What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-05 · 327 added, 271 removed, 623 unchanged (49% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS

September 30,

($ in thousands)

36 unchanged sentences

Treasury stock –

at cost, 5,366,000 shares at June 30, 2021 and 5,434,000 at December 31, 2020

at cost, 5,361,000 shares at September 30, 2021 and 5,434,000 at December 31, 2020

Total Kirby stockholders’

4 unchanged sentences

CONDENSED STATEMENTS OF EARNINGS

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands, except per share amounts)

13 unchanged sentences

Earnings (loss) before taxes on income

(Provision) benefit for taxes on income

Benefit for taxes on income

Net earnings (loss)

Net earnings attributable to noncontrolling interests

Net (earnings) loss attributable to noncontrolling interests

Net earnings (loss) attributable to Kirby

3 unchanged sentences

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

5 unchanged sentences

Total comprehensive income (loss), net of taxes

Net earnings attributable to noncontrolling interests

Net (earnings) loss attributable to noncontrolling interests

Comprehensive income (loss) attributable to Kirby

2 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands)

Cash flows from operating activities:

Net earnings (loss)

Adjustments to reconcile net earnings (loss) to net cash provided by operations:

Adjustments to reconcile net loss to net cash provided by operations:

Depreciation and amortization

35 unchanged sentences

(in thousands)

Balance at March 31, 2021

Balance at June 30, 2021

Stock option exercises

2 unchanged sentences

Amortization of unearned share-based compensation

Total comprehensive income, net of taxes

Balance at June 30, 2021

Total comprehensive loss, net of taxes

Return of investment to noncontrolling interests

Balance at September 30, 2021

Comprehensive

2 unchanged sentences

(in thousands)

Balance at March 31, 2020

Balance at June 30, 2020

Issuance of stock for equity awards, net of forfeitures

3 unchanged sentences

Return of investment to noncontrolling interests

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying notes to condensed financial statements.

10 unchanged sentences

Amortization of unearned share-based compensation

Total comprehensive income, net of taxes

Total comprehensive loss, net of taxes

Return of investment to noncontrolling interests

Balance at June 30, 2021

Balance at September 30, 2021

Comprehensive

9 unchanged sentences

Return of investment to noncontrolling interests

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying notes to condensed financial statements.

13 unchanged sentences

(2) Acquisition

During the six months ended June 30, 2021, the Company purchased four inland tank barges from a leasing company for $ 7,470,000 in cash.

During the nine months ended September 30, 2021 , the Company purchased four inland tank barges from a leasing company for $ 7,470,000 in cash.

The Company had been leasing the barges prior to the purchase.

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

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Marine transportation segment:

4 unchanged sentences

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 six months ended June 30, 2021 and 2020 that were included in the opening contract liability balances were $ 39,181,000 and $ 33,693,000 , respectively.

Revenues recognized during the nine months ended September 30, 2021 and 2020 that were included in the opening contract liability balances were $ 40,315,000 and $ 37,153,000 , 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 June 30, 2021 or December 31, 2020.

The Company did not have any contract assets at September 30, 2021 or December 31, 2020 .

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.

9 unchanged sentences

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 the distribution and services segment from the marine transportation segment of $ 7,254,000 and $ 12,157,000 for the three months and six months ended June 30, 2021, respectively, and $ 6,061,000 and $ 16,347,000 for the three months and six months ended June 30, 2020, respectively, as well as the related intersegment profit of $ 726,000 and $ 1,216,000 for the three months and six months ending June 30, 2021, respectively, and $ 606,000 and $ 1,635,000 for the three months and six months ended June 30, 2020, respectively, have been eliminated from the tables below.

Intersegment revenues, based on market-based pricing, of the distribution and services segment from the marine transportation segment of $ 5,436,000 and $ 17,593,000 for the three months and nine months ended September 30, 2021, respectively, and $ 6,768,000 and $ 23,115,000 for the three months and nine months ended September 30, 2020, respectively, as well as the related intersegment profit of $ 543,000 and $ 1,759,000 for the three months and nine months ended September 30, 2021, respectively, and $ 676,000 and $ 2,311,000 for the three months and nine months ended September 30, 2020, 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 June 30,

Six months ended June 30

Three Months Ended September 30,

Nine Months Ended September 30,

Marine transportation

3 unchanged sentences

Distribution and services

September 30,

Total assets:

3 unchanged sentences

segment loss (in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

General corporate expenses

4 unchanged sentences

total assets (in thousands):

September 30,

General corporate assets

2 unchanged sentences

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):

June 30, 2021

September 30, 2021

December 31, 2020

1 unchanged sentence

Carrying Value

Revolving Credit Facility (a)

Term Loan (a)

Revolving Credit Facility due March 27, 2024 (a)

Term Loan due March 27, 2024 (a)

3.29 % senior notes due February 27, 2023

2 unchanged sentences

Bank notes payable

Unamortized debt discounts and issuance costs

(a) Variable interest rate of 1.5 % at both June 30, 2021 and December 31, 2020.

Unamortized debt discounts and issuance costs (b)

(a) Variable interest rate of 1.5 % at both September 30, 2021 and December 31, 2020.

(b) Excludes $ 1,559,000 attributable to the Revolving Credit Facility included in other assets at September 30, 2021 .

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

Six Months Ended June 30,

Nine Months Ended September 30,

Borrowings on bank credit facilities

2 unchanged sentences

as the administrative agent bank, allowing for an $ 850,000,000 unsecured revolving credit facility (“Revolving Credit Facility”) and an unsecured term loan (“Term Loan”) with a maturity date of March 27, 2024 .

The Term Loan is repayable in quarterly installments currently scheduled to commence September 30, 2023, with $ 343,750,000 due on March 27, 2024 .

The Term Loan is prepayable, in whole or in part, without penalty.

Outstanding letters of credit under the Revolving Credit Facility were $ 5,063,000 and available borrowing capacity was $ 789,937,000 as of June 30, 2021.

Outstanding letters of credit under the $ 10,000,000 credit line were $ 1,299,000 and available borrowing capacity was $ 8,701,000 as of June 30, 2021.

The Term Loan is due on March 27, 2024 and is prepayable, in whole or in part, without penalty.

During the nine months ended September 30, 2021 , the Company repaid $ 15,000,000 under the Term Loa n.

During October 2021, the Company repaid $ 20,000,000 under the Term Loan.

Outstanding letters of credit under the Revolv ing Credit Facility were $ 5,063,000 and available borrowing capacity was $ 844,937,000 as of September 30, 2021.

Outstanding letters of credit under the $ 10,000,000 credit line were $ 1,299,000 and available borrowing capacity was $ 8,701,000 as of September 30, 2021 .

The Company currently leases various facilities and equipment under cancelable and noncancelable operating leases.

5 unchanged sentences

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,

Total lease payments

2 unchanged sentences

The following table summarizes lease costs (in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease cost

3 unchanged sentences

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

September 30,

Weighted average discount rate

1 unchanged sentence

(7) Impairments and Other Charges

During the 2020 first quarter, Kirby’s market capitalization declined significantly compared to the 2019 fourth quarter.

During the three months ended September 30, 2021, the Company decided to exit the Hawaii market, selling marine transportation equipment including four coastal tank barges, seven coastal tugboats, and certain other assets for aggregate cash proceeds of $ 17,200,000 .

In addition, as of September 30, 2021, the Company has retired and classified as held for sale, an additional 12 coastal tank barges and four coastal tugboats which were underutilized.

The sales and retirements of coastal marine transportation equipment resulted in an aggregate non‑cash impairment charge of $ 97,508,000 to reduce the carrying value of these assets to their estimated sales prices, net of costs to sell.

As a result of the sale of the Hawaii marine transportation equipment, and the decision to retire certain additional underutilized coastal tank barges and tugboats, the Company concluded that a triggering event had occurred and performed interim quantitative impairment tests as of September 30, 2021 for certain of the marine transportation segment's long-lived assets and goodwill within the coastal marine market.

The Company determined the estimated fair value of such long-lived assets using a combination of a cost approach, a discounted cash flow analysis, and a market approach.

The Company determined the estimated fair value of the reporting unit using a combination of a discounted cash flow analysis and a market approach for comparable companies.

These analyses included management’s judgment regarding short-term and long-term internal forecasts, updated for recent events, appropriate discount rates, and capital expenditures using inputs characteristic of a Level 3 fair value measurement.

In performing the impairment test of certain long-lived assets within the marine transportation segment, the Company determined that the carrying value of certain long-lived assets, including certain coastal marine transportation equipment and operating lease right-of-use assets, were no longer recoverable, resulting in a non-cash impairment charge of $ 24,152,000 during the three months ended September 30, 2021 to reduce such long-lived assets to fair value.

Based upon the results of the goodwill impairment test, the Company concluded that the carrying value of one reporting unit in the marine transportation segment exceeded its estimated fair value.

The carrying value of the reporting unit, including goodwill, and after recording impairments of long-lived assets identified above, exceeded its estimated fair value, resulting in a non-cash goodwill impairment charge of $ 219,052,000 for the three months ended September 30, 2021.

The following table summarizes the changes in goodwill during 2021 (in thousands):

Marine Transportation

Distribution and Services

Balance at December 31, 2020 (gross)

Accumulated impairment and amortization

Balance at December 31, 2020

Balance at September 30, 2021

Accumulated impairment and amortization

Balance at September 30, 2021

During the first quarter of 2020, Kirby’s market capitalization declined significantly compared to the 2019 fourth quarter.

Over the same period, the overall United States stock market also declined significantly amid market volatility.

2 unchanged sentences

As a result, the Company concluded that a triggering event had occurred and performed interim quantitative impairment tests as of March 31, 2020 for certain of the distribution and services segment’s long-lived assets and goodwill.

The Company determined the estimated fair value of such long-lived assets and reporting units using a discounted cash flow analysis and a market approach for comparable companies.

This analysis included management’s judgment regarding short-term and long-term internal forecasts, updated for recent events, appropriate discount rates, and capital expenditures using inputs characteristic of a Level 3 fair value measurement.

In performing the impairment test of long-lived assets within the distribution and services segment, the Company determined that the carrying value of certain long-lived assets, including property and equipment as well as intangible assets associated with customer relationships, tradenames, and distributorships, were no longer recoverable, resulting in an impairment charge of $ 165,304,000 (including $ 148,909,000 impairment of intangible assets other than goodwill and $ 16,395,000 impairment of property and equipment) to reduce such long-lived assets to fair value during the three months ended March 31, 2020.

4 unchanged sentences

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 June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Compensation cost

2 unchanged sentences

The amendment to the Plan was subsequently approved at the Annual Meeting of Stockholders on April 27, 2021.

At June 30, 2021, there were 2,225,222 shares available for future grants under the Plan.

During the six months ended June 30, 2021, the Company granted 311,016 restricted stock units (“RSUs”) to selected officers and other key employees under the Plan, the majority of which vest ratably over five years .

During the six months ended June 30, 2021, the Company granted 27,120 shares of restricted stock to nonemployee directors of the Company under the director stock award plan.

At September 30, 2021, there wer e 2,228,857 shares available for future grants under the Plan.

During the nine months ended September 30, 2021, the Company grante d 311,016 restricted stock units (“RSUs”) to selected officers and other key employees under the Plan, the majority of which vest ratably over five years .

During the nine months ended September 30, 2021 , the Company granted 29,773 sh ares of restricted stock to nonemployee directors of the Company under the director stock award plan.

The restricted stock vests six months after the date of grant except that restricted stock granted in lieu of cash director fees vests in equal quarterly increments through March 31, 2022.

2 unchanged sentences

One provision of the CARES Act allowed net operating losses generated in 2018 through 2020 to be carried back up to five years .

Pursuant to this provision of the CARES Act, the Company recorded a net federal current benefit for taxes on income for the three months ended June 30, 2020 due to carrying back net operating losses generated between 2018 and 2020 used to offset taxable income generated between 2013 and 2017.

Net operating losses carried back to tax years 2013 through 2017 were applied at a federal tax rate of 35 % applicable to those tax years, compared to a 21 % tax rate effective at June 30, 2020.

Pursuant to this provision of the CARES Act, the Company recorded a net federal current benefit for taxes on income for the nine months ended September 30, 2020 due to carrying back net operating losses generated between 2018 and 2020 used to offset taxable income generated between 2013 and 2017.

Net operating losses carried back to tax years 2013 through 2017 were applied at a federal tax rate of 35 % applicable to those tax years, compared to a 21 % tax rate effective at September 30, 2020.

Net operating losses generated in 2018 and 2019 were used to offset taxable income generated between 2013 and 2017 taxed at 35 % resulting in a tax benefit of $ 58,746,000 .

At June 30, 2021 and December 31, 2020, the Company had a federal income tax receivable of $ 70,528,000 and $ 188,177,000 , respectively, included in Accounts Receivable –

At September 30, 2021 and December 31, 2020, the Company had a federal income tax receivable of $ 70,959,000 and $ 188,177,000 , respectively, included in Accounts Receivable –

Other on the balance sheets.

1 unchanged sentence

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

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Earnings (loss) before taxes on income:

5 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net earnings (loss) attributable to Kirby

11 unchanged sentences

Net earnings (loss) per share attributable to Kirby common stockholders:

Certain outstanding options to purchase approximately 550,000 and 681,000 shares of common stock were excluded in the computation of diluted earnings per share as of June 30, 2021 and 2020, respectively, as such stock options would have been antidilutive.

Certain outstanding RSUs to convert to 5,000 and 162,000 shares of common stock were also excluded in the computation of diluted earnings per share as of June 30, 2021 and 2020, respectively, as such RSUs would have been antidilutive.

Certain outstanding options to purchase approximately 627,000 and 681,000 shares of common stock were excluded in the computation of diluted earnings per share as of September 30, 2021 and 2020, respectively, as such stock options would have been antidilutive.

Certain outstanding RSUs to convert to 565,000 and 162,000 shares of common stock were also excluded in the computation of diluted earnings per share as of September 30, 2021 and 2020 , respectively, as such RSUs would have been antidilutive.

(11) Inventories

1 unchanged sentence

net (in thousands):

September 30,

Finished goods

14 unchanged sentences

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 a contribution of $ 479,000 to the Higman pension plan during the six months ended June 30, 2021.

The Company made a contribution of $ 479,000 to the Higman pension plan during the nine months ended September 30, 2021.

The Company does not expect to make any additional contributions during 2021.

8 unchanged sentences

Pension Plans

Three months ended June 30,

Three Months Ended September 30,

Components of net periodic benefit cost:

5 unchanged sentences

Pension Plans

Six months ended June 30,

Nine Months Ended September 30,

Components of net periodic benefit cost:

6 unchanged sentences

Postretirement Welfare Plan

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Components of net periodic benefit cost:

4 unchanged sentences

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

Three months ended June 30,

(Provision) Benefit

Three Months Ended September 30,

Income Tax Provision

Income Tax (Provision) Benefit

Pension and postretirement benefits (a):

2 unchanged sentences

Foreign currency translation

Six months ended June 30,

(Provision) Benefit

Nine Months Ended September 30,

Income Tax Provision

Income Tax (Provision) Benefit

Pension and postretirement benefits (a):

16 unchanged sentences

Under the agreement, the Company agreed to pay state and federal natural resource trustees $ 2,102,000 .

The agreement will be final following Court approval.

The liability trial was conducted during the week of February 2, 2021.

The Court issued its decision on July 8, 2021, finding that the Genesis River was solely at fault and no liability on the part of Kirby Inland Marine.

No appeal has been filed.

The NTSB issued a report dated March 10, 2021 of its investigation of the incident.

The NTSB determined that the probable cause of the collision was the Genesis River pilot’s decision to transit at sea speed, out of maneuvering mode, which increased the hydrodynamic effects of the channel banks, reduced his ability to maintain control of the vessel after meeting another deep-draft vessel, and resulted in the Genesis River’s sheering across the channel toward the tow.

Among the NTSB’s conclusions, it found that the actions of the M/V Voyager relief captain to attempt to avoid the collision by crossing the channel were reasonable, given the information available to him at the time he had to make the decision to maneuver.

The Company has various insurance policies covering liabilities including pollution, marine and general liability and believes that it has satisfactory insurance coverage for the 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.

No appeal was filed by the Genesis River.

The Company and its insurance carriers are collecting the $ 20,206,000 judgment from the Genesis River and its interests.

On October 13, 2016, the tug Nathan E.

18 unchanged sentences

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 $ 23,396,000 at June 30, 2021, including $ 13,878,000 in letters of credit and $ 9,518,000 in performance bonds.

All of these instruments have an expiration date within three years .

The aggregate notional value of these instruments is $ 21,199,000 at September 30, 2021, including $ 13,847,000 in letters of credit and $ 7,352,000 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.

16 unchanged sentences

The weighted average number of common shares applicable to diluted earnings (loss) per share were as follows (in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted average number of common stock - diluted

4 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total revenues

3 unchanged sentences

Capital expenditures

The 2021 third quarter included $340,713,000 before taxes, $275,068,000 after taxes, or $4.58 per share, non-cash charges related to impairment of long-lived assets related to coastal marine transportation equipment and impairment of goodwill in the marine transportation segment.

See Note 7, Impairments and Other Charges in the financial statements for additional information.

The 2020 first quarter included $561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment.

2 unchanged sentences

See Note 9, Taxes on Income in the financial statements for additional information.

Cash provided by operating activities for the 2021 first six months decreased primarily due to lower revenues and operating income in the marine transportation segment, partially offset by the receipt of a tax refund of $119,493,000, including accrued interest, for the Company’s 2019 federal tax return.

For the 2021 first six months, capital expenditures of $38,369,000 included $31,118,000 in the marine transportation segment and $7,251,000 in the distribution and services segment and corporate, more fully described under cash flow and capital expenditures below.

Cash provided by operating activities for the 2021 first nine months decreased primarily due to lower revenues and operating income in the marine transportation segment, partially offset by the receipt of a tax refund of $119,493,000, including accrued interest, for the Company’s 2019 federal tax return.

For the 2021 first nine months, capital expenditures of $71,968,000 included $61,565,000 in the marine transportation segment and $10,403,000 in the distribution and services segment and corporate, more fully described under cash flow and capital expenditures below.

The Company projects that capital expenditures for 2021 will be in the $120,000,000 to $130,000,000 range.

The 2021 construction program will consist of approximately $10,000,000 for the construction of new inland towboats, $95,000,000 to $100,000,000 primarily for capital upgrades and improvements to existing marine equipment and facilities, and $15,000,000 to $20,000,000 for new machinery and equipment, facilities improvements, and information technology projects in the distribution and services segment and corporate.

The Company’s debt-to-capitalization ratio decreased to 29.1% at June 30, 2021 from 32.2% at December 31, 2020, primarily due to repayments under the Revolving Credit Facility in the 2021 first six months and an increase in total equity, primarily due to the amortization of unearned share-based compensation for the 2021 first six months of $9,148,000 and net earnings attributable to Kirby of $6,815,000, partially offset by tax withholdings of $2,853,000 on restricted stock and RSU vestings.

The Company’s debt outstanding as of June 30, 2021 and December 31, 2020 is detailed in Long-Term Financing below.

The Company’s debt-to-capitalization ratio decreased to 29.8% at September 30, 2021 from 32.2% at December 31, 2020, primarily due to repayments under the Revolving Credit Facility and Term Loan in the 2021 first nine months, partially offset by a decrease in total equity, primarily due to the net loss attributable to Kirby of $257,915,000.

The Company’s debt outstanding as of September 30, 2021 and December 31, 2020 is detailed in Long-Term Financing below.

Marine Transportation

For the 2021 second quarter and first six months, the Company’s marine transportation segment generated 59% and 60%, respectively, of the Company’s revenues.

For the 2021 third quarter and first nine months, the Company’s marine transportation segment generated 57% and 59%, respectively, of the Company’s revenues.

The segment’s customers include many of the major petrochemical and refining companies that operate in the United States.

3 unchanged sentences

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

September 30,

Inland tank barges:

6 unchanged sentences

Offshore tugboats and docking tugboat (owned and chartered)

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

During the 2021 first six months, the Company retired 17 inland tank barges and returned three leased barges.

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, as well as a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.

During the 2021 first nine months, the Company retired 26 inland tank barges and returned four leased barges.

The net result was a decrease of 30 inland tank barges and approximately 907,000 barrels of capacity.

The Company’s marine transportation segment’s revenues for the 2021 second quarter and first six months decreased 13% and 19%, respectively, and operating income decreased 64% and 80%, respectively, compared with the 2020 second quarter and first six months revenues and operating income.

The decreases were primarily due to reduced barge utilization in the inland and coastal markets as well as reduced term and spot pricing in the inland market when compared to 2020, however, the year over year spot contract price decrease for the 2021 second quarter was partially offset by spot contract prices improving approximately 10% from the 2021 first quarter to the 2021 second quarter.

The Company’s marine transportation segment’s revenues for the 2021 third quarter and first nine months increased 6% and decreased 12%, respectively, and operating income decreased 48% and 72%, respectively, compared with the 2020 third quarter and first nine months revenues and operating income.

The increase in revenues for the 2021 third quarter was primarily due to increased fuel rebills in the inland and coastal markets and increased tank barge utilization in the inland market.

The decreases for the 2021 first nine months were primarily due to reduced barge utilization in the inland and coastal markets as well as reduced term and spot pricing in the inland market when compared to 2020.

The decreases were partially offset by the addition of the Savage Inland Marine, LLC (“Savage”) fleet acquired on April 1, 2020.

The 2021 first six months was also heavily impacted by Winter Storm Uri during the first quarter which shut down many Gulf Coast refineries and chemical plants for an extended period of time starting in mid-February.

The 2021 third quarter benefited from improving business activity and inland market barge utilization which were largely offset by reduced term pricing when compared to the 2020 third quarter.

2021 third quarter revenues and operating income were also impacted by Hurricane Ida which shuttered almost the entire Southeast Louisiana refinery and chemical complex and key waterways for an extended period of time.

The 2021 first nine months was also heavily impacted by Winter Storm Uri during the first quarter which shut down many Gulf Coast refineries and chemical plants for an extended period of time starting in mid-February.

These emergency shutdowns resulted in significantly reduced liquids production and lower volumes for the Company’s inland marine transportation market during the 2021 first quarter.

The 2021 and 2020 first quarters were also 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, in addition to ice on the Illinois River during the 2021 first quarter and increased shipyard days on large capacity coastal vessels during the 2020 first quarter.

For the 2021 second quarter and first six months, the inland tank barge fleet contributed 76% and 75%, respectively, and the coastal fleet contributed 24% and 25%, respectively, of marine transportation revenues.

For the 2020 second quarter and first six months, the inland tank barge fleet contributed 80% and 79%, respectively, and the coastal fleet contributed 20% and 21%, respectively, of marine transportation revenues.

Inland tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter and the low to mid-80% range during the 2021 second quarter.

In 2020, inland tank barge utilization levels averaged in the low to mid-90% range during the 2020 first quarter and the mid-80% range during the 2020 second quarter.

The 2021 first six months and the 2020 second quarter were impacted by reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown.

For the 2021 third quarter and first nine months, the inland tank barge fleet contributed 76% and 75%, respectively, and the coastal fleet contributed 24% and 25%, respectively, of marine transportation revenues.

For the 2020 third quarter and first nine months, the inland tank barge fleet contributed 77% and 79%, respectively, and the coastal fleet contributed 23% and 21%, respectively, of marine transportation revenues.

Inland tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter, the low to mid-80% range during the 2021 second quarter, and the low 80% range during the 2021 third quarter.

In 2020, inland tank barge utilization levels averaged in the low to mid-90% range during the 2020 first quarter, the mid-80% range during the 2020 second quarter, and the low 70% range during the 2020 third quarter.

The 2021 first nine months and the 2020 second and third quarters were impacted by reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown.

The 2021 second quarter was favorably impacted by the Colonial Pipeline outage in May.

The 2021 first six months was also impacted by reduced volumes as a result of Winter Storm Uri during the first quarter.

The 2021 first nine months was also impacted by reduced volumes as a result of Winter Storm Uri during the first quarter.

The 2020 first quarter experienced strong demand from petrochemicals, black oil, and refined petroleum products customers.

In addition, extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter slowed the transport of customer cargoes and contributed to strong utilization.

Coastal tank barge utilization levels averaged in the mid-70% range during the 2021 first quarter and the low to mid-70% range during the 2021 second quarter.

Coastal tank barge utilization levels averaged in the low to mid-80% range during the 2020 first quarter and the mid-70% range during the 2020 second quarter.

The 2021 first six months and the 2020 second quarter were impacted by reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown.

Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of smaller tank barges in the coastal industry in 2021 and 2020.

During both the 2021 second quarter and first six months, approximately 65% of marine transportation’s inland revenues were under term contracts and 35% were spot contract revenues.

During the 2020 second quarter and first six months, approximately 65% and 60%, respectively, of marine transportation’s inland revenues were under term contracts and 35% and 40%, respectively, were spot contract revenues.

Inland time charters during the 2021 second quarter and first six months represented 57% and 59%, respectively, of the inland revenues under term contracts compared with 68% and 67% in the 2020 second quarter and first six months, respectively.

During both the 2021 second quarter and first six months, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues.

During both the 2020 second quarter and first six months, approximately 85% of coastal revenues were under term contracts, and 15% were under spot contract revenues.

Coastal time charters represented approximately 85% of coastal revenues under term contracts during both the 2021 second quarter and first six months compared with approximately 90% during both the 2020 second quarter and first six months.

Coastal tank barge utilization levels averaged in the mid-70% range during the 2021 first and third quarters and the low to mid‑70% range during the 2021 second quarter.

Coastal tank barge utilization levels averaged in the low to mid-80% range during the 2020 first quarter and the mid-70% range during the 2020 second and third quarters.

The 2021 first nine months and the 2020 second and third quarters were impacted by reduced demand as a result of the COVID-19 pandemic and the resulting economic slowdown.

Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of tank barges in the coastal industry in 2021 and 2020.

During both the 2021 third quarter and first nine months, approximately 65% of marine transportation’s inland revenues were under term contracts and 35% were spot contract revenues.

During the 2020 third quarter and first nine months, approximately 70% and 65%, respectively, of marine transportation’s inland revenues were under term contracts and 30% and 35%, respectively, were spot contract revenues.

Inland time charters during the 2021 third quarter and first nine months represented 56% and 58%, respectively, of the inland revenues under term contracts compared with 67% in both the 2020 third quarter and first nine months.

During both the 2021 third quarter and first nine months, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues.

During both the 2020 third quarter and first nine months, approximately 85% of coastal revenues were under term contracts, and 15% were under spot contract revenues.

Coastal time charters represented approximately 85% of coastal revenues under term contracts during both the 2021 third quarter and first nine months compared with approximately 90% during both the 2020 third quarter 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.

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June 30, 2021

September 30, 2021

Inland market:

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(7)% –

(6)% –

(2)% –

Spot decrease

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Effective January 1, 2021, 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 3%, excluding fuel.

The marine transportation segment operating margin was 5.6% for the 2021 second quarter compared with 13.5% for the 2020 second quarter and 3.2% for the 2021 first six months compared to 13.0% for the 2020 first six months.

The marine transportation segment operating margin was 5.0% for the 2021 third quarter compared with 10.1% for the 2020 third quarter and 3.8% for the 2021 first nine months compared to 12.2% for the 2020 first nine months.

Distribution and Services

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The Company also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, for land-based oilfield service customers.

For the 2021 second quarter and first six months, the distribution and services segment generated 41% and 40%, respectively, of the Company’s revenues, of which 83% and 86%, respectively, was generated from service and parts and 17% and 14%, respectively, from manufacturing.

For the 2021 third quarter and first nine months, the distribution and services segment generated 43% and 41%, respectively, of the Company’s revenues, of which 87% and 86%, respectively, was generated from service and parts and 13% and 14%, respectively, from manufacturing.

The results of the distribution and services segment are largely influenced by the economic cycles of the oilfield service and oil and gas operator and producer markets, marine, power generation, on-highway, and other industrial markets.

Distribution and services revenues for the 2021 second quarter and first six months increased 42% and 5%, respectively, and operating income increased 144% and 187%, respectively, compared with the 2020 second quarter and first six months revenues and operating income.

In the commercial and industrial market, the increases in the 2021 second quarter compared to the 2020 second quarter were primarily attributable to improved economic activity across the U.S.

which resulted in higher business levels in the on-highway and power generation businesses.

The marine repair business was down slightly compared to the 2020 second quarter and first six months due to reduced service activity.

The commercial and industrial market 2021 first six months was impacted by Winter Storm Uri with reduced activity levels at many locations across the Southern U.S.

Distribution and services revenues for the 2021 third quarter and first nine months increased 48% and 18%, respectively, and operating income increased 900% and 316%, respectively, compared with the 2020 third quarter and first nine months revenues and operating income.

In the commercial and industrial market, the increases in the 2021 third quarter and first nine months compared to the 2020 third quarter and first nine months were primarily attributable to improved economic activity across the U.S.

which resulted in higher business levels in the power generation and on-highway businesses.

Increased product sales in Thermo King also contributed favorably to the 2021 third quarter and first nine months results.

The marine repair business was down slightly compared to the 2020 third quarter and first nine months due to reduced service activity.

The commercial and industrial market 2021 first nine months was impacted by Winter Storm Uri with reduced activity levels at many locations across the Southern U.S.

during the first quarter.

For the 2021 second quarter and first six months, the commercial and industrial market contributed 62% and 65%, respectively, of the distribution and services revenues.

In the oil and gas market, revenues increased compared to the 2020 second quarter and first six months due to higher oilfield activity which resulted in increased demand for new and overhauled engines, transmissions, parts, and service.

The manufacturing business also experienced increases in orders and deliveries of new and remanufactured pressure pumping equipment.

The oil and gas market 2021 first six months was impacted by Winter Storm Uri with reduced activity levels at many locations across Texas and Oklahoma during the first quarter.

For the 2021 second quarter and first six months, the oil and gas market contributed 38% and 35%, respectively, of the distribution and services revenues.

The distribution and services segment operating margin for the 2021 second quarter was 2.7% compared with (8.8)% for the 2020 second quarter and 2.1% for the 2021 first six months compared to (2.6)% for the 2020 first six months.

The 2020 second quarter results were adversely impacted by the bankruptcy of a large oil and gas customer, resulting in a $3,339,000 bad debt expense charge and severance expenses of $1,354,000 as a result of workforce reductions.

Although the recent spike in COVID-19 cases in pockets of the U.S.

and around the world has created some uncertainty which could slow the pace of the economic recovery, the Company expects further growth in both marine transportation and distribution and services during the second half of 2021 as the U.S.

and international economies reopen.

Increasing supply chain and labor constraints and delays of key components, particularly in distribution and services, could defer some product sales and manufacturing deliveries in the second half of the year.

In the inland marine transportation market, barge utilization in July improved into the mid-80% range and is expected to gradually increase into the high 80% to 90% range during the second half of 2021.

This increase in activity should yield further improvements in the spot market, which currently represents approximately 35% of inland revenue, and contribute favorably to revenues and operating margins.

During the balance of 2021 and into 2022, term contracts that renewed lower during the last several quarters should gradually reset to reflect the improved market conditions.

Overall, inland revenues are expected to increase in the second half of the year with inland operating margins in the low double digits for the third quarter and further operating margin improvement expected in the fourth quarter subject to seasonal weather disruptions and potential COVID-19 issues slowing the economic recovery.

As of June 30, 2021, the Company estimated there were approximately 4,000 inland tank barges in the industry fleet, of which approximately 350 were over 30 years old and approximately 260 of those over 40 years old.

For the 2021 third quarter and first nine months, the commercial and industrial market contributed 59% and 63%, respectively, of the distribution and services revenues.

In the oil and gas market, revenues improved compared to the 2020 third quarter and first nine months due to higher oilfield activity which resulted in increased demand for new and overhauled engines, transmissions, parts, and service.

The manufacturing business also experienced increases in orders and deliveries of new and remanufactured pressure pumping equipment as well as power generation equipment for electric fracturing.

For the 2021 third quarter and first nine months, the oil and gas market contributed 41% and 37%, respectively, of the distribution and services revenues.

The distribution and services segment operating margin for the 2021 third quarter was 4.2% compared with 0.6% for the 2020 third quarter and 2.9% for the 2021 first nine months compared to (1.6)% for the 2020 first nine months.

The 2020 first nine months results were adversely impacted by the bankruptcy of a large oil and gas customer, resulting in a $3,339,000 bad debt expense charge and severance expenses of $1,354,000 as a result of workforce reductions.

Although the COVID-19 delta variant in the U.S.

and around the world has created some uncertainty which has slowed the pace of the economic recovery, the Company expects further growth in marine transportation during the 2021 fourth quarter.

Supply chain and labor constraints and delays of key components, particularly in distribution and services, could defer some product sales and manufacturing deliveries into 2022 resulting in modest declines in revenue in distribution and services during the 2021 fourth quarter.

In the inland marine transportation market, barge utilization in October improved into the high 80% range and is expected to remain strong for the duration of the fourth quarter as Louisiana refinery and petrochemical plants restart and customers boost production levels to meet pend-up demand.

While ongoing navigational issues in the wake of Hurricane Ida, which have resulted in extended closures of key waterways and contributed to some increases in barge utilization, should subside, the onset of seasonal winter weather and continued economic growth should result in improved barge utilization.

Overall, increased inland activity levels should yield further improvements in the spot market, which currently represents approximately 35% of inland revenue, and contribute to improved revenues and operating margins.

During the fourth quarter and into 2022, term contracts that renewed lower over the past year should reset to reflect the improved market conditions.

Overall, inland revenues are expected to increase in the 2021 fourth quarter with operating margins around 10%.

As of September 30, 2021, the Company estimated there were approximately 4,000 inland tank barges in the industry fleet, of which approximately 350 were over 30 years old and approximately 285 of those over 40 years old.

The Company estimates that approximately 60 to 75 new tank barges have been ordered for delivery in 2021 and many older tank barges, including an expected 28 by the Company, will be retired, dependent on 2021 market conditions.

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The extent of the retirements is dependent on petrochemical and refinery production levels, and crude oil and natural gas condensate movements, both of which can have a direct effect on industry-wide tank barge utilization, as well as term and spot contract rates.

In the coastal marine transportation market, market conditions are expected to remain challenging for the remainder of the year, but increasing demand for refined products is expected to contribute to modest improvement in spot market activity levels.

As a result, the Company expects coastal barge utilization to increase into the mid-70% range with the third and fourth quarter revenues and operating margins modestly improved compared to the 2021 second quarter.

As of June 30, 2021, the Company estimated there were approximately 275 tank barges operating in the 195,000 barrels or less coastal industry fleet, the sector of the market in which the Company operates, and approximately 20 of those were over 25 years old.

In the coastal marine transportation market, market conditions are expected to modestly improve in the 2021 fourth quarter.

Combined with the recent sale of the Hawaiian marine equipment and the retirement of underutilized barges, coastal barge utilization is expected to be near 90% in the fourth quarter.

Although the Hawaii equipment has been sold, the Company has chartered and will continue to operate the assets until existing customer contracts expire at the end of 2021.

Elsewhere in the coastal market, planned shipyard activity on several large capacity barges will likely result in an overall sequential revenue reduction in the mid-single digits during the fourth quarter with operating margins at or slightly below breakeven.

As of September 30, 2021, the Company estimated there were approximately 270 tank barges operating in the 195,000 barrels or less coastal industry fleet, the sector of the market in which the Company operates, and approximately 20 of those were over 25 years old.

The Company is aware of one announced small specialized coastal ATB in the 195,000 barrels or less category that was delivered in the 2021 first quarter with no further coastal barges currently under construction.

The results of the distribution and services segment are largely influenced by the cycles of the land-based oilfield service and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets.

In the commercial and industrial market, continued economic improvements are expected to contribute to enhanced activity levels in the on-highway and power generation markets.

Third quarter results are also expected to benefit from seasonal summer increases in demand for back-up power generation rental equipment and Thermo King products and service.

These gains are expected to be partially offset by modest seasonal reductions in marine repair activity.

In the distribution and services oil and gas market, favorable commodity prices and increasing well completions activity are expected to drive increased demand for new transmissions, service, and parts for the duration of the year.

In manufacturing, new orders for environmentally friendly pressure pumping and frac related power generation equipment, as well as remanufacturing of existing conventional equipment, is expected to boost demand in the second half of the year.

Overall, compared to 2020, full year distribution and services revenues are expected to increase by 15% to 25% with positive operating margins in the low to mid-single digits.

While the COVID-19 pandemic has adversely impacted the Company’s business, to date, it has not materially adversely impacted its ability to conduct its operations in either business segment.

The Company has maintained business continuity and expects to continue to do so.

During the six months ended June 30, 2021, the Company purchased four inland tank barges from a leasing company for $7,470,000 in cash.

Seasonality in the commercial and industrial market, including reduced marine repair activity, lower demand for Thermo King refrigeration parts and service, and reduced utilization of the power generation rental fleet, are all expected to contribute to sequential reductions in revenue and operating income in the 2021 fourth quarter.

In the distribution and services oil and gas market, strong commodity prices and oilfield activity levels are expected to yield robust demand for new transmissions, service, and parts for the duration of the year.

In manufacturing, activity is also expected to remain strong driven by an increasing backlog of environmentally friendly pressure pumping equipment, frac related power generation equipment, and remanufacturing of existing conventional equipment.

However, increasing original equipment manufacturer supply chain issues are expected to delay some sales into 2022 and result in a sequential reduction in oil and gas revenues and operating margins.

Overall, compared to the 2021 third quarter, distribution and services revenues are expected to decline modestly with operating margins in the low to mid-single digits.

While the Company's outlook is dependent on developments regarding the COVID-19 pandemic and related supply chain constraints, the Company has maintained business continuity and expects to continue to do so.

During the nine months ended September 30, 2021, the Company purchased four inland tank barges from a leasing company for $7,470,000 in cash.

The Company had been leasing the barges prior to the purchase.

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The following table sets forth the Company’s marine transportation and distribution and services revenues and the percentage of each to total revenues for the comparable periods (dollars in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Marine transportation

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The following table sets forth the Company’s marine transportation segment’s revenues, costs and expenses, operating income, and operating margin (dollars in thousands):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Marine transportation revenues

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

2021 Third Quarter

2021 Nine Months

Products Moved

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Corn, Cotton and Wheat Production, Chemical Feedstock Usage

The Company’s marine transportation segment’s revenues for the 2021 second quarter and first six months decreased 13% and 19%, respectively, compared with the 2020 second quarter and first six months revenues.

The decrease was primarily due to reduced barge utilization in the inland and coastal markets as well as reduced term and spot pricing in the inland market when compared to 2020, however, the year over year spot contract price decrease for the 2021 second quarter was partially offset by spot contract prices improving approximately 10% from the 2021 first quarter to the 2021 second quarter.

The Company’s marine transportation segment’s revenues for the 2021 third quarter and first nine months increased 6% and decreased 12%, respectively, compared with the 2020 third quarter and first nine months revenues.

The increase for the 2021 third quarter was primarily due to increased fuel rebills in the inland and coastal markets and increased tank barge utilization in the inland market.

The decrease for the 2021 first nine months was primarily due to reduced barge utilization in the inland and coastal markets as well as reduced term and spot pricing in the inland market when compared to 2020.

The decrease was partially offset by the addition of the Savage fleet acquired on April 1, 2020.