KIRBY CORP 10-Q

Item 1. Financial Statements KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED BALANCE SHEETS (Unaudited) March 31, 2024 December 31, 2023 ($ in thousands) ASSETS Current assets: Cash and cash equivalents $ 75,216 $ 32,577 Accounts receivable: Trade – less allowance for doubtful accounts 529,141 526,691 Other 55,949 52,025 Inventories – net 446,803 454,389 Prepaid expenses and other current assets 68,369 69,479 Total current assets 1,175,478 1,135,161 Property and equipment 5,880,403 5,824,038 Accumulated depreciation ( 1,997,082 ) ( 1,962,933 ) Property and equipment – net 3,883,321 3,861,105 Operating lease right-of-use assets 149,412 152,216 Goodwill 438,748 438,748 Other intangibles, net 40,797 42,927 Other assets 88,081 92,040 Total assets $ 5,775,837 $ 5,722,197 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Bank notes payable $ 8,643 $ 8,068 Income taxes payable 11,252 1,486 Accounts payable 249,644 269,378 Accrued liabilities 194,819 228,946 Current portion of operating lease liabilities 32,601 33,340 Deferred revenues 153,435 134,577 Total current liabilities 650,394 675,795 Long-term debt, net – less current portion 1,051,822 1,008,527 Deferred income taxes 705,834 696,557 Operating lease liabilities – less current portion 136,980 138,811 Other long-term liabilities 14,066 15,830 Total long-term liabilities 1,908,702 1,859,725 Contingencies and commitments — — Equity: Kirby stockholders’ equity: Common stock, $ 0.10 par value per share. Authorized 120 million shares, issued 65.5 million shares 6,547 6,547 Additional paid-in capital 859,150 863,963 Accumulated other comprehensive income – net 34,611 35,006 Retained earnings 2,761,733 2,691,665 Treasury stock – at cost, 7.2 million shares at March 31, 2024 and 6.8 million at December 31, 2023 ( 446,393 ) ( 411,750 ) Total Kirby stockholders’ equity 3,215,648 3,185,431 Noncontrolling interests 1,093 1,246 Total equity 3,216,741 3,186,677 Total liabilities and equity $ 5,775,837 $ 5,722,197 See accompanying notes to condensed financial statements. 2 KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended March 31, 2024 2023 ($ in thousands, except per share amounts) Revenues: Marine transportation $ 475,412 $ 412,495 Distribution and services 332,610 337,949 Total revenues 808,022 750,444 Costs and expenses: Costs of sales and operating expenses 550,681 542,080 Selling, general and administrative 90,206 88,849 Taxes, other than on income 8,044 9,186 Depreciation and amortization 57,642 51,109 Gain on disposition of assets ( 74 ) ( 2,230 ) Total costs and expenses 706,499 688,994 Operating income 101,523 61,450 Other income 3,269 6,443 Interest expense ( 13,151 ) ( 13,221 ) Earnings before taxes on income 91,641 54,672 Provision for taxes on income ( 21,726 ) ( 14,051 ) Net earnings 69,915 40,621 Net loss attributable to noncontrolling interests 153 77 Net earnings attributable to Kirby $ 70,068 $ 40,698 Net earnings per share attributable to Kirby common stockholders: Basic $ 1.20 $ 0.68 Diluted $ 1.19 $ 0.68 See accompanying notes to condensed financial statements. 3 KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended March 31, 2024 2023 ($ in thousands) Net earnings $ 69,915 $ 40,621 Other comprehensive income (loss), net of taxes: Pension and postretirement benefits ( 395 ) ( 61 ) Foreign currency translation adjustments — 225 Total other comprehensive income (loss), net of taxes ( 395 ) 164 Total comprehensive income, net of taxes 69,520 40,785 Net loss attributable to noncontrolling interests 153 77 Comprehensive income attributable to Kirby $ 69,673 $ 40,862 See accompanying notes to condensed financial statements. 4 KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2024 2023 ($ in thousands) Cash flows from operating activities: Net earnings $ 69,915 $ 40,621 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 57,642 51,109 Provision for deferred income taxes 9,411 12,573 Amortization of share-based compensation 6,408 5,808 Amortization of major maintenance costs 8,345 6,992 Other 1,607 ( 2,302 ) Decrease in cash flows resulting from changes in operating assets and liabilities, net ( 30,040 ) ( 98,321 ) Net cash provided by operating activities 123,288 16,480 Cash flows from investing activities: Capital expenditures ( 81,047 ) ( 73,199 ) Proceeds from disposition of assets 2,412 8,031 Net cash used in investing activities ( 78,635 ) ( 65,168 ) Cash flows from financing activities: Borrowings on bank credit facilities, net 43,575 112,691 Borrowings on long-term debt — 240,000 Payments on long-term debt — ( 350,000 ) Payment of debt issuance costs ( 3 ) ( 1,236 ) Proceeds from exercise of stock options 1,509 118 Payments related to tax withholding for share-based compensation ( 5,284 ) ( 3,555 ) Treasury stock purchases ( 41,787 ) ( 3,184 ) Other ( 24 ) ( 24 ) Net cash used in financing activities ( 2,014 ) ( 5,190 ) Increase (decrease) in cash and cash equivalents 42,639 ( 53,878 ) Cash and cash equivalents, beginning of year 32,577 80,577 Cash and cash equivalents, end of period $ 75,216 $ 26,699 Supplemental disclosures of cash flow information: Cash paid during the period: Interest paid $ 21,511 $ 20,293 Income taxes paid, net $ 1,062 $ 694 Operating cash outflow from operating leases $ 11,256 $ 10,451 Non-cash investing activity: Capital expenditures included in accounts payable $ 1,590 $ ( 8,197 ) Right-of-use assets obtained in exchange for lease obligations $ 5,088 $ 10,768 See accompanying notes to condensed financial statements. 5 KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Accumulated Additional Other Common Stock Paid-in- Comprehensive Retained Treasury Stock Noncontrolling Shares Amount Capital Income, Net Earnings Shares Amount Interests Total (in thousands) Balance at December 31, 2023 65,472 $ 6,547 $ 863,963 $ 35,006 $ 2,691,665 ( 6,843 ) $ ( 411,750 ) $ 1,246 $ 3,186,677 Stock option exercises — — 319 — — 19 1,190 — 1,509 Issuance of stock for equity awards, net of forfeitures — — ( 11,540 ) — — 190 11,540 — — Tax withholdings on equity award vesting — — — — — ( 66 ) ( 5,284 ) — ( 5,284 ) Amortization of share-based compensation — — 6,408 — — — — — 6,408 Treasury stock purchases — — — — — ( 499 ) ( 41,787 ) — ( 41,787 ) Excise taxes on treasury stock purchases — — — — — — ( 302 ) — ( 302 ) Total comprehensive income, net of taxes — — — ( 395 ) 70,068 — — ( 153 ) 69,520 Balance at March 31, 2024 65,472 $ 6,547 $ 859,150 $ 34,611 $ 2,761,733 ( 7,199 ) $ ( 446,393 ) $ 1,093 $ 3,216,741 Accumulated Additional Other Common Stock Paid-in- Comprehensive Retained Treasury Stock Noncontrolling Shares Amount Capital Income, Net Earnings Shares Amount Interests Total (in thousands) Balance at December 31, 2022 65,472 $ 6,547 $ 859,345 $ 16,853 $ 2,468,730 ( 5,565 ) $ ( 308,598 ) $ 2,291 $ 3,045,168 Stock option exercises — — ( 217 ) — — 13 335 — 118 Issuance of stock for equity awards, net of forfeitures — — ( 8,256 ) — — 149 8,256 — — Tax withholdings on equity award vesting — — — — — ( 54 ) ( 3,555 ) — ( 3,555 ) Amortization of share-based compensation — — 5,808 — — — — — 5,808 Treasury stock purchases — — — — — ( 47 ) ( 3,184 ) — ( 3,184 ) Total comprehensive income, net of taxes — — — 164 40,698 — — ( 77 ) 40,785 Balance at March 31, 2023 65,472 $ 6,547 $ 856,680 $ 17,017 $ 2,509,428 ( 5,504 ) $ ( 306,746 ) $ 2,214 $ 3,085,140 See accompanying notes to condensed financial statements. 6 KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (1) Basis for Preparation of the Condensed Financial Statements The condensed financial statements included herein have been prepared by Kirby Corporation and its consolidated subsidiaries (“Kirby” or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including significant accounting policies normally included in annual financial statements, have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Certain reclassifications have been made to reflect the current presentation of financial information. Effective January 1, 2024, the power generation revenue source within the distribution and services segment has been broken out from the commercial and industrial and oil and gas revenue sources due to the significance of the power generation market to the Company’s growth. This change had no net impact on overall Company or segment revenues and has been reflected retrospectively for all periods presented. (2) Acquisitions On July 14, 2023, the Company purchased 23 inland tank barges with a total capacity of 265,000 barrels from an undisclosed seller for $ 37 million in cash. The 23 tank barges transport petrochemicals and refined products on the Mississippi River System and the Gulf Intracoastal Waterway. The average age of the 23 barges was 14 years. The Company purchased four inland tank barges from a leasing company for $ 0.5 million in cash during the 2023 third quarter. The Company had been leasing the barges prior to the purchase. (3) Revenues The following table sets forth the Company’s revenues by major source (in thousands): Three Months Ended March 31, 2024 2023 Marine transportation segment: Inland transportation $ 386,007 $ 337,888 Coastal transportation 89,405 74,607 $ 475,412 $ 412,495 Distribution and services segment: Commercial and industrial $ 142,624 $ 153,054 Power generation 135,669 90,309 Oil and gas 54,317 94,586 $ 332,610 $ 337,949 Contract liabilities represent advance consideration received from customers, and are recognized as revenue over time or at a point in time as the related performance obligation is satisfied. Revenues recognized during the three months ended March 31, 2024 and 2023 that were included in the opening contract liability balances were $ 54.4 million and $ 38.8 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, 2024 or December 31, 2023 . The Company applies the practical expedient that allows non-disclosure of information about remaining performance obligations that have original expected durations of one year or less. (4) Segment Data The Company’s operations are aggregated into two reportable business segments as follows: Marine Transportation Segment (“KMT”) — Provides marine transportation by United States flagged vessels principally of liquid cargoes throughout the United States inland waterway system, along all three United States coasts, and, to a lesser extent, in United States coastal transportation of dry-bulk cargoes. The principal products transported include petrochemicals, black oil, refined petroleum products, and agricultural chemicals. 7 Distribution and Services Segment (“KDS”) — Provides after-market services and genuine replacement parts for engines, transmissions, reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers. The Company’s two reportable business segments are managed separately based on fundamental differences in their operations. The Company evaluates the performance of its segments based on the contributions to operating income of the respective segments, before income taxes, interest, gains or losses on disposition of assets, other nonoperating income, noncontrolling interests, accounting changes, and nonrecurring items. Intersegment revenues, based on market-based pricing, of KDS from KMT of $ 6.6 million and $ 9.4 million for the three months ended March 31, 2024 and 2023, respectively, as well as the related intersegment profit of $ 0.7 million and $ 0.9 million for the three months ended March 31, 2024 and 2023, 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, 2024 2023 Revenues: Marine transportation $ 475,412 $ 412,495 Distribution and services 332,610 337,949 $ 808,022 $ 750,444 Segment profit: Marine transportation $ 82,983 $ 43,036 Distribution and services 22,014 22,792 Other ( 13,356 ) ( 11,156 ) $ 91,641 $ 54,672 March 31, 2024 December 31, 2023 Total assets: Marine transportation $ 4,464,945 $ 4,454,931 Distribution and services 1,156,967 1,156,384 Other 153,925 110,882 $ 5,775,837 $ 5,722,197 The following table presents the details of “Other” segment loss (in thousands): Three Months Ended March 31, 2024 2023 General corporate expenses $ ( 3,548 ) $ ( 6,608 ) Gain on disposition of assets 74 2,230 Interest expense ( 13,151 ) ( 13,221 ) Other income 3,269 6,443 $ ( 13,356 ) $ ( 11,156 ) The following table presents the details of “Other” total assets (in thousands): March 31, 2024 December 31, 2023 General corporate assets $ 151,069 $ 108,306 Investment in affiliates 2,856 2,576 $ 153,925 $ 110,882 8 (5) Long-Term Debt The following table presents the carrying value and fair value (determined using inputs characteristic of a Level 2 fair value measurement) of debt outstanding (in thousands): March 31, 2024 December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value Revolving Credit Facility due July 29, 2027 (a) $ 87,000 $ 87,000 $ 44,000 $ 44,000 Term Loan due July 29, 2027 (a) 170,000 170,000 170,000 170,000 4.2 % senior notes due March 1, 2028 500,000 479,689 500,000 475,920 3.46 % senior notes due January 19, 2033 60,000 51,900 60,000 49,955 3.51 % senior notes due January 19, 2033 240,000 208,452 240,000 200,698 Credit line due June 30, 2024 — — — — Bank notes payable 8,643 8,643 8,068 8,068 1,065,643 1,005,684 1,022,068 948,641 Unamortized debt discounts and issuance costs ( 5,178 ) — ( 5,473 ) — $ 1,060,465 $ 1,005,684 $ 1,016,595 $ 948,641 (a) Variable interest rate o f 6.6 % at March 31, 2024 and 6.8 % at December 31, 2023 . On July 29, 2022, the Company entered into a new credit agreement (the “2027 Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank that allows for a $ 500 million unsecured revolving credit facility (the “2027 Revolving Credit Facility”) and a $ 250 million unsecured term loan (the “2027 Term Loan”) with a maturity date of July 29, 2027 . No repayments are required until June 30, 2025. Outstanding letters of credit under the 2027 Revolving Credit Facility were $ 6,000 and available borrowing capacity was $ 413.0 million as of March 31, 2024. On February 3, 2022, the Company entered into a note purchase agreement for the issuance of $ 300 million of unsecured senior notes with a group of institutional investors, consisting of $ 60 million of 3.46 % series A notes (“Series A Notes”) and $ 240 million of 3.51 % series B notes (“Series B Notes ”), each due January 19, 2033 (collectively, the “2033 Notes”). The Series A Notes were issued on October 20, 2022, and the Series B Notes were issued on January 19, 2023. No principal payments will be required until maturity. The Company has a $ 10 million line of credit (“Credit Line”) with Bank of America, N.A. (“Bank of America”) for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2024 . Outstanding letters of credit under the $ 10 million credit line were $ 7.3 million and available borrowing capacity was $ 2.7 million as of March 31, 2024 . (6) Leases The Company currently leases various facilities and equipment under cancelable and noncancelable operating leases. The accounting for the Company’s leases may require judgments, which include determining whether a contract contains a lease, allocating the consideration between lease and non-lease components, and determining the incremental borrowing rates. Leases with an initial noncancelable term of 12 months or less are not recorded on the balance sheet and related lease expense is recognized on a straight-line basis over the lease term. The Company has also elected to combine lease and non-lease components on all classes of leased assets, except for leased towing vessels, for which the Company estimates approximately 70 % of the costs relate to service costs and other non-lease components. Variable lease costs relate primarily to real estate executory costs (i.e. taxes, insurance and maintenance). Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year were as follows (in thousands): March 31, 2024 December 31, 2023 2024 $ 33,995 $ 38,943 2025 29,994 27,638 2026 27,246 24,945 2027 24,165 22,842 2028 19,522 18,318 Thereafter 79,809 79,755 Total lease payments 214,731 212,441 Less: imputed interest ( 45,150 ) ( 40,290 ) Operating lease liabilities $ 169,581 $ 172,151 9 The following table summarizes lease costs (in thousands): Three Months Ended March 31, 2024 2023 Operating lease cost $ 11,599 $ 10,577 Variable lease cost 578 758 Short-term lease cost 8,809 6,219 Sublease income ( 830 ) ( 843 ) $ 20,156 $ 16,711 The following table summarizes other supplemental information about the Company’s operating leases: March 31, 2024 December 31, 2023 Weighted average discount rate 4.5 % 4.4 % Weighted average remaining lease term 9 years 9 years (7) Stock Award Plans The compensation cost that has been charged against earnings for the Company’s stock award plans and the income tax benefit recognized in the statement of earnings for stock awards were as follows (in thousands): Three Months Ended March 31, 2024 2023 Compensation cost $ 6,408 $ 5,808 Income tax benefit $ 1,519 $ 1,493 During the three months ended March 31, 2024, the Company grant ed 164,793 restricted stock units (“RSUs”) to selected officers and other key employees under the employee stock award plan, the majority of which vest ratably over five years . During April 2024, the Company granted 14,624 shares of restricted stock to nonemployees directors of the Company under the director stock plan which vest six months after the date of grant. (8) Taxes on Income Earnings (loss) before taxes on income and details of the provision for taxes on income were as follows (in thousands): Three Months Ended March 31, 2024 2023 Earnings (loss) before taxes on income: United States $ 91,654 $ 53,863 Foreign ( 13 ) 809 $ 91,641 $ 54,672 Provision for taxes on income: Federal: Current $ 10,619 $ — Deferred 8,082 11,733 State and local: Current 1,622 1,267 Deferred 1,329 840 Foreign - current 74 211 $ 21,726 $ 14,051 10 (9) Earnings Per Share The following table presents the components of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended March 31, 2024 2023 Net earnings attributable to Kirby $ 70,068 $ 40,698 Undistributed earnings allocated to restricted shares ( 1 ) ( 2 ) Earnings available to Kirby common stockholders – basic 70,067 40,696 Undistributed earnings allocated to restricted shares 1 2 Undistributed earnings reallocated to restricted shares ( 1 ) ( 2 ) Earnings available to Kirby common stockholders – diluted $ 70,067 $ 40,696 Shares outstanding: Weighted average common stock issued and outstanding 58,473 59,981 Weighted average unvested restricted stock ( 1 ) ( 3 ) Weighted average common stock outstanding – basic 58,472 59,978 Dilutive effect of stock options and restricted stock units 347 294 Weighted average common stock outstanding – diluted 58,819 60,272 Net earnings per share attributable to Kirby common stockholders: Basic $ 1.20 $ 0.68 Diluted $ 1.19 $ 0.68 Certain outstanding options to purchase approximately 23,000 and 309,000 shares of common stock were excluded in the computation of diluted earnings per share as of March 31, 2024 and 2023 , respectively, as such stock options would have been antidilutive. There were no antidilutive RSUs as of March 31, 2024 and 2023 . (10) Inventories The following table presents the details of inventories – net (in thousands): March 31, 2024 December 31, 2023 Finished goods $ 356,688 $ 351,050 Work in process 90,115 103,339 $ 446,803 $ 454,389 (11) Retirement Plans The Company sponsors a defined benefit plan for certain of its inland vessel personnel and shore based tankermen. The plan benefits are based on an employee’s years of service and compensation. The plan assets consist primarily of equity and fixed income securities. On April 12, 2017, the Company amended its pension plan to cease all benefit accruals for periods after May 31, 2017 for certain participants. Participants grandfathered and not impacted were those, as of the close of business on May 31, 2017, who either (a) had completed 15 years of pension service or (b) had attained age 50 and completed 10 years of pension service. Participants non-grandfathered are eligible to receive discretionary 401(k) plan contributions. The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. The plan’s benefit obligations are based on a variety of demographic and economic assumptions, and the pension plan assets’ returns are subject to various risks, including market and interest rate risk, making an accurate prediction of the pension plan contribution difficult. Based on current pension plan assets and market conditions, the Company does not expect to make a contribution to the Kirby pension plan during 2024. On February 14, 2018, with the acquisition of Higman Marine, Inc. and its affiliated companies (“Higman”), the Company assumed Higman’s pension plan for its inland vessel personnel and office staff. On March 27, 2018, the Company amended the Higman pension plan to close it to all new entrants and cease all benefit accruals for periods after May 15, 2018 for all participants. The Company made contributions of $ 0.2 million to the Higman pension plan during the three months ended March 31, 2024 . The Company expects to make additional contributions of $ 1.6 million during the remainder of 2024. 11 The Company sponsors an unfunded defined benefit health care plan that provides limited postretirement medical benefits to employees who meet minimum age and service requirements, and to eligible dependents. The plan is contributory, with retiree contributions adjusted annually. The plan eliminated coverage for future retirees as of December 31, 2011. The Company also has an unfunded defined benefit supplemental executive retirement plan (“SERP”) that was assumed in an acquisition in 1999. That plan ceased to accrue additional benefits effective January 1, 2000. The components of net periodic benefit cost for the Company’s defined benefit plans were as follows (in thousands): Pension Benefits Pension Plans SERP Three Months Ended March 31, Three Months Ended March 31, 2024 2023 2024 2023 Components of net periodic benefit cost: Service cost $ 874 $ 892 $ — $ — Interest cost 4,320 4,606 10 11 Expected return on plan assets ( 6,219 ) ( 5,723 ) — — Amortization of actuarial (gain) loss ( 473 ) — 8 6 Net periodic benefit cost $ ( 1,498 ) $ ( 225 ) $ 18 $ 17 The components of net periodic benefit cost for the Company’s postretirement benefit plan were as follows (in thousands): Other Postretirement Benefits Postretirement Welfare Plan Three Months Ended March 31, 2024 2023 Components of net periodic benefit cost: Interest cost $ 5 $ 6 Amortization of actuarial gain ( 70 ) ( 86 ) Net periodic benefit cost $ ( 65 ) $ ( 80 ) (12) Other Comprehensive Income The Company’s changes in other comprehensive income (loss) were as follows (in thousands): Three Months Ended March 31, 2024 2023 Gross Amount Income Tax Benefit Net Amount Gross Amount Income Tax Benefit Net Amount Pension and postretirement benefits (a): Amortization of net actuarial gain $ ( 535 ) $ 140 $ ( 395 ) $ ( 80 ) $ 19 $ ( 61 ) Foreign currency translation — — — 225 — 225 Total $ ( 535 ) $ 140 $ ( 395 ) $ 145 $ 19 $ 164 (a) Actuarial gains are amortized into other income (expense). ( See Note 11, Retirement Plans) (13) Contingencies and Commitments On October 13, 2016, the tug Nathan E. Stewart and barge DBL 55, an articulated tank barge and tugboat unit (“ATB”) owned and operated by Kirby Offshore Marine, LLC, a wholly owned subsidiary of the Company, ran aground at the entrance to Seaforth Channel on Atholone Island, British Columbia. The grounding resulted in a breach of a portion of the Nathan E. Stewart’s fuel tanks causing a discharge of diesel fuel into the water. The United States Coast Guard and the National Transportation Safety Board designated the Company as a party of interest in their investigation as to the cause of the incident. The Canadian authorities including Transport Canada and the Canadian Transportation Safety Board investigated the cause of the incident. On October 10, 2018, the Heiltsuk First Nation filed a civil action in the British Columbia Supreme Court against a subsidiary of the Company, the master and pilot of the tug, the vessels and the Canadian government seeking unquantified damages as a result of the incident. On May 1, 2019, the Company filed a limitation action in the Federal Court of Canada seeking limitation of liability relating to the incident as provided under admiralty law. The Heiltsuk First Nation’s civil claim has been consolidated into the Federal Court limitation action as of July 26, 2019 and it is expected that the Federal Court of Canada will decide all claims against the Company. The Company is unable to estimate the potential exposure in the civil proceeding. The Company has various insurance policies covering liabilities including pollution, property, marine and general liability and believes that it has satisfactory insurance coverage for the cost of cleanup and salvage operations as well as other potential liabilities arising from the incident. The Company believes its accrual of such estimated liability is adequate for the incident and does not expect the incident to have a material adverse effect on its business or financial condition. 12 In addition, the Company is involved in various legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations, or cash flows. Management believes its accrual of such estimated liability is adequate and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies. The Company has issued guaranties or obtained standby letters of credit and performance bonds supporting performance by the Company and its subsidiaries of contractual or contingent legal obligations of the Company and its subsidiaries incurred in the ordinary course of business. The aggregate notional value of these instruments is $ 31.6 million at March 31, 2024, including $ 12.1 million in letters of credit and $ 19.5 million in performance bonds. All of these instruments have an expiration date within two years . The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur regarding these instruments. (14) Subsequent Event On April 23, 2024, the Company signed an agreement to purchase 13 inland tank barges, with a total capacity of 347,000 barrels, and two high horsepower towboats from an undisclosed seller for approximately $ 65 million in cash. The 13 tank barges, including three specialty barges, transport petrochemicals and refined products on the Mississippi River System and Gulf Intracoastal Waterway. The average age of the 13 barges is 15 years. The equipment acquisition is expected to close in May 2024 . 13