed its examination of the Company’s federal income tax returns for the years 2013 through 2020. In April 2023, the Company received its tax refund of $70.4 million plus accrued interest.

Earnings (loss) before taxes on income and details of the provision (benefit) for taxes on income were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Earnings (loss) before taxes on income:
United States	$	81,989		$	50,906		$	212,014		$	114,167
Foreign		(263	)		51			662			225
	$	81,726		$	50,957		$	212,676		$	114,392
Provision (benefit) for taxes on income:
Federal:
Current	$	(3	)	$	(6	)	$	(3	)	$	513
Deferred		16,083			10,043			44,282			23,764
State and local:
Current		2,479			1,015			5,056			2,313
Deferred		121			608			2,159			2,222
Foreign - current		42			53			239			144
	$	18,722		$	11,713		$	51,733		$	28,956

(9) Earnings Per Share

The following table presents the components of basic and diluted earnings per share (in thousands, except per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net earnings attributable to Kirby	$	62,964		$	39,091		$	161,029		$	84,982
Undistributed earnings allocated to restricted shares		(31	)		(18	)		(50	)		(27	)
Earnings available to Kirby common stockholders – basic		62,933			39,073			160,979			84,955
Undistributed earnings allocated to restricted shares		31			18			50			27
Undistributed earnings reallocated to restricted shares		(31	)		(18	)		(50	)		(27	)
Earnings available to Kirby common stockholders – diluted	$	62,933		$	39,073		$	160,979		$	84,955

Shares outstanding:
Weighted average common stock issued and outstanding		59,413			59,923			59,739			60,107
Weighted average unvested restricted stock		(30	)		(27	)		(18	)		(19	)
Weighted average common stock outstanding – basic		59,383			59,896			59,721			60,088
Dilutive effect of stock options and restricted stock units		363			286			312			281
Weighted average common stock outstanding – diluted		59,746			60,182			60,033			60,369

Net earnings per share attributable to Kirby common stockholders:
Basic	$	1.06		$	0.65		$	2.70		$	1.41
Diluted	$	1.05		$	0.65		$	2.68		$	1.41

Certain outstanding options to purchase approximately 33,000 and 396,000 shares of common stock were excluded in the computation of diluted earnings per share as of September 30, 2023 and 2022, respectively, as such stock options would have been antidilutive. Certain outstanding RSUs to convert to 11,000 shares of common stock were also excluded in the computation of diluted earnings per share as of September 30, 2022 as such RSUs would have been antidilutive. There were no antidilutive RSUs as of September 30, 2023.

(10) Inventories

The following table presents the details of inventories – net (in thousands):


	September 30, 2023		December 31, 2022
Finished goods	$	386,353	$	358,702
Work in process		119,153		103,146
	$	505,506	$	461,848

(11) Retirement Plans

The Company sponsors a defined benefit plan for certain of its inland vessel personnel and shore based tankermen. The plan benefits are based on an employee’s years of service and compensation. The plan assets consist primarily of equity and fixed income securities.

On April 12, 2017, the Company amended its pension plan to cease all benefit accruals for periods after May 31, 2017 for certain participants. Participants grandfathered and not impacted were those, as of the close of business on May 31, 2017, who either (a) had completed 15 years of pension service or (b) had attained age 50 and completed 10 years of pension service. Participants non-grandfathered are eligible to receive discretionary 401(k) plan contributions.

The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. The plan’s benefit obligations are based on a variety of demographic and economic assumptions, and the pension plan assets’ returns are subject to various risks, including market and interest rate risk, making an accurate prediction of the pension plan contribution difficult. Based on current pension plan assets and market conditions, the Company does not expect to make a contribution to the Kirby pension plan during 2023.

On February 14, 2018, with the acquisition of Higman Marine, Inc. and its affiliated companies (“Higman”), the Company assumed Higman’s pension plan for its inland vessel personnel and office staff. On March 27, 2018, the Company amended the Higman pension plan to close it to all new entrants and cease all benefit accruals for periods after May 15, 2018 for all participants. The Company made contributions of $8.0 million to the Higman pension plan during the nine months ended September 30, 2023. The Company expects to make additional contributions of $0.2 million during the remainder of 2023.

The Company sponsors an unfunded defined benefit health care plan that provides limited postretirement medical benefits to employees who meet minimum age and service requirements, and to eligible dependents. The plan is contributory, with retiree contributions adjusted annually. The plan eliminated coverage for future retirees as of December 31, 2011. The Company also has an unfunded defined benefit supplemental executive retirement plan (“SERP”) that was assumed in an acquisition in 1999. That plan ceased to accrue additional benefits effective January 1, 2000.

The components of net periodic benefit cost for the Company’s defined benefit plans were as follows (in thousands):


	Pension Benefits
	Pension Plans						SERP
	Three Months Ended September 30,						Three Months Ended September 30,
	2023			2022			2023		2022
Components of net periodic benefit cost:
Service cost	$	924		$	1,634		$	—	$	—
Interest cost		4,589			3,694			11		7
Expected return on plan assets		(5,727	)		(7,099	)		—		—
Amortization of actuarial loss		—			6			6		7
Net periodic benefit cost	$	(214	)	$	(1,765	)	$	17	$	14


	Pension Benefits
	Pension Plans						SERP
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023		2022
Components of net periodic benefit cost:
Service cost	$	2,772		$	4,903		$	—	$	—
Interest cost		13,767			11,056			32		22
Expected return on plan assets		(17,182	)		(21,395	)		—		—
Amortization of actuarial loss		—			248			18		22
Net periodic benefit cost	$	(643	)	$	(5,188	)	$	50	$	44

The components of net periodic benefit cost for the Company’s postretirement benefit plan were as follows (in thousands):


	Other Postretirement Benefits
	Postretirement Welfare Plan
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Components of net periodic benefit cost:
Interest cost	$	6		$	5		$	17		$	13
Amortization of actuarial gain		(86	)		(98	)		(258	)		(295	)
Net periodic benefit cost	$	(80	)	$	(93	)	$	(241	)	$	(282	)

(12) Other Comprehensive Income

The Company’s changes in other comprehensive income were as follows (in thousands):


	Three Months Ended September 30,
	2023								2022
	Gross Amount			Income Tax Benefit		Net Amount			Gross Amount			Income Tax (Provision) Benefit			Net Amount
Pension and postretirement benefits (a):
Amortization of net actuarial gain	$	(80	)	$	18	$	(62	)	$	(85	)	$	21		$	(64	)
Actuarial gains		1			—		1			12,265			(3,091	)		9,174
Foreign currency translation		143			—		143			(608	)		—			(608	)
Total	$	64		$	18	$	82		$	11,572		$	(3,070	)	$	8,502


	Nine Months Ended September 30,
	2023									2022
	Gross Amount			Income Tax (Provision) Benefit			Net Amount			Gross Amount			Income Tax (Provision) Benefit			Net Amount
Pension and postretirement benefits (a):
Amortization of net actuarial gain	$	(240	)	$	58		$	(182	)	$	(25	)	$	4		$	(21	)
Actuarial gains		1,778			(444	)		1,334			17,737			(4,462	)		13,275
Foreign currency translation		1,073			—			1,073			(743	)		—			(743	)
Total	$	2,611		$	(386	)	$	2,225		$	16,969		$	(4,458	)	$	12,511

(a) Actuarial gains are amortized into other income (expense). (See Note 11, Retirement Plans)

(13) Contingencies and Commitments

On October 13, 2016, the tug Nathan E. Stewart and barge DBL 55, an articulated tank barge and tugboat unit (“ATB”) owned and operated by Kirby Offshore Marine, LLC, a wholly owned subsidiary of the Company, ran aground at the entrance to Seaforth Channel on Atholone Island, British Columbia. The grounding resulted in a breach of a portion of the Nathan E. Stewart’s fuel tanks causing a discharge of diesel fuel into the water. The United States Coast Guard and the National Transportation Safety Board designated the Company as a party of interest in their investigation as to the cause of the incident. The Canadian authorities including Transport Canada and the Canadian Transportation Safety Board investigated the cause of the incident. On October 10, 2018, the Heiltsuk First Nation filed a civil action in the British Columbia Supreme Court against a subsidiary of the Company, the master and pilot of the tug, the vessels and the Canadian government seeking unquantified damages as a result of the incident. On May 1, 2019, the Company filed a limitation action in the Federal Court of Canada seeking limitation of liability relating to the incident as provided under admiralty law. The Heiltsuk First Nation’s civil claim has been consolidated into the Federal Court limitation action as of July 26, 2019 and it is expected that the Federal Court of Canada will decide all claims against the Company. The Company is unable to estimate the potential exposure in the civil proceeding. The Company has various insurance policies covering liabilities including pollution, property, marine and general liability and believes that it has satisfactory insurance coverage for the cost of cleanup and salvage operations as well as other potential liabilities arising from the incident. The Company believes its accrual of such estimated liability is adequate for the incident and does not expect the incident to have a material adverse effect on its business or financial condition.

In addition, the Company is involved in various legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations, or cash flows. Management believes its accrual of such estimated liability is adequate and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies.

The Company has issued guaranties or obtained standby letters of credit and performance bonds supporting performance by the Company and its subsidiaries of contractual or contingent legal obligations of the Company and its subsidiaries incurred in the ordinary course of business. The aggregate notional value of these instruments is $27.6 million at September 30, 2023, including $13.0 million in letters of credit and $14.6 million in performance bonds. All of these instruments have an expiration date within two years. The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur regarding these instruments.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. Such statements involve risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue,” or the negative thereof or other variations thereon or comparable terminology. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornados, COVID-19 or other pandemics, marine accidents, lock delays, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Item 1A-Risk Factors found in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2022. Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements. For purposes of Management’s Discussion, all net earnings per share attributable to Kirby common stockholders are “diluted earnings per share.”

Overview

The Company is the nation’s largest domestic tank barge operator, transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts. The Company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. Through KDS, the Company provides after-market service and parts for engines, transmissions, reduction gears and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers.

The following table summarizes key operating results of the Company (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total revenues	$	764,772	$	745,843	$	2,292,464	$	2,054,589
Net earnings attributable to Kirby	$	62,964	$	39,091	$	161,029	$	84,982
Net earnings per share attributable to Kirby common stockholders – diluted	$	1.05	$	0.65	$	2.68	$	1.41
Net cash provided by operating activities					$	324,227	$	161,185
Capital expenditures					$	274,963	$	120,263

The 2023 first quarter included $3.0 million before taxes, $2.4 million after taxes, or $0.04 per share of costs related to strategic review and shareholder engagement and $2.7 million before taxes, $2.2 million after taxes, or $0.04 per share of other income associated with the interest on the refund from the IRS. The 2022 second quarter included $1.5 million before taxes, $1.3 million after taxes, or $0.02 per share of severance expense.

Cash provided by operating activities for the 2023 first nine months increased in comparison to the 2022 first nine months primarily due to higher business activity levels and the receipt of the IRS refund. For the 2023 first nine months, capital expenditures of $275.0 million included $193.0 million in KMT and $82.0 million in KDS and corporate, each more fully described under Cash Flow and Capital Expenditures below.

The Company projects that capital expenditures for 2023 will be in the $330 million to $380 million range. Approximately $240 million is primarily for maintenance capital and improvements to existing marine equipment, including ballast water treatment systems on some coastal vessels, and facility improvements. The 2023 construction program also consists of growth capital of up to approximately $40 million for the construction of specialized inland equipment, and of up to approximately $100 million for new electric fracturing equipment.

The Company’s debt-to-capitalization ratio decreased to 25.3% at September 30, 2023 from 26.2% at December 31, 2022, primarily due an increase in total equity, primarily from net earnings attributable to Kirby of $161.0 million, and a reduction of debt outstanding of $11.8 million, partially offset by treasury stock purchases of $60.9 million. The Company’s debt outstanding as of September 30, 2023 and December 31, 2022 is detailed in Long-Term Financing below.

Marine Transportation

For the 2023 third quarter and first nine months, KMT generated 56% and 55%, respectively, of the Company’s revenues compared to 58% for both the 2022 third quarter and first nine months. The segment’s customers include many of the major petrochemical and refining companies that operate in the United States. Products transported include intermediate materials used to produce many of the end products used widely by businesses and consumers — plastics, fiber, paints, detergents, oil additives and paper, among others, as well as residual fuel oil, ship bunkers, asphalt, gasoline, diesel fuel, heating oil, crude oil, natural gas condensate, and agricultural chemicals. Consequently, KMT is directly affected by the volumes produced by the Company’s petroleum, petrochemical, and refining customer base.

The following table summarizes the Company’s marine transportation fleet:


	September 30,
	2023		2022
Inland tank barges:
Owned		1,037		997
Leased		34		38
Total		1,071		1,035
Barrel capacity (in millions)		23.6		23.0

Active inland towboats (quarter average):
Owned		219		215
Chartered		55		59
Total		274		274

Coastal tank barges:
Owned		28		28
Leased		-		1
Total		28		29
Barrel capacity (in millions)		2.9		3.0

Coastal tugboats:
Owned		24		24
Chartered		1		3
Total		25		27

Offshore dry-bulk cargo barges (owned)		4		4
Offshore tugboats and docking tugboat (owned and chartered)		5		5

The Company also owns shifting operations and fleeting facilities for dry cargo barges and tank barges on the Houston Ship Channel and in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana and a shipyard for building towboats and performing routine maintenance near the Houston Ship Channel. Further, the Company owns a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.

During the 2023 first nine months, the Company brought back into service 20 inland tank barges, purchased 23 inland tank barges, purchased three newly constructed inland specialty tank barges, and retired 12 inland tank barges. The net result was an increase of 34 inland tank barges and approximately 0.5 million barrels of capacity during the 2023 first nine months.

KMT revenues for the 2023 third quarter and first nine months decreased 1% and increased 6%, respectively, and operating income increased 52% and 91%, respectively, compared to the 2022 third quarter and first nine months. The decrease in revenues for the 2023 third quarter was primarily due to lower tank barge utilization as a result of Illinois River lock closures and several refinery outages, as well as lower fuel rebills in the inland market. The increase in revenues for the first nine months was primarily due to higher term and spot pricing and increased tank barge utilization in the inland and coastal markets. The 2023 and 2022 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, flooding on the Mississippi River, and various lock closures along the Gulf Intracoastal Waterway resulting in higher delay days. The 2022 first quarter was also impacted by the COVID-19 Omicron variant as increased cases among the Company’s mariners led to crewing challenges, lost revenue and increased operating costs. For both the 2023 third quarter and first nine months, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues. For the 2022 third quarter and first nine months, the inland tank barge fleet contributed 80% and 79%, respectively, and the coastal fleet contributed 20% and 21%, respectively, of KMT revenues.

Inland tank barge utilization levels averaged in the low to mid-90% range during the 2023 first quarter, the low 90% range during the 2023 second quarter and the high 80% range during the 2023 third quarter compared to the mid-80% range during the 2022 first quarter and the low 90% range during both the 2022 second and third quarters. The 2023 first nine months reflected increasing activity levels as a result of higher refinery and petrochemical plant utilization, partially offset by Illinois River lock closures and several refinery outages during the 2023 third quarter while the 2022 first nine months were impacted by the COVID-19 Omicron variant as increased cases among the Company’s mariners led to crewing challenges.

Coastal tank barge utilization levels averaged in the mid to high 90% range during both the 2023 first and second quarters and the mid-90% range during the 2023 third quarter compared to the low 90% range during both the 2022 first and second quarters and the low to mid-90% range during the 2022 third quarter. The increase in coastal tank barge utilization during 2023 was primarily due to continued improvements in market and customer demand.

During both the 2023 third quarter and first nine months, approximately 55% of KMT inland revenues were under term contracts and 45% were spot contract revenues. During both the 2022 third quarter and first nine months, approximately 60% of KMT inland revenues were under term contracts and 40% were spot contract revenues. Inland time charters during the 2023 third quarter and first nine months represented approximately 66% and 63%, respectively, of inland revenues under term contracts compared with 56% and 57% in the 2022 third quarter and first nine months, respectively. During the 2023 third quarter and first nine months, approximately 90% and 85%, respectively, of KMT coastal revenues were under term contracts. During the 2023 third quarter and first nine months, approximately 10% and 15%, respectively, of KMT coastal revenues were under spot contracts. During the 2022 third quarter and first nine months, approximately 65% and 75%, respectively, of KMT coastal revenues were under term contracts and 35% and 25%, respectively, were spot contracts. Coastal time charters represented approximately 90% of coastal revenues under term contracts during both the 2023 and 2022 third quarters and first nine months. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months.

The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2023 compared to contracts renewed during the corresponding quarter of 2022:


	Three Months Ended
	March 31, 2023	June 30, 2023	September 30, 2023
Inland market:
Term increase	10% – 12%	10% – 12%	7% – 9%
Spot increase	23% – 26%	26% – 29%	14% – 16%
Coastal market (a):
Term increase	10% – 12%	16% – 18%	10% – 12%
Spot increase	20% – 23%	25% – 28%	31% – 33%

(a)

Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced.

Effective January 1, 2023, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 9%, excluding fuel.

KMT operating margin was 14.8% and 13.5% for the 2023 third quarter and first nine months, respectively, compared to 9.6% and 7.5% for the 2022 third quarter and first nine months, respectively.

Distribution and Services

KDS sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, manufactures and remanufactures oilfield service equipment, including pressure pumping units, and manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electric distribution and control equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers.

For the 2023 third quarter and first nine months, KDS generated 44% and 45%, respectively, of the Company’s revenues, of which 80% and 79%, respectively, were generated from service and parts and 20% and 21%, respectively, from manufacturing. The results of KDS are largely influenced by the economic cycles of the oil and gas, marine, power generation, on-highway, and other related industrial markets.

KDS revenues for the 2023 third quarter and first nine months increased 7% and 19%, respectively, and operating income increased 49% and 72%, respectively, compared with the 2022 third quarter and first nine months. In the commercial and industrial market, the increases for the 2023 third quarter and first nine months were primarily attributable to strong economic activity across the United States which resulted in higher business levels in the marine and on-highway businesses. Increased product sales in Thermo King also contributed favorably to the 2023 third quarter and first nine months results. These increases were partially offset by continuing supply chain constraints and delays. For the 2023 third quarter and first nine months, the commercial and industrial market contributed 63% and 57%, respectively, of KDS revenues.

In the oil and gas market, revenues and operating income improved compared to the 2022 third quarter and first nine months due to higher oilfield activity which resulted in increased demand for new transmissions and parts in the distribution business. Although the manufacturing business was impacted by ongoing supply chain delays, the business continued to experience increased orders and deliveries of new environmentally friendly pressure pumping equipment and power generation equipment for electric fracturing. For the 2023 third quarter and first nine months, the oil and gas market contributed 37% and 43%, respectively, of KDS revenues.

KDS operating margin was 9.9% and 8.4% for the 2023 third quarter and first nine months, respectively, compared to 7.1% and 5.8% for the 2022 third quarter and first nine months, respectively.

Outlook

Overall, the Company expects both KMT and KDS to deliver improved financial results in 2023 and going into 2024. In KMT, refinery and petrochemical activity levels remain high. This is favorable for pricing, which continues to increase, and for the Company’s barge utilization, which is strong in both inland and coastal markets. In KDS, demand for the Company’s products and services continues to grow despite ongoing supply chain constraints and delays which could impact the Company’s product deliveries. The Company remains mindful of the ever-changing economic landscape related to the impact of higher interest rates, and possible recessionary headwinds as it moves into 2024.

In the inland marine transportation market, the Company anticipates continued gradual upward movement in pricing for the remainder of 2023 and into 2024 as favorable conditions are expected to continue, driven by the combination of high refinery and petrochemical plant utilization and minimal new barge construction across the industry. As a result, the Company expects further pricing improvements in the spot market, which currently represents approximately 45% of inland revenues. Term contracts are also expected to continue to reset higher as a result of improved market conditions. These price increases are also critical in helping address the impact of persistent inflationary pressures in some areas of the Company’s business. The Company expects these strengths to be partially offset in the 2023 fourth quarter by increasing delay days due to normal seasonal weather conditions, lock delays, and low water conditions on the Mississippi River. In coastal marine, revenues and operating margins are impacted this year by an approximate doubling of planned shipyard maintenance days including ballast water treatment installations on certain vessels. The Company expects steady customer demand through the balance of the year with barge utilization in the low to mid-90% range. Rates are expected to continue improving as the availability of equipment is reduced across the industry due to improved economic conditions and a heavier than normal maintenance cycle. For the fourth quarter, coastal revenues are expected to increase modestly compared to 2023 third quarter as the Company continues to progress through major shipyards with the timing of some possibly shifting into early 2024.

KDS results are largely influenced by the cycles of the oil and gas, marine, power generation, on-highway and other related industrial markets. Stable demand in commercial and industrial and favorable oilfield fundamentals are expected to continue throughout the remainder of 2023 and into 2024. In commercial and industrial, steady markets are expected to remain in the fourth quarter with incremental activity in power generation, marine repair, and on-highway. This activity is expected to be partially offset by lower rental equipment activity as the hurricane season winds down. In the oil and gas market, despite the near-term volatility in commodity prices and rig counts, the Company expects continued demand for manufacturing as well as for OEM products, parts, and services. Within manufacturing, the Company expects demand for environmentally friendly pressure pumping and electric fracturing power generation equipment to remain strong, with new orders and increased deliveries of new equipment for the remainder of 2023 and into 2024. Supply chain issues and long lead times are expected to persist in the near-term, contributing to some volatility with the potential for deliveries of some products to shift into 2024.

Acquisitions

The Company purchased four inland tank barges from a leasing company for $0.5 million in cash during the 2023 third quarter. The Company had been leasing the barges prior to the purchase. Financing of the equipment acquisition was through borrowings under the Company’s revolving credit facility.

On March 31, 2022, the Company paid $3.9 million in cash to purchase assets of a gearbox repair company in KDS. Financing of the purchases was through cash provided by operating activities.

Results of Operations

The following table sets forth the Company’s KMT and KDS revenues and the percentage of each to total revenues (dollars in thousands):


	Three Months Ended September 30,										Nine Months Ended September 30,
	2023		%			2022		%			2023		%			2022		%
Marine transportation	$	429,885		56	%	$	433,040		58	%	$	1,269,342		55	%	$	1,194,231		58	%
Distribution and services		334,887		44			312,803		42			1,023,122		45			860,358		42
	$	764,772		100	%	$	745,843		100	%	$	2,292,464		100	%	$	2,054,589		100	%

Marine Transportation

The following table sets forth KMT revenues, costs and expenses, operating income, and operating margin (dollars in thousands):


	Three Months Ended September 30,									Nine Months Ended September 30,
	2023			2022			% Change			2023			2022			% Change
Marine transportation revenues	$	429,885		$	433,040			(1	)%	$	1,269,342		$	1,194,231			6	%

Costs and expenses:
Costs of sales and operating expenses		278,979			306,817			(9	)		836,620			855,519			(2	)
Selling, general and administrative		33,000			32,794			1			101,592			93,424			9
Taxes, other than on income		7,783			7,346			6			23,052			23,156			—
Depreciation and amortization		46,656			44,370			5			137,324			132,667			4
		366,418			391,327			(6	)		1,098,588			1,104,766			(1	)
Operating income	$	63,467		$	41,713			52	%	$	170,754		$	89,465			91	%
Operating margins		14.8	%		9.6	%					13.5	%		7.5	%

Marine Transportation Revenues

The following table shows the marine transportation markets serviced by the Company, KMT revenue distribution, products moved and the drivers of the demand for the products the Company transports:


Markets Serviced	2023 Third Quarter Revenue Distribution	2023 Nine Months Revenue Distribution	Products Moved	Drivers
Petrochemicals	51%	51%	Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene	Consumer non-durables – 70%, Consumer durables – 30%
Black Oil	26%	26%	Residual Fuel Oil, Coker Feedstock, Vacuum Gas Oil, Asphalt, Carbon Black Feedstock, Crude Oil, Natural Gas Condensate, Ship Bunkers	Fuel for Power Plants and Ships, Feedstock for Refineries, Road Construction
Refined Petroleum Products	20%	20%	Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol	Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization
Agricultural Chemicals	3%	3%	Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia	Corn, Cotton and Wheat Production, Chemical Feedstock Usage

The petrochemical market, which is the Company’s largest market, contributed 51% of KMT revenues for both the 2023 third quarter and first nine months, reflecting increased rates, volumes and utilization from Gulf Coast petrochemical plants as a result of improved economic conditions and a reduced supply of barges across the industry due to a heavier than normal maintenance cycle as compared to the 2022 first nine months.

The black oil market, which contributed 26% of KMT revenues for both the 2023 third quarter and first nine months, reflected improved demand as refinery utilization and production levels of refined petroleum products and fuel oils increased. During the 2023 first nine months, the Company transported crude oil and natural gas condensate produced from the Permian Basin and the Eagle Ford shale formation in Texas, both along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast and Canadian and Bakken crude downriver from the Midwest to the Gulf Coast.

The refined petroleum products market, which contributed 20% of KMT revenues for both the 2023 third quarter and first nine months, reflected increased volumes in the inland market with improved refinery utilization and product levels.

The agricultural chemical market, which contributed 3% of KMT revenues for both the 2023 third quarter and first nine months, reflected improved demand for transportation of both domestically produced and imported products.

For the 2023 third quarter, inland operations incurred 1,548 delay days, 24% more than the 1,253 delay days that occurred during the 2022 third quarter. For the 2023 first nine months, inland operations incurred 7,990 delay days, 12% more than the 7,152 delays days that occurred during the 2022 first nine months. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions, or other navigational factors. Delay days reflected Illinois River lock closures during the 2023 third quarter and poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays on the Mississippi and Illinois rivers during the 2023 and 2022 first quarters.

The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2023 compared to contracts renewed during the corresponding quarter of 2022:


	Three Months Ended
	March 31, 2023	June 30, 2023	September 30, 2023
Inland market:
Term increase	10% – 12%	10% – 12%	7% – 9%
Spot increase	23% – 26%	26% – 29%	14% – 16%
Coastal market (a):
Term increase	10% – 12%	16% – 18%	10% – 12%
Spot increase	20% – 23%	25% – 28%	31% – 33%

(a)

Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced.

Marine Transportation Costs and Expenses

Costs and expenses for the 2023 third quarter and first nine months decreased 6% and 1%, respectively, compared to the 2022 third quarter and first nine months. Costs of sales and operating expenses for the 2023 third quarter and first nine months decreased 9% and 2%, respectively, compared with the 2022 third quarter and first nine months. The decrease during the 2023 third quarter and first nine months reflected lower fuel costs, partially offset by improved business activity levels and inflationary cost pressures. The 2022 first quarter was negatively impacted by incremental costs associated with the COVID-19 Omicron variant.

The inland marine transportation fleet operated an average of 274 towboats during the 2023 third quarter, of which an average of 55 were chartered, compared to 274 during the 2022 third quarter, of which an average of 59 were chartered. The Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements, taking into account variability in demand or anticipated demand, addition or removal of tank barges from the fleet, chartered towboat availability, and weather or water conditions. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements.

During the 2023 third quarter, inland operations consumed 11.6 million gallons of diesel fuel compared to 12.5 million gallons consumed during the 2022 third quarter. The average price per gallon of diesel fuel consumed during the 2023 third quarter was $2.71 per gallon compared with $4.24 per gallon for the 2022 third quarter. During the 2023 first nine months, inland operations consumed 35.9 million gallons of diesel fuel compared to 36.7 million gallons consumed during the 2022 first nine months. The average price per gallon of diesel fuel consumed during the 2023 first nine months was $2.97 per gallon compared with $3.60 per gallon for the 2022 first nine months. Fuel escalation and de-escalation clauses are typically included in term contracts and are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; however, there is generally a 30 to 120 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel.

Selling, general and administrative expenses for the 2023 third quarter and first nine months increased 1% and 9%, respectively, compared to the 2022 third quarter and first nine months due to higher business activity levels and inflationary cost pressures. The increase for the 2023 third quarter and first nine months was also due to compensation increases, partially offset by lower legal costs as compared to the 2022 third quarter.

Marine Transportation Operating Income and Operating Margin

KMT operating income for the 2023 third quarter and first nine months increased 52% and 91%, respectively, compared with the 2022 third quarter and first nine months. The 2023 third quarter operating margin was 14.8% compared with 9.6% for the 2022 third quarter. The 2023 first nine months operating margin was 13.5% compared with 7.5% for the 2022 first nine months. The increases in operating income and operating margin were primarily due to higher term and spot contract pricing in the inland and coastal markets as a result of improving business activity levels, high utilization and a reduced supply of barges across the industry due to a heavier than normal maintenance cycle. The 2022 first quarter was negatively impacted by the COVID-19 Omicron variant as increased cases among the Company’s mariners led to crewing challenges, lost revenue and increased operating costs.

Distribution and Services

The following table sets forth KDS revenues, costs and expenses, operating income, and operating margin (dollars in thousands):


	Three Months Ended September 30,									Nine Months Ended September 30,
	2023			2022			% Change			2023			2022			% Change
Distribution and services revenues	$	334,887		$	312,803			7	%	$	1,023,122		$	860,358			19	%

Costs and expenses:
Costs of sales and operating expenses		251,163			245,223			2			779,684			670,938			16
Selling, general and administrative		43,701			39,289			11			138,584			121,864			14
Taxes, other than on income		1,812			1,749			4			5,370			5,067			6
Depreciation and amortization		5,017			4,274			17			13,656			12,513			9
		301,693			290,535			4			937,294			810,382			16
Operating income	$	33,194		$	22,268			49	%	$	85,828		$	49,976			72	%
Operating margins		9.9	%		7.1	%					8.4	%		5.8	%

Distribution and Services Revenues

The following table shows the markets serviced by KDS, the revenue distribution, and the customers for each market:


Markets Serviced	2023 Third Quarter Revenue Distribution	2023 Nine Months Revenue Distribution	Customers
Commercial and Industrial	63%	57%	Inland River Carriers — Dry and Liquid, Offshore Towing — Dry and Liquid, Offshore Oilfield Services — Drilling Rigs & Supply Boats, Harbor Towing, Dredging, Great Lakes Ore Carriers, Pleasure Crafts, On and Off-Highway Transportation, Power Generation, Standby Power Generation, Pumping Stations, Mining
Oil and Gas	37%	43%	Oilfield Services, Oil and Gas Operators and Producers

KDS revenues for the 2023 third quarter and first nine months increased 7% and 19%, respectively, compared to the 2022 third quarter and first nine months. In the commercial and industrial market, the increase for the 2023 third quarter and first nine months was primarily attributable to strong economic activity across the United States which resulted in higher business levels in the marine and on-highway businesses. Increased product sales in Thermo King also contributed favorably to the 2023 third quarter and first nine months results. These increases were partially offset by continuing supply chain constraints and delays. For the 2023 third quarter and first nine months, the commercial and industrial market contributed 63% and 57%, respectively, of KDS revenues.

In the oil and gas market, revenues improved compared to the 2022 third quarter and first nine months due to higher oilfield activity which resulted in increased demand for new transmissions and parts in the distribution business. Although the manufacturing business was impacted by ongoing supply chain delays, the business continued to experience increased orders and deliveries of new environmentally friendly pressure pumping equipment and power generation equipment for electric fracturing. For the 2023 third quarter and first nine months, the oil and gas market contributed 37% and 43%, respectively, of KDS revenues.

Distribution and Services Costs and Expenses

Costs and expenses for the 2023 third quarter and first nine months increased 4% and 16%, respectively, compared with the 2022 third quarter and first nine months. Costs of sales and operating expenses for the 2023 third quarter and first nine months increased 2% and 16%, respectively, compared with the 2022 third quarter and first nine months, reflecting continued inflationary cost pressures, higher demand in the marine and on-highway businesses in commercial and industrial markets, and increased demand in the oil and gas market as a result of higher oilfield activity levels.

Selling, general and administrative expenses for the 2023 third quarter and first nine months increased 11% and 14%, respectively, compared to the 2022 third quarter and first nine months, primarily due to continued inflationary cost pressures, higher business activity and compensation increases.

Distribution and Services Operating Income and Operating Margin

KDS operating income for the 2023 third quarter and first nine months increased 49% and 72%, respectively, compared with the 2022 third quarter and first nine months. The 2023 third quarter operating margin was 9.9% compared to 7.1% for the 2022 third quarter. The 2023 first nine months operating margin was 8.4% compared to 5.8% for the 2022 first nine months. The results reflect increased business levels in both the commercial and industrial and oil and gas markets, as well as cost management initiatives.

General Corporate Expenses

General corporate expenses for the 2023 first nine months increased compared to the 2022 first nine months primarily due to higher legal and insurance costs. The 2023 first quarter also included costs related to strategic review and shareholder engagement.

Gain on Disposition of Assets

The Company reported a net gain on disposition of assets of $1.5 million for the 2023 third quarter and $0.4 million for the 2022 third quarter. The Company reported a net gain on disposition of assets of $4.2 million for the 2023 first nine months and $8.0 million for the 2022 first nine months. The net gains were primarily from sales of marine transportation equipment.

Other Income and Expenses

The following table sets forth other income, noncontrolling interests, and interest expense (dollars in thousands):


	Three Months Ended September 30,									Nine Months Ended September 30,
	2023			2022			% Change			2023			2022			% Change
Other income	$	1,589		$	3,805			(58	)%	$	9,296		$	11,853			(22	)%
Noncontrolling interests	$	(40	)	$	(153	)		(74	)%	$	86		$	(454	)		(119	)%
Interest expense	$	(13,386	)	$	(11,755	)		14	%	$	(38,893	)	$	(32,598	)		19	%

Other Income

Other income for the 2023 and 2022 third quarters includes income of $1.2 million and $3.5 million, respectively, and the 2023 and 2022 first nine months includes income of $3.6 million and $10.3 million, respectively, for all components of net benefit costs except the service cost component related to the Company’s defined benefit plans. The 2023 first quarter also includes interest income associated with the IRS refund.

Interest Expense

The following table sets forth average debt and average interest rate (dollars in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Average debt	$	1,071,262		$	1,228,759		$	1,099,058		$	1,185,426
Average interest rate		4.9	%		3.7	%		4.7	%		3.6	%

Interest expense for the 2023 third quarter and first nine months increased 14% and 19%, respectively, compared with the 2022 third quarter and first nine months, primarily due to a higher average interest rate partially offset by lower average debt. There was no capitalized interest excluded from interest expense during the 2023 or 2022 first nine months.

Financial Condition, Capital Resources and Liquidity

Balance Sheets

The following table sets forth the significant components of the balance sheets (dollars in thousands):


	September 30, 2023		December 31, 2022		% Change
Assets:
Current assets	$	1,195,571	$	1,211,759		(1	)%
Property and equipment, net		3,782,124		3,633,462		4
Operating lease right-of-use assets		155,098		154,507		—
Goodwill		438,748		438,748		—
Other intangibles, net		45,058		51,463		(12	)
Other assets		66,281		64,985		2
	$	5,682,880	$	5,554,924		2	%

Liabilities and stockholders’ equity:
Current liabilities	$	635,852	$	642,197		(1	)%
Long-term debt, net – less current portion		1,058,248		1,076,326		(2	)
Deferred income taxes		672,711		625,884		7
Operating lease liabilities – less current portion		142,237		142,140		—
Other long-term liabilities		15,750		23,209		(32	)
Total equity		3,158,082		3,045,168		4
	$	5,682,880	$	5,554,924		2	%

Current assets as of September 30, 2023 decreased 1% compared with December 31, 2022. Trade accounts receivable increased 6%, primarily due to increased business activity levels in both KMT and KDS. Other receivables decreased 53% as the Company received its tax refund of $70.4 million plus accrued interest in April 2023. Inventories increased by 9% due to higher activity and the impact of ongoing supply chain delays in KDS resulting in buildup for projects that will be delivered later in 2023 and into 2024. Prepaid expenses and other current assets increased 11% primarily due to the increase in the price of diesel fuel purchased in September 2023 and the timing of payments of insurance premiums.

Property and equipment, net of accumulated depreciation, at September 30, 2023 increased 4% compared with December 31, 2022. The increase reflected $277.3 million of capital additions (including an increase in accrued capital expenditures of $2.3 million), and $37.5 million of acquisitions of barge equipment, partially offset by $150.4 million of depreciation expense and $15.8 million of property disposals more fully described under Cash Flow and Capital Expenditures below.

Other intangibles, net, as of September 30, 2023 decreased 12% compared with December 31, 2022, primarily due to amortization during the 2023 first nine months.

Current liabilities as of September 30, 2023 decreased 1% compared with December 31, 2022. Accounts payable decreased 7% primarily due to timing of inventory purchases, partially offset by higher business activity levels. Deferred revenue increased 13% primarily due to deposits on equipment expected to be shipped later in 2023 and 2024 in KDS.

Long-term debt, net – less current portion, as of September 30, 2023 decreased 2% compared with December 31, 2022, primarily reflecting the maturity of the 3.29% senior notes due February 27, 2023, offset by borrowings under the 3.46% and 3.51% senior notes due January 19, 2033 and the 2027 Revolving Credit Facility.

Deferred income taxes as of September 30, 2023 increased 7% compared with December 31, 2022, primarily reflecting the deferred tax provision of $46.4 million.

Other long-term liabilities as of September 30, 2023 decreased 32% compared with December 31, 2022, primarily due to a decrease in pension liabilities as a result of pension contributions of $7.6 million during the 2023 first nine months and amortization of intangible liabilities.

Total equity as of September 30, 2023 increased 4% compared with December 31, 2022. The increase was primarily due to the net earnings attributable to Kirby of $161.0 million, amortization of share-based compensation of $12.3 million, and stock option exercises of $3.4 million, partially offset by treasury stock purchases of $60.9 million and tax withholdings of $3.6 million on RSU vestings.

Long-Term Financing

The following table summarizes the Company’s outstanding debt (in thousands):


	September 30, 2023			December 31, 2022
Long-term debt, including current portion:
Revolving Credit Facility due July 29, 2027 (a)	$	94,000		$	—
Term Loan due July 29, 2027 (a)		170,000			170,000
3.29% senior notes due February 27, 2023		—			350,000
4.2% senior notes due March 1, 2028		500,000			500,000
3.46% senior notes due January 19, 2033		60,000			60,000
3.51% senior notes due January 19, 2033		240,000			—
Credit line due June 30, 2024		—			—
Bank notes payable		9,608			3,292
		1,073,608			1,083,292
Unamortized debt discounts and issuance costs (b)		(5,752	)		(3,674	)
	$	1,067,856		$	1,079,618

(a)

Variable interest rate of 6.8% at September 30, 2023.

(b)

Excludes $1.8 million attributable to the 2027 Revolving Credit Facility included in other assets at December 31, 2022.

At the beginning of 2022, the Company had in place its 2024 Credit Agreement with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, that allowed for an $850 million 2024 Revolving Credit Facility and a 2024 Term Loan with a maturity date of March 27, 2024. The 2024 Term Loan was prepayable, in whole or in part, without penalty.

On July 29, 2022, the Company entered into the 2027 Credit Agreement with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank that allows for a $500 million 2027 Revolving Credit Facility and a $250 million 2027 Term Loan with a maturity date of July 29, 2027. The 2027 Credit Agreement replaced the 2024 Credit Agreement. In conjunction with entering into the 2027 Credit Agreement, on July 29, 2022, the Company borrowed $35 million under the 2027 Revolving Credit Facility and $250 million under the 2027 Term Loan to repay borrowings under the 2024 Term Loan. In the fourth quarter of 2022, the Company repaid $80.0 million under the 2027 Term Loan prior to scheduled maturities. As a result, no repayments are required until June 30, 2025. Outstanding letters of credit under the 2027 Revolving Credit Facility were $0.1 million and available borrowing capacity was $405.9 million as of September 30, 2023.

The 2027 Term Loan is repayable in quarterly installments, with no repayments until June 30, 2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable upon maturity, assuming no prepayment. The 2027 Term Loan is prepayable, in whole or in part, without penalty. The 2027 Credit Agreement provides for a variable interest rate based on the SOFR or a base rate calculated with reference to the prime rate quoted by The Wall Street Journal, the Federal Reserve Bank of New York Rate plus 0.5%, or the Alternate Base Rate. The interest rate varies with the Company’s credit rating and is currently 137.5 basis points over SOFR or 37.5 basis points over the Alternate Base Rate. The 2027 Credit Agreement contains certain financial covenants including an interest coverage ratio and debt-to-capitalization ratio. In addition to financial covenants, the 2027 Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates, and changes in lines of business. The 2027 Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness, among other events. Borrowings under the 2027 Credit Agreement may be used for general corporate purposes including acquisitions. The 2027 Revolving Credit Facility includes a $25 million commitment which may be used for standby letters of credit.

On February 3, 2022, the Company entered into a note purchase agreement for the 2033 Notes with a group of institutional investors, consisting of $60 million Series A Notes and $240 million Series B Notes, each due January 19, 2033. The Series A Notes were issued on October 20, 2022, and the Series B Notes were issued on January 19, 2023. No principal payments will be required until maturity. Beginning in 2023, interest payments of $5.3 million will be due semi-annually on January 19 and July 19 of each year, with the exception of the first payment on January 19, 2023, which was $0.5 million. The 2033 Notes are unsecured and rank equally in right of payment with the Company's other unsecured senior indebtedness. The 2033 Notes contain certain covenants on the part of the Company, including an interest coverage covenant, a debt-to-capitalization covenant, and covenants relating to liens, asset sales and mergers, among others. The 2033 Notes also specify certain events of default, upon the occurrence of which the maturity of the notes may be accelerated, including failure to pay principal and interest, violation of covenants or default on other indebtedness, among others. The 2023 Notes were repaid using a combination of the proceeds from the issuance of the 2033 Notes and availability under the 2027 Revolving Credit Facility.

The Company has a $10 million Credit Line with Bank of America for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2024. Outstanding letters of credit under the $10 million credit line were $7.3 million and available borrowing capacity was $2.7 million as of September 30, 2023.

As of September 30, 2023, the Company was in compliance with all covenants under its debt instruments. For additional information about the Company’s debt instruments, see Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Cash Flow and Capital Expenditures

The Company generated positive operating cash flows during the 2023 first nine months with net cash provided by operating activities of $324.2 million compared with $161.2 million for the 2022 first nine months, a 101% increase. Higher revenues and operating income in KMT and KDS and the receipt of the IRS refund of $70.4 million plus accrued interest in April 2023 more than offset an increase in trade accounts receivable, primarily due to higher revenues and timing of collections, and increased inventory levels in KDS due to higher activity and managing supply chain challenges during the 2023 first nine months. Increases in KMT revenues and operating income were driven by higher term and spot contract pricing and increased barge utilization in the inland and coastal markets during the 2023 first nine months. During the 2023 and 2022 third quarters and first nine months, the Company generated cash of $21.8 million and $32.9 million, respectively, from proceeds from the disposition of assets, and $3.4 million and $3.9 million, respectively, from proceeds from the exercise of stock options.

For the 2023 first nine months, cash generated was used for capital expenditures of $275.0 million, including $35.5 million for specialized inland equipment construction and $239.5 million primarily for upgrading existing marine equipment, new electric fracturing equipment, and KMT and KDS facilities. In addition, as more fully described under Acquisitions above, $37.5 million was used for acquisitions of barge equipment in KMT.

Treasury Stock Purchases

During the 2023 first nine months, the Company purchased 811,880 shares of its common stock for $60.9 million, at an average price of $75.02 per share. Subsequent to September 30, 2023 and through November 3, 2023, the Company purchased an additional 193,432 shares of its common stock for $15.3 million, at an average price of $79.01 per share. As of November 3, 2023, the Company had approximately 5.0 million shares available under its existing repurchase authorization. Historically, treasury stock purchases have been financed through operating cash flows and borrowings under the Company’s revolving credit facility. The Company is authorized to purchase its common stock on the New York Stock Exchange and in privately negotiated transactions. When purchasing its common stock, the Company is subject to price, trading volume, and other market considerations. Shares purchased may be used for reissuance upon the exercise of stock options or the granting of other forms of incentive compensation, in future acquisitions for stock, or for other appropriate corporate purposes.

Liquidity

Funds generated from operations are available for acquisitions, capital expenditure projects, common stock repurchases, repayments of borrowings, and for other corporate and operating requirements. In addition to net cash flows provided by operating activities, as of November 3, 2023 the Company also had cash and cash equivalents of $53.2 million, availability of $416.0 million under its 2027 Revolving Credit Facility, and $2.7 million available under its credit line.

Neither the Company, nor any of its subsidiaries, is obligated on any debt instrument, swap agreement, or any other financial instrument or commercial contract which has a rating trigger, except for the pricing grid on its 2027 Credit Agreement.

The Company expects to continue to fund expenditures for acquisitions, capital construction projects, common stock repurchases, repayment of borrowings, and for other operating requirements from a combination of available cash and cash equivalents, funds generated from operating activities, and available financing arrangements.

The 2027 Revolving Credit Facility's commitment is in the amount of $500 million and matures July 29, 2027. The 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The 2033 Notes do not mature until January 19, 2033 and require no prepayments. The 2027 Term Loan in the amount of $250 million is subject to quarterly installments, beginning June 30, 2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable on July 29, 2027, assuming no prepayments. The 2027 Term Loan is prepayable, in whole or in part, without penalty.

There are numerous factors that may negatively impact the Company’s cash flows in 2023. For a list of significant risks and uncertainties that could impact cash flows, see Note 13, Contingencies and Commitments, of the Notes to Condensed Financial Statements (Unaudited), and Item 1A — Risk Factors and Note 14, Contingencies and Commitments, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Amounts available under the Company’s existing financial arrangements are

subject to the Company continuing to meet the covenants of the credit facilities as described in Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

KMT term contracts typically contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 120 day delay before contracts are adjusted depending on the specific terms of the contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. The Company’s spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel.

The Company has certain mechanisms designed to help mitigate the impacts of rising costs. For example, KMT has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be largely passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which somewhat limits exposure to inflation. The repair portion of KDS is based on prevailing current market rates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to risk from changes in interest rates on certain of its outstanding debt. The outstanding loan balances under the Company’s current bank credit facilities bear interest at variable rates based on prevailing short-term interest rates in the United States, while the previous bank credit facilities also included banks in Europe. A 1% increase in variable interest rates would impact the 2023 interest expense by $1.7 million based on balances outstanding at December 31, 2022, and would change the fair value of the Company’s debt by approximately 1.8%.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)), as of September 30, 2023, as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of September 30, 2023, the disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Note 13, Contingencies and Commitments, of the Notes to Condensed Financial Statements (Unaudited).

Item 1A. Risk Factors

The Company continues to be subject to the risk factors previously disclosed in its “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares that May Yet be Purchased Under the Plans
July 1 — July 31, 2023		60,326	$	76.03		—		—
August 1 — August 31, 2023		149,028	$	79.98		—		—
September 1 — September 30, 2023		80,901	$	84.09		—		—
Total		290,255	$	80.31		—		—

Purchases of the Company's common stock during the 2023 third quarter were made in the open market pursuant to a discretionary authorization by the Board of Directors.

Item 5. Other Information

During the three months ended September 30, 2023, the following Section 16 officers adopted, modified or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act):

Name & Title

Date Adopted

Character of Trading Arrangement(a)

Aggregate Number of Shares of Common Stock to be Purchased or Sold Pursuant to Trading Arrangement

Duration(b)

Other Material Terms

Date Terminated

David W. Grzebinski

President & Chief Executive Officer

9/20/2023

Rule 10b5-1 Trading Arrangement

Up to 18,000 shares to be sold

2/12/2024 - 2/23/2024

N/A

Raj Kumar

Executive Vice President and Chief Financial Officer

8/21/2023

Rule 10b5-1 Trading Arrangement

Up to 9,178 shares to be sold

12/12/2023 - 7/31/2024

N/A

Scott P. Miller

Vice President and Chief Information Officer

8/2/2023

Rule 10b5-1 Trading Arrangement

Up to 7,915 shares to be sold

1/26/2024 - 4/15/2024

N/A

Scott P. Miller

Vice President and Chief Information Officer

3/8/2023

Rule 10b5-1 Trading Arrangement

Up to 8,718 shares to be sold(c)

6/15/2023 - 4/15/2024

N/A

8/2/2023

(a)

Except as indicated by footnote, each trading arrangement marked as a “Rule 10b5-1 Trading Arrangement” is intended to satisfy the affirmative defense of Rule 10b5-1(c), as amended (the “Rule”).

(b)

Except as indicated by footnote, each trading arrangement permitted or permits transactions through and including the earlier to occur of (a) the completion of all purchases or sales or (b) the date listed in the table, subject to certain conditions. Each trading arrangement marked as a “Rule 10b5-1 Trading Arrangement” only permitted or only permits transactions upon expiration of the applicable mandatory cooling-off period under the Rule, which is at least 90 days for executive officers and directors under the Company's insider trading policies.

(c)

As of the date of termination, 607 shares had been sold under this Rule 10b5-1 trading arrangement.

There were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act) adopted, modified or terminated during the three months ended September 30, 2023 by the Company’s directors and Section 16 officers. Each of the trading arrangements are in accordance with the Company’s policy against insider trading, and actual sale transactions made pursuant to such trading arrangements have been or will be disclosed publicly in Section 16 filings with the SEC in accordance with applicable securities laws, rules and regulations.

Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number		Description of Exhibits
3.1	–	Restated Articles of Incorporation of the Company with all amendments to date (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014).
3.2	–	Bylaws of the Company with all amendments to date (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 28, 2022).
4.1	–	See Exhibits 3.1 and 3.2 hereof for provisions of our Restated Articles of Incorporation of the Company with all amendments to date and the Bylaws of the Company with all amendments to date (incorporated, respectively, by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 and Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 28, 2022).
31.1*	–	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
31.2*	–	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
32*	–	Certification Pursuant to 18 U.S.C. Section 1350
101.INS*	–	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	–	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	–	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	–	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	–	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	–	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	–	Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

† Management contract, compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	KIRBY CORPORATION
	(Registrant)

	By:	/s/ Raj Kumar
		Raj Kumar
		Executive Vice President and
		Chief Financial Officer

Dated: November 6, 2023

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Kirby (KEX) 10-Q2023 Q3 Quarterly report

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