What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 309 added, 215 removed, 507 unchanged (51% of the section changed)

19 unchanged sentences

Bank notes payable

Income taxes payable

Accounts payable

18 unchanged sentences

Treasury stock –

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

at cost, 5.5 million shares at June 30, 2022 and 5.4 million at December 31, 2021

Total Kirby stockholders’

4 unchanged sentences

CONDENSED STATEMENTS OF EARNINGS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands, except per share amounts)

11 unchanged sentences

Interest expense

Earnings (loss) before taxes on income

(Provision) benefit for taxes on income

Net earnings (loss)

Earnings before taxes on income

Provision for taxes on income

Net earnings attributable to noncontrolling interests

Net earnings (loss) attributable to Kirby

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

Net earnings attributable to Kirby

Net earnings per share attributable to Kirby common stockholders:

See accompanying notes to condensed financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

Net earnings (loss)

Other comprehensive income (loss), net of taxes:

Other comprehensive income, net of taxes:

Pension and postretirement benefits

Foreign currency translation adjustments

Total other comprehensive income (loss), net of taxes

Total comprehensive income (loss), net of taxes

Total other comprehensive income, net of taxes

Total comprehensive income, net of taxes

Net earnings attributable to noncontrolling interests

Comprehensive income (loss) attributable to Kirby

Comprehensive income attributable to Kirby

See accompanying notes to condensed financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 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 earnings to net cash provided by operations:

Depreciation and amortization

Provision (benefit) for deferred income taxes

Provision for deferred income taxes

Amortization of share-based compensation

4 unchanged sentences

Capital expenditures

Acquisitions of businesses

Acquisitions of businesses and marine equipment

Proceeds from disposition of assets

5 unchanged sentences

Payments related to tax withholding for share-based compensation

Treasury stock purchases

Return of investment to noncontrolling interest and other

6 unchanged sentences

Interest paid

Income taxes refunded, net

Income taxes paid (refunded), net

Operating cash outflow from operating leases

9 unchanged sentences

(in thousands)

Balance at March 31, 2022

Stock option exercises

Issuance of stock for equity awards, net of forfeitures

Tax withholdings on equity award vesting

Amortization of unearned share-based compensation

Treasury stock purchases

Total comprehensive income, net of taxes

Return of investment to noncontrolling interests

Balance at June 30, 2022

Comprehensive

Treasury Stock

Noncontrolling

(in thousands)

Balance at March 31, 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 income, net of taxes

Balance at June 30, 2021

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

3 unchanged sentences

Amortization of share-based compensation

Treasury stock purchases

Total comprehensive income, net of taxes

Return of investment to noncontrolling interests

Balance at March 31, 2022

Balance at June 30, 2022

Comprehensive

7 unchanged sentences

Amortization of share-based compensation

Total comprehensive loss, net of taxes

Total comprehensive income, net of taxes

Return of investment to noncontrolling interests

Balance at March 31, 2021

Balance at June 30, 2021

See accompanying notes to condensed financial statements.

6 unchanged sentences

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

(2) Acquisition

(2) Acquisitions

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.

During the six months ended June 30, 2021, the Company purchased four inland tank barges from a leasing company for $ 7.5 million 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 March 31,

Three Months Ended June 30,

Six Months Ended June 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 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.

Revenues recognized during the six months ended June 30, 2022 and 2021 that were included in the opening contract liability balances were $ 46.7 million and $ 39.2 million , respectively.

The Company presents all contract liabilities within the deferred revenues financial statement caption on the balance sheets.

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

The Company did no t have any contract assets at June 30, 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 Segment ("KMT") —

Marine Transportation Segment (“KMT”) —

Provides marine transportation by United States flagged vessels principally of liquid cargoes throughout the United States inland waterway system, along all three United States coasts, and, to a lesser extent, in United States coastal transportation of dry-bulk cargoes.

The principal products transported include petrochemicals, black oil, refined petroleum products, and agricultural chemicals.

Distribution and Services Segment ("KDS") —

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.

2 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 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.

Intersegment revenues, based on market-based pricing, of KDS from KMT of $ 6.3 million and $ 13.9 million for the three months and six months ended June 30, 2022, respectively, and $ 7.3 million and $ 12.2 million for the three months and six months ended June 30, 2021, respectively, as well as the related intersegment profit of $ 0.6 million and $ 1.4 million for the three months and six months ended June 30, 2022 and $ 0.7 million and $ 1.2 million for the three months and six months ended June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Marine transportation

8 unchanged sentences

segment loss (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

General corporate expenses

7 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):

March 31, 2022

June 30, 2022

December 31, 2021

8 unchanged sentences

Unamortized debt discounts and issuance costs (b)

(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.

(a) Variable interest rate o f 3.0 % and 1.5 % at June 30, 2022 and December 31, 2021, respectively.

(b) Excludes $ 1.1 million and $ 1.4 million attributable to the 2024 Revolving Credit Facility included in other assets at June 30, 2022 and December 31, 2021 , respectively.

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

Three Months Ended March 31,

Six Months Ended June 30,

Borrowings on bank credit facilities

Payments on bank credit facilities

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 million unsecured revolving credit facility (“Revolving Credit Facility”) and an unsecured term loan (“Term Loan”) with a maturity date of March 27, 2024 .

At June 30, 2022, the Company had an amended and restated credit agreement (the “2024 Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A.

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

The 2024 Term Loan was prepayable, in whole or in part, without penalty.

During the six months ended June 30, 2022 , the Company repaid $ 30.0 million under the 2024 Term Loan.

Outstanding letters of credit under the 2024 Revolving Credit Facility were $ 5.1 million and available borrowing capacity was $ 844.9 million as of June 30, 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 June 30, 2022.

On July 29, 2022, the 2024 Credit Agreement was replaced with a new credit agreement (the “2027 Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A.

as the administrative agent bank that allows for a $ 500 million unsecured revolving credit facility (the “2027 Revolving Credit Facility”) and a $ 250 million unsecured term loan (the “2027 Term Loan”) with a maturity date of July 29, 2027 .

In conjunction with entering into the 2027 Credit Agreement, on July 29, 2022, the Company borrowed $ 35 million under the 2027 Revolving Credit Facility and $ 250 million under the 2027 Term Loan to repay borrowings under the 2024 Term Loan.

The 2027 Term Loan is repayable in quarterly installments, scheduled to commence December 31, 2022, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $ 43.8 million payable upon maturity, assuming no prepayment.

The 2027 Term Loan is prepayable, in whole or in part, without penalty.

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 2027 Credit Agreement provides for a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) or a base rate calculated with reference to the prime rate quoted by The Wall Street Journal, the Federal Reserve Bank of New York Rate plus 0.5 %, or the adjusted SOFR rate for a one month interest period plus 1.0 %, among other factors (the “Alternate Base Rate”).

The interest rate varies with the Company's credit rating and is currently 137.5 basis points over SOFR or 37.5 basis points over the Alternate Base Rate.

The 2027 Credit Agreement contains certain financial covenants including an interest coverage ratio and debt-to-capitalization ratio.

In addition to financial covenants, the 2027 Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates, and changes in lines of business.

The 2027 Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness, among other events.

Borrowings under the 2027 Credit Agreement may be used for general corporate purposes including acquisitions.

The 2027 Revolving Credit Facility includes a $ 25 million commitment which may be used for standby letters of credit.

On February 3, 2022, the Company entered into a note purchase agreement for the issuance of $ 300 million of unsecured senior notes with a group of institutional investors, consisting of $ 60 million of 3.46 % series A notes (“Series A Notes”) and $ 240 million of 3.51 % series B notes (“Series B Notes ”), each due January 19, 2033 (collectively, the “2033 Notes”).

The Series A Notes 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.

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.

2 unchanged sentences

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 3.29 % unsecured senior notes due February 27, 2023 (the “2023 Notes”) are excluded from short term liabilities because the Company intends to use a combination of the proceeds from the issuance of the 2033 Notes and availability under the 2027 Re volving Credit Facility to repay the 2023 Notes upon maturity.

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

9 unchanged sentences

The following table summarizes lease costs (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

7 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Compensation cost

Income tax benefit

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.

During the six months ended June 30, 2022, the Company grant ed 207,916 restricted stock units (“RSUs”) to selected officers and other key employees under the employee stock award plan which vest ratably over five years and 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

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 –

At June 30, 2022 and December 31, 2021, the Company had a federal income tax receivable of $ 70.5 million and $ 71.0 million , 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Earnings (loss) before taxes on income:

4 unchanged sentences

(9) Earnings Per Share

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

Three Months Ended March 31,

Net earnings (loss) attributable to Kirby

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

Three Months Ended June 30,

Six Months Ended June 30,

Net earnings attributable to Kirby

Undistributed earnings allocated to restricted shares

Earnings (loss) available to Kirby common stockholders –

Earnings available to Kirby common stockholders –

Undistributed earnings allocated to restricted shares

Undistributed earnings reallocated to restricted shares

Earnings (loss) available to Kirby common stockholders –

Earnings available to Kirby common stockholders –

Shares outstanding:

4 unchanged sentences

Weighted average common stock outstanding –

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

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.

Net earnings per share attributable to Kirby common stockholders:

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 June 30, 2022 and 2021, respectively, as such stock options would have been antidilutive.

Certain outstanding RSUs to convert to 12,000 and 5,000 shares of common stock were also excluded in the computation of diluted earnings per share as of June 30, 2022 and 2021 , respectively, as such RSUs would have been antidilutive.

(10) Inventories

17 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 $ 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 made a contribution of $ 0.5 million to the Higman pension plan during the six months ended June 30, 2022 and a contribution of $ 0.2 million during July 2022 .

The Company expects to make additional contributions of $ 0.2 million during the remainder of 2022.

8 unchanged sentences

Pension Plans

Three Months Ended March 31,

Three Months Ended June 30,

Components of net periodic benefit cost:

3 unchanged sentences

Net periodic benefit cost

Pension Benefits

Pension Plans

Six Months Ended June 30,

Components of net periodic benefit cost:

Interest cost

Expected return on plan assets

Amortization of actuarial loss

Net periodic benefit cost

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

1 unchanged sentence

Postretirement Welfare Plan

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Components of net periodic benefit cost:

3 unchanged sentences

(12) Other Comprehensive Income

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

Three Months Ended March 31,

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

Three Months Ended June 30,

Income Tax Provision

2 unchanged sentences

Amortization of net actuarial loss

Actuarial gains

Foreign currency translation

(a) Actuarial gains (losses) are amortized into other income (expense).

Six Months Ended June 30,

Income Tax Provision

Pension and postretirement benefits (a):

Amortization of net actuarial loss

Actuarial gains

Foreign currency translation

(a) Actuarial gains are amortized into other income (expense).

( See Note 11, Retirement Plans)

15 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 $ 19.7 million at March 31, 2022, including $ 12.1 million in letters of credit and $ 7.6 million in performance bonds.

The aggregate notional value of these instruments is $ 20.2 million at June 30, 2022, including $ 12.1 million in letters of credit and $ 8.1 million in performance bonds.

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

15 unchanged sentences

Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements.

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

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

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.

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total revenues

Net earnings (loss) attributable to Kirby

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

Net earnings attributable to Kirby

Net earnings per share attributable to Kirby common stockholders –

Net cash provided by operating activities

Capital expenditures

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 2022 second quarter included $1.5 million before taxes, $1.3 million after taxes, or $0.02 per share of severance expense.

Cash provided by operating activities for the 2022 first six months 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 six months, capital expenditures of $79.1 million included $66.3 million in KMT and $12.8 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.

The Company’s debt-to-capitalization ratio decreased to 27.9% at June 30, 2022 from 28.7% at December 31, 2021, primarily due to repayments under the 2024 Term Loan in the 2022 first six months, and an increase in total equity, primarily due to the net earnings attributable to Kirby of $45.9 million, partially offset by treasury stock purchases of $18.1 million.

The Company’s debt outstanding as of June 30, 2022 and December 31, 2021 is detailed in Long-Term Financing below.

Marine Transportation

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

For both the 2022 second quarter and first six months, 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.

12 unchanged sentences

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 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.

During the 2022 first six months, the Company brought back into service seven inland tank barges and leased two tank barges.

The net result was an increase of nine inland tank barges and approximately 0.1 million barrels of capacity.

KMT revenues for the 2022 second quarter and first six months increased 22% and 20%, respectively, and operating income increased 67% and 134%, respectively, compared to the 2021 second quarter and first six months.

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

The 2021 first six months 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 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 2022 and 2021 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast, flooding on the Mississippi River, and various lock closures along the Gulf Intracoastal Waterway, in addition to ice on the Illinois River.

For both the 2022 second quarter and first six months, the inland tank barge fleet contributed 78% and the coastal fleet contributed 22% of KMT revenues.

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 KMT revenues.

Inland tank barge utilization levels averaged in the mid-80% range during the 2022 first quarter and the low 90% range during the 2022 second quarter compared to the mid-70% range during the 2021 first quarter and the low to mid-80% range during the 2021 second quarter.

The 2022 first six months reflected increasing activity levels as a result of higher refinery and petrochemical plant utilization while the 2021 first six months 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 during the 2021 first quarter partially offset by the Colonial Pipeline outage which increased barge transportation activity in the 2021 second quarter.

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

During both the 2022 second quarter and first six months, approximately 60% of KMT inland revenues were under term contracts and 40% were spot contract revenues.

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

Inland time charters during both the 2022 second quarter and first six months represented 57% of the inland revenues under term contracts compared with 57% and 59% in the 2021 second quarter and first six months, respectively.

During each of the 2022 and 2021 second quarters and first six months, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues.

Coastal time charters represented approximately 90% of coastal revenues under term contracts during both the 2022 second quarter and first six months compared to approximately 85% during both the 2021 second quarter and first six months.

Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months.

2 unchanged sentences

March 31, 2022

June 30, 2022

Inland market:

5 unchanged sentences

(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.

Contract pricing in the coastal marine market continued to be impacted by the oversupply of tank barges in the coastal industry in 2022 and 2021.

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.

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

KMT operating margin was 7.6% and 6.3% for the 2022 second quarter and first six months, respectively, compared to 5.6% and 3.2% for the 2021 second quarter and first six months, respectively.

Distribution and Services

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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.

For both the 2022 second quarter and first six months, KDS generated 42% of the Company’s revenues, of which 82% and 85%, respectively, were generated from service and parts and 18% and 15%, respectively, from manufacturing.

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

KDS revenues for the 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.

KDS revenues for the 2022 second quarter and first six months increased 29% and 30%, respectively, and operating income increased 172% and 206%, respectively, compared with the 2021 second quarter and first six months.

In the commercial and industrial market, the increases for the 2022 second quarter and first six months were primarily attributable to strong economic activity across the United States which resulted in higher business levels in the marine and on-highway businesses.

Increased product sales in Thermo King also contributed favorably to the 2022 second quarter and first six months results.

These increases were partially offset by continuing supply chain constraints and delays.

The 2021 first six months 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 second quarter and first six months, the commercial and industrial market contributed 55% and 56%, respectively, of KDS revenues.

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

Although the manufacturing business was 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.

For the 2022 second quarter and first six months, the oil and gas market contributed 45% and 44%, respectively, of KDS revenues.

KDS operating margin was 5.7% and 5.1% for the 2022 second quarter and first six months, respectively, compared to 2.7% and 2.1% for the 2021 second quarter and first six months, respectively.

Refinery and petrochemical utilization levels are near historic highs.

This is favorable for the Company's barge utilization which is strong in both inland and coastal markets with steadily increasing rates.

In KDS, despite persistent supply chain constraints and delays, demand for the Company's products and services continues to grow.

Overall, the Company expects both KMT and KDS to deliver 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.

The impacts of rising costs from inflationary pressures, including significantly higher fuel prices, are expected to be recovered as term contracts renew and contract escalators reprice over the coming quarters and into 2023.

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.

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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.

During the six months ended June 30, 2021, the Company purchased four inland tank barges from a leasing company for $7.5 million in cash.

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

Financing of the purchases was through cash provided by operating activities.

Results of Operations

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

Three Months Ended March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

Marine transportation

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Marine transportation revenues

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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

2022 Second Quarter

2022 Six Months

Products Moved

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Corn, Cotton and Wheat Production, Chemical Feedstock Usage

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.

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.

KMT revenues for the 2022 second quarter and first six months increased 22% and 20%, respectively, compared to the 2021 second quarter and first six months revenues.

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