What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 266 added, 494 removed, 456 unchanged (63% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS

September 30,

($ in thousands)

31 unchanged sentences

Common stock, $ 0.10 par value per share.

Authorized 120,000,000 shares, issued 65,472,000 shares

Authorized 120 million shares, issued 65.5 million shares

Additional paid-in capital

2 unchanged sentences

Treasury stock –

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

at cost, 5.2 million shares at March 31, 2022 and 5.4 million at December 31, 2021

Total Kirby stockholders’

4 unchanged sentences

CONDENSED STATEMENTS OF EARNINGS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands, except per share amounts)

7 unchanged sentences

Depreciation and amortization

Impairments and other charges

(Gain) loss on disposition of assets

Gain on disposition of assets

Total costs and expenses

Operating income (loss)

Operating income

Interest expense

Earnings (loss) before taxes on income

Benefit for taxes on income

(Provision) benefit for taxes on income

Net earnings (loss)

Net (earnings) loss attributable to noncontrolling interests

Net earnings attributable to noncontrolling interests

Net earnings (loss) attributable to Kirby

3 unchanged sentences

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands)

5 unchanged sentences

Total comprehensive income (loss), net of taxes

Net (earnings) loss attributable to noncontrolling interests

Net earnings attributable to noncontrolling interests

Comprehensive income (loss) attributable to Kirby

2 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands)

Cash flows from operating activities:

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

Net earnings (loss)

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

Depreciation and amortization

Provision (benefit) for deferred income taxes

Impairments and other charges

Amortization of unearned share-based compensation

Amortization of share-based compensation

Amortization of major maintenance costs

3 unchanged sentences

Capital expenditures

Acquisitions of businesses and marine equipment

Acquisitions of businesses

Proceeds from disposition of assets

5 unchanged sentences

Payments related to tax withholding for share-based compensation

Return of investment to noncontrolling interest

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

Return of investment to noncontrolling interest and other

Net cash used in financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of year

15 unchanged sentences

(in thousands)

Balance at June 30, 2021

Stock option exercises

Issuance of stock for equity awards, net of forfeitures

Tax withholdings on equity award vesting

Amortization of unearned share-based compensation

Total comprehensive loss, net of taxes

Return of investment to noncontrolling interests

Balance at September 30, 2021

Comprehensive

Treasury Stock

Noncontrolling

(in thousands)

Balance at June 30, 2020

Issuance of stock for equity awards, net of forfeitures

Tax withholdings on equity award vesting

Amortization of unearned share-based compensation

Total comprehensive income, net of taxes

Return of investment to noncontrolling interests

Balance at September 30, 2020

See accompanying notes to condensed financial statements.

KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF STOCKHOLDERS’

Comprehensive

Treasury Stock

Noncontrolling

(in thousands)

Balance at December 31, 2021

2 unchanged sentences

Tax withholdings on equity award vesting

Amortization of unearned share-based compensation

Total comprehensive loss, net of taxes

Amortization of share-based compensation

Total comprehensive income, net of taxes

Return of investment to noncontrolling interests

Balance at September 30, 2021

Balance at March 31, 2022

Comprehensive

6 unchanged sentences

Tax withholdings on equity award vesting

Amortization of unearned share-based compensation

Amortization of share-based compensation

Total comprehensive loss, net of taxes

Return of investment to noncontrolling interests

Balance at September 30, 2020

Balance at March 31, 2021

See accompanying notes to condensed financial statements.

6 unchanged sentences

Certain reclassifications have been made to reflect the current presentation of financial information.

Accounting Standard Adoption

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes”

(“ASU 2019-12”) which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes.

The Company adopted ASU 2019-12 on January 1, 2021.

There was no material impact on the Company’s financial statements or disclosures upon adoption of ASU 2019-12.

(2) Acquisition

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.

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.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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 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.

Revenues recognized during the three months ended March 31, 2022 and 2021 that were included in the opening contract liability balances were $ 28.6 million and $ 30.8 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, 2021 or December 31, 2020 .

The Company did no t have any contract assets at March 31, 2022 or December 31, 2021 .

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.

1 unchanged sentence

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

Marine Transportation —

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, in Alaska and Hawaii and, to a lesser extent, in United States coastal transportation of dry-bulk cargoes.

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 —

Provides after-market services and parts for engines, transmissions, reduction gears and related equipment used in oilfield service, marine, power generation, on-highway, and other industrial applications.

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.

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 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.

Intersegment revenues, based on market-based pricing, of KDS from KMT of $ 7.6 million and $ 4.9 million for the three months ended March 31, 2022 and 2021, respectively, as well as the related intersegment profit of $ 0.8 million and $ 0.5 million for the three months ended March 31, 2022 and 2021, 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,

Three Months Ended March 31,

Marine transportation

Distribution and services

Segment profit (loss):

Segment profit:

Marine transportation

Distribution and services

September 30,

Total assets:

3 unchanged sentences

segment loss (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

General corporate expenses

Gain (loss) on disposition of assets

Impairments and other charges

Gain on disposition of assets

Interest expense

1 unchanged sentence

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):

September 30, 2021

March 31, 2022

December 31, 2021

8 unchanged sentences

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 .

(a) Variable interest rate of 1.8 % and 1.5 % at March 31, 2022 and December 31, 2021, respectively.

(b) Excludes $ 1.2 million and $ 1.4 million attributable to the Revolving Credit Facility included in other assets at March 31, 2022 and December 31, 2021 , respectively.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Borrowings on bank credit facilities

1 unchanged sentence

The Company has an amended and restated credit agreement (the “Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A.

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 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 .

as the administrative agent bank, allowing for an $ 850 million 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 prepayable, in whole or in part, without penalty .

During the three months ended March 31, 2022 , the Company repaid $ 10.0 million under the Term Loan.

During April 2022 , the Company repaid $ 5.0 million under the Term Loan.

Outstanding letters of credit under the Revolving Credit Facility were $ 5.1 million and available borrowing capacity was $ 844.9 million as of March 31, 2022.

Outstanding letters of credit under the $ 10 million credit line were $ 1.3 million and available borrowing capacity was $ 8.7 million as of March 31, 2022.

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 are scheduled to be issued on October 20, 2022, and the Series B Notes are scheduled to be 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 will be $ 0.5 million.

The 2033 Notes will be 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") are excluded from short term liabilities because the Company intends to use the proceeds from the issuance of the 2033 Notes and availability under the Revolving Credit Facility to repay the 2023 Notes upon maturity.

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 between lease and non-lease components, and determining the incremental borrowing rates.

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.

3 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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

Weighted average remaining lease term

(7) Impairments and Other Charges

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.

In addition, as a result of uncertainty surrounding the outbreak of COVID-19 and a sharp decline in oil prices during the 2020 first quarter, many of the Company’s oil and gas customers responded by quickly cutting 2020 capital spending budgets and activity levels quickly declined.

Lower activity levels resulted in a decline in drilling activity, resulting in lower demand for new and remanufactured oilfield equipment and related parts and service in the distribution and services segment.

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.

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.

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

For the three months ended March 31, 2020, the goodwill impairment charge of $ 387,970,000 was calculated as the amount that the carrying value of the reporting unit, including goodwill, and after recording impairments of long-lived assets identified above, exceeded its estimated fair value, incorporating all tax impacts caused by the recognition of the impairment loss.

In addition, the Company determined cost exceeded net realizable value for certain oilfield and pressure pumping related inventory, resulting in an $ 8,000,000 non-cash write-down during the three months ended March 31, 2020.

(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,

Three Months Ended March 31,

Compensation cost

Income tax benefit

On March 1, 2021, subject to stockholder approval, the Board of Directors approved amendments to the Company’s 2005 Stock and Incentive Plan (the “Plan”) to, among other things, add 1,400,000 shares of availability.

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

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.

During the three months ended March 31, 2022, the Company grante d 197,850 restricted stock units (“RSUs”) to selected officers and other key employees under the employee stock award plan which vest ratably over five years .

During May 2022 , the Company granted 27,696 shares of restricted stock to nonemployee 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

On March 27, 2020, the United States Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law to address the COVID-19 pandemic.

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 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 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 –

At both March 31, 2022 and December 31, 2021, the Company had a federal income tax receivable of $ 71.0 million included in Accounts Receivable –

Other on the balance sheets.

During the three months ended March 31, 2021, the Company received a tax refund of $ 119,493,000 , including accrued interest, for its 2019 federal tax return related to net operating losses being carried back to offset taxable income generated between 2014 and 2017.

During the three months ended March 31, 2021, the Company received a tax refund of $ 119.5 million, including accrued interest, for its 2019 federal tax return related to net operating losses being carried back to offset taxable income generated between 2014 and 2017.

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,

Three Months Ended March 31,

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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 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.

Certain outstanding options to purchase approximately 0.4 million and 0.6 million shares of common stock were excluded in the computation of diluted earnings per share as of March 31, 2022 and 2021, respectively, as such stock options would have been antidilutive.

Certain outstanding RSUs to convert to 7,000 shares of common stock were also excluded in the computation of diluted earnings per share as of March 31, 2021 as such RSUs would have been antidilutive.

There were no antidilutive RSUs as of March 31, 2022.

(10) 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 nine months ended September 30, 2021.

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

The Company made a contribution of $ 0.3 million to the Higman pension plan during the three months ended March 31, 2022 and a contribution of $ 0.2 million during April 2022.

The Company expects to make additional contributions of $ 0.4 million during the remainder of 2022.

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.

7 unchanged sentences

Pension Plans

Three Months Ended September 30,

Components of net periodic benefit cost:

Interest cost

Expected return on plan assets

Amortization of actuarial loss

Net periodic benefit cost

Pension Benefits

Pension Plans

Nine Months Ended September 30,

Three Months Ended March 31,

Components of net periodic benefit cost:

6 unchanged sentences

Postretirement Welfare Plan

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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 September 30,

Three Months Ended March 31,

Income Tax Provision

Income Tax (Provision) Benefit

Pension and postretirement benefits (a):

Amortization of net actuarial loss

Actuarial gains (losses)

Foreign currency translation

Nine Months Ended September 30,

Income Tax Provision

Income Tax (Provision) Benefit

Pension and postretirement benefits (a):

Amortization of net actuarial loss

Actuarial gains (losses)

Foreign currency translation

2 unchanged sentences

(13) Contingencies and Commitments

On May 10, 2019, two tank barges and a towboat, the M/V Voyager, owned and operated by Kirby Inland Marine, LP (“Kirby Inland Marine”), a wholly owned subsidiary of the Company, were struck by the LPG tanker, the Genesis River, in the Houston Ship Channel.

The bow of the Genesis River penetrated the Kirby 30015T and capsized the MMI 3014.

The collision penetrated the hull of the Kirby 30015T causing its cargo, reformate, to be discharged into the water.

The United States Coast Guard (“USCG”) and the National Transportation Safety Board (“NTSB”) designated the owner and pilot of the Genesis River as well as the subsidiary of the Company as parties of interest in their investigation into the cause of the incident.

On June 19, 2019, the Company filed a limitation action in the U.S.

District Court of the Southern District of Texas ‑

Galveston Division seeking limitation of liability and asserting that the Genesis River and her owner/manager are at fault for damages including removal costs and claims under the Oil Pollution Act of 1990 and maritime law.

Multiple claimants have filed claims in the limitation seeking damages under the Oil Pollution Act of 1990.

The court bifurcated the matter into two trials, the first to determine liability amongst the parties and the second to assess damages.

The Company entered into a settlement agreement resolving claims of natural resource damage arising out of the spill.

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

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 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.

10 unchanged sentences

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.

On March 22, 2014, two tank barges and a towboat, the M/V Miss Susan, owned by Kirby Inland Marine, were involved in a collision with the M/S Summer Wind on the Houston Ship Channel near Texas City, Texas.

The lead tank barge was damaged in the collision resulting in a discharge of intermediate fuel oil from one of its cargo tanks.

The Company is participating in the natural resource damage assessment and restoration process with federal and state government natural resource trustees.

The Company believes it has adequate insurance coverage for pollution, marine and 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.

1 unchanged sentence

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 $ 21,199,000 at September 30, 2021, including $ 13,847,000 in letters of credit and $ 7,352,000 in performance bonds.

The aggregate notional value of these instruments is $ 19.7 million at March 31, 2022, including $ 12.1 million in letters of credit and $ 7.6 million in performance bonds.

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

16 unchanged sentences

For purposes of Management’s Discussion, all net earnings (loss) per share attributable to Kirby common stockholders are “diluted earnings (loss) per share.”

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

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted average number of common stock - diluted

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, coastwise along all three United States coasts, and in Alaska and Hawaii.

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 its distribution and services segment, 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.

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,

Three Months Ended March 31,

Total revenues

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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.

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

In addition, the 2020 first quarter was favorably impacted by an income tax benefit of $50,824,000, or $0.85 per share related to net operating losses generated in 2018 and 2019 used to offset taxable income generated between 2013 and 2017.

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

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 29.8% 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.

Cash provided by operating activities for the 2022 first quarter decreased primarily due to the receipt of a tax refund of $119.5 million, including accrued interest, for the Company’s 2019 federal tax return during the 2021 first quarter.

For the 2022 first quarter, capital expenditures of $35.1 million included $30.1 million in KMT and $5.0 million in KDS and corporate, more fully described under cash flow and capital expenditures below.

The Company projects that capital expenditures for 2022 will be in the $170 million to $190 million range.

The 2022 construction program will consist of approximately $5 million for the construction of new inland towboats, $145 million to $155 million primarily for maintenance capital and improvements to existing marine equipment and facilities, and $20 million to $30 million for new machinery and equipment, facilities improvements, and information technology projects in KDS and corporate.

The Company’s debt-to-capitalization ratio decreased to 28.4% at March 31, 2022 from 28.7% at December 31, 2021, primarily due to repayments under the Term Loan in the 2022 first quarter, and an increase in total equity, primarily due to the net earnings attributable to Kirby of $17.4 million.

The Company’s debt outstanding as of March 31, 2022 and December 31, 2021 is detailed in Long-Term Financing below.

Marine Transportation

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.

For the 2022 first quarter, KMT generated 58% of the Company’s revenues.

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

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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, the Company’s marine transportation business is directly affected by the volumes produced by the Company’s petroleum, petrochemical and refining customer base.

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,

Inland tank barges:

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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 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 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.

During the 2022 first quarter, the Company's inland tank barge count and capacity was unchanged.

KMT revenues for the 2022 first quarter increased 18% and operating income increased 773% compared to the 2021 first quarter.

The increases for the 2022 first quarter were primarily due to increased tank barge utilization and term and spot pricing in the inland market and increased fuel rebills in the inland and coastal markets.

The 2021 first quarter was also heavily impacted by Winter Storm Uri 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 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 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 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.

The 2022 and 2021 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.

For the 2022 and 2021 first quarters the inland tank barge fleet contributed 78% and 75%, respectively, and the coastal fleet contributed 22% and 25%, respectively, of KMT revenues.

Inland tank barge utilization levels averaged in the mid-80% range during the 2022 first quarter compared to the mid-70% range during the 2021 first quarter.

The 2022 first quarter reflected increasing activity levels as a result of higher refinery and petrochemical plant utilization while the 2021 first quarter was impacted by reduced demand resulting from the effects of the COVID-19 pandemic causing an economic slowdown as well as reduced volumes due to Winter Storm Uri.

Coastal tank barge utilization levels averaged in the low 90% range during the 2022 first quarter compared to the mid-70% range during the 2021 first quarter.

The increase in coastal tank barge utilization during 2022 was primarily due to the retirement of underutilized barges in the 2021 third quarter and some modest improvements in customer demand.

Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of tank barges in the coastal industry in 2022 and 2021.

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.

During both the 2022 and 2021 first quarters approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues.

Inland time charters during the 2022 and 2021 first quarters represented 58% and 61%, respectively, of the inland revenues under term contracts.

During both the 2022 and 2021 first quarters approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues.

Coastal time charters represented approximately 90% and 85% of coastal revenues under term contracts during the 2022 and 2021 first quarters, respectively.

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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March 31, 2022

June 30, 2021

September 30, 2021

Inland market:

Term decrease

(7)% –

(6)% –

(2)% –

Spot decrease

(25)% –

(10)% –

Term increase

Spot increase

Coastal market (a):

Term increase (decrease)

Spot increase (decrease)

Term increase

Spot increase

(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, 2022, 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 5%, excluding fuel.

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.

KMT operating margin was 4.8% and 0.6% for the 2022 and 2021 first quarters, respectively.

Distribution and Services

The Company, through its distribution and services segment, 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.

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 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 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.

Historically, 75 to 150 older inland tank barges are retired from service each year industry-wide.

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 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.

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.

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 2022 first quarter KDS generated 42% of the Company’s revenues, of which 88% was generated from service and parts and 12%, 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 2022 first quarter increased 30% and operating income increased 277% compared with the 2021 first quarter.

In the commercial and industrial market, the increases for the 2022 first quarter were primarily attributable to improved 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 2022 first quarter results.

In addition, the 2021 first quarter was impacted by Winter Storm Uri which caused reduced activity, especially in the Southern United States, in the commercial and industrial market.

For the 2022 first quarter, the commercial and industrial market contributed 58% of KDS revenues.

In the oil and gas market, revenues and operating income improved compared to the 2021 first quarter due to higher oilfield activity which resulted in increased demand for new transmissions and parts in the distribution business.

Although the manufacturing business was heavily impacted by 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 2022 first quarter, the oil and gas market contributed 42% of KDS revenues.

KDS operating margin was 4.3% and 1.5% for the 2022 and 2021 first quarters, respectively.

Although the 2022 first quarter was heavily impacted by the COVID-19 Omicron variant in KMT, activity levels improved considerably in March.

KDS also experienced supply chain challenges that impacted the 2022 first quarter but expects overall demand for its products and services to continue to improve as the year progresses.

As such, the Company expects both KMT and KDS to deliver continued improved financial results in 2022.

The inland marine transportation market, revenues and operating income are expected to continue to improve, driven by increased barge utilization, improvements in the spot market, and renewals of expiring term contracts at higher rates.

Rising costs from inflation, including significantly higher fuel prices, are expected to be headwinds but are anticipated to be largely mitigated when escalations in contracts occur during the second half of the year.

In coastal marine, modest improvements in demand and pricing are anticipated in 2022, but revenues and operating income are expected to be impacted by planned shipyard maintenance and ballast water treatment installations on certain vessels for the duration of the year.

KDS results are largely influenced by the cycles of the oil and gas, marine, power generation, on-highway and other related industrial markets.

In the oil and gas market, high commodity prices, increasing rig counts, and growing well completions activity are expected to result in increased demand for original equipment manufacturer products, parts, and services as well as for new environmentally friendly pressure pumping equipment and power generation equipment for electric fracturing.

In commercial and industrial, favorable economic activity is expected to result in increased demand in power generation, marine repair, and on-highway.

Overall, despite ongoing supply chain issues and long lead times, favorable oilfield fundamentals and increased demand in commercial and industrial are expected to result in improved financial results in 2022.

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 purchase was through cash provided by operating activities.

Results of Operations

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 September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

Marine transportation

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Marine Transportation

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 September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

Marine transportation revenues

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Marine Transportation Revenues

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

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:

2022 First Quarter

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 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.

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.

KMT revenues for the 2022 first quarter increased 18% compared to the 2021 first quarter revenues.

The increase for the 2022 first quarter was primarily due to increased tank barge utilization and term and spot pricing in the inland market and increased fuel rebills in the inland and coastal markets.