KIRBY CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. Such statements involve risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue,” or the negative thereof or other variations thereon or comparable terminology. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornados, COVID-19 or other pandemics, marine accidents, lock delays or closures, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Item 1A-Risk Factors found in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023. Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements. For purposes of Management’s Discussion, all net earnings per share attributable to Kirby common stockholders are “diluted earnings per share.” Overview The Company is the nation’s largest domestic tank barge operator, transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts. The Company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. Through KDS, the Company provides after-market service and parts for engines, transmissions, reduction gears and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers. The following table summarizes key operating results of the Company (in thousands, except per share amounts): Three Months Ended March 31, 2024 2023 Total revenues $ 808,022 $ 750,444 Net earnings attributable to Kirby $ 70,068 $ 40,698 Net earnings per share attributable to Kirby common stockholders – diluted $ 1.19 $ 0.68 Net cash provided by operating activities $ 123,288 $ 16,480 Capital expenditures $ 81,047 $ 73,199 The 2023 first quarter included $3.0 million before taxes, $2.4 million after taxes, or $0.04 per share of costs related to strategic review and shareholder engagement and $2.7 million before taxes, $2.2 million after taxes, or $0.04 per share of other income associated with the interest on the refund from the IRS. Cash provided by operating activities for the 2024 first quarter increased in comparison to the 2023 first quarter primarily due to higher business activity levels. For the 2024 first quarter, capital expenditures of $81.0 million included $57.0 million in KMT and $24.0 million in KDS and corporate, each more fully described under Cash Flow and Capital Expenditures below. The Company projects that capital expenditures for 2024 will be in the $290 million to $330 million range. Approximately $190 million to $240 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, including the remaining ballast water treatment systems on some coastal vessels, and facility improvements. Approximately $90 million is associated with growth capital spending in both segments. The Company’s debt-to-capitalization ratio increased to 24.8% at March 31, 2024 from 24.2% at December 31, 2023. Total equity increased as of March 31, 2024 as compared to December 31, 2023 primarily from net earnings attributable to Kirby of $70.1 million, partially offset by treasury stock purchases of $41.8 million. The Company’s debt outstanding as of March 31, 2024 and December 31, 2023 is detailed in Long-Term Financing below. 14 Marine Transportation For the 2024 first quarter, KMT generated 59% of the Company’s revenues compared to 55% for the 2023 first quarter. The segment’s customers include many of the major petrochemical and refining companies that operate in the United States. Products transported include intermediate materials used to produce many of the end products used widely by businesses and consumers — plastics, fiber, paints, detergents, oil additives and paper, among others, as well as residual fuel oil, ship bunkers, asphalt, gasoline, diesel fuel, heating oil, crude oil, natural gas condensate, and agricultural chemicals. Consequently, KMT is directly affected by the volumes produced by the Company’s petroleum, petrochemical, and refining customer base. The following table summarizes the Company’s marine transportation fleet: March 31, 2024 2023 Inland tank barges: Owned 1,044 1,004 Leased 34 39 Total 1,078 1,043 Barrel capacity (in millions) 23.8 23.2 Active inland towboats (quarter average): Owned 214 216 Chartered 72 66 Total 286 282 Coastal tank barges: Owned 28 28 Leased - 1 Total 28 29 Barrel capacity (in millions) 2.9 3.0 Coastal tugboats: Owned 24 24 Chartered 1 1 Total 25 25 Offshore dry-bulk cargo barges (owned) 4 4 Offshore tugboats and docking tugboat (owned and chartered) 5 5 The Company also owns shifting operations and fleeting facilities for dry cargo barges and tank barges in 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. Furthermore, the Company owns a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge. During the 2024 first quarter, the Company brought back into service one inland tank barge and chartered one inland tank barge, increasing its capacity by approximately 0.1 million barrels during the 2024 first quarter. KMT revenues for the 2024 first quarter increased 15% and operating income increased 93% compared to the 2023 first quarter. The increase in revenues for the 2024 first quarter was primarily due to higher term and spot pricing in the inland and coastal markets. The 2024 and 2023 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast and various lock closures. For the 2024 first quarter, the inland tank barge fleet contributed 81% and the coastal fleet contributed 19% of KMT revenues. For the 2023 first quarter, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues. Inland tank barge utilization levels averaged in the low to mid-90% range during both the 2024 and 2023 first quarters. The 2024 and 2023 first quarters were impacted by high winds and heavy fog along the Gulf Coast and lock delays. Coastal tank barge utilization levels averaged in the mid to high 90% range during both the 2024 and 2023 first quarters. During the 2024 first quarter, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. During the 2023 first quarter, approximately 55% of KMT inland revenues were under term contracts and 45% were spot 15 contract revenues. Inland time charters during the 2024 first quarter represented approximately 62% of inland revenues under term contracts compared with 60% in the 2023 first quarter. During the 2024 first quarter, approximately 96% of KMT coastal revenues were under term contracts and 4% were under spot contracts. During the 2023 first quarter, approximately 75% of KMT coastal revenues were under term contracts and 25% were under spot contracts. Coastal time charters represented approximately 98% and 90% of coastal revenues under term contracts during the 2024 and 2023 first quarters, respectively. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months. The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2024 compared to contracts renewed during the corresponding quarter of 2023: Three Months Ended March 31, 2024 Inland market: Term increase 9% – 12% Spot increase 14% – 17% Coastal market (a): Term increase 19% – 21% Spot increase 30% – 32% (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, 2024, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 9.5%, excluding fuel. KMT operating margin was 17.5% for the 2024 first quarter, compared to 10.4% for the 2023 first quarter. Distribution and Services KDS sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, manufactures and remanufactures oilfield service equipment, including pressure pumping units, and manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electric distribution and control equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers. For the 2024 first quarter, KDS generated 41% of the Company’s revenues, of which 74% were generated from service and parts and 26% 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 2024 first quarter decreased 2% and operating income decreased 3% compared with the 2023 first quarter. In the commercial and industrial market, revenues decreased compared to the 2023 first quarter, as higher business levels in marine repair were offset by lower on-highway activity. Operating income in the commercial and industrial market was up slightly compared to the 2023 first quarter mainly due to sales mix. For the 2024 first quarter, the commercial and industrial market contributed 43% of KDS revenues. In the power generation market, revenues and operating income increased compared to the 2023 first quarter with several large project awards from data center customers. For the 2024 first quarter, the power generation market contributed 41% of KDS revenues. In the oil and gas market, revenues and operating income declined compared to the 2023 first quarter due to lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts, partially offset by deliveries of electric fracturing equipment. For the 2024 first quarter, the oil and gas market contributed 16% of KDS revenues. KDS operating margin was 6.6% for the 2024 first quarter compared to 6.7% for the 2023 first quarter. Outlook Overall, the Company expects to deliver improved financial results in 2024. In KMT, barge utilization and customer demand remain strong, and rates continue to increase. In KDS, demand for products and services remains steady, and the Company continues to 16 receive new orders in manufacturing. The Company remains mindful of the ever-changing economic landscape related to the impact of higher interest rates, and possible recessionary headwinds as it moves through 2024. In the inland marine transportation market, the Company anticipates favorable market conditions driven by steady refinery and petrochemical plant utilization, as well as minimal new barge construction across the industry and a heavy year for industry maintenance due to regulatory shipyard periods. As a result, the Company expects further pricing improvements in the spot market, which currently represents 35% of inland revenues. Term contracts are also expected to continue to reset higher as a result of improved market conditions. In coastal marine, the Company expects steady customer demand and improved rates as economic conditions continue to improve. KDS results are largely influenced by power generation needs, as well as the cycles of the oil and gas, marine, on-highway and other related industrial markets. Despite economic uncertainty, the Company expects to yield incremental demand for OEM products, parts, and services in the segment. While on-highway activity in the 2024 first quarter was driven lower by reduced business levels and delays in product deliveries for Thermo King refrigeration products, the on-highway business is expected to remain stable with improved revenues as the year progresses. The Marine repair business is also expected to remain stable with improving revenues. In power generation, strong demand is expected to continue as the need for 24/7 power and back up capabilities become more critical. In oil and gas, the Company’s manufacturing backlog is expected to provide stable levels of activity through most of 2024 which will be offset by lower conventional oil and gas work. The Company anticipates extended lead times in the near-term to continue contributing to a volatile delivery schedule of new products in 2024. Acquisitions 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 with financing through borrowings under the Company’s revolving credit facility. 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. Financing of the equipment acquisition was through borrowings under the Company’s revolving credit facility. The Company purchased four inland tank barges from a leasing company for $0.5 million in cash during the 2023 third quarter. The Company had been leasing the barges prior to the purchase. Financing of the equipment acquisition was through borrowings under the Company’s revolving credit facility. Results of Operations The following table sets forth the Company’s KMT and KDS revenues and the percentage of each to total revenues (dollars in thousands): Three Months Ended March 31, 2024 % 2023 % Marine transportation $ 475,412 59 % $ 412,495 55 % Distribution and services 332,610 41 337,949 45 $ 808,022 100 % $ 750,444 100 % 17 Marine Transportation The following table sets forth KMT revenues, costs and expenses, operating income, and operating margin (dollars in thousands): Three Months Ended March 31, 2024 2023 % Change Marine transportation revenues $ 475,412 $ 412,495 15 % Costs and expenses: Costs of sales and operating expenses 301,262 282,023 7 Selling, general and administrative 37,121 34,987 6 Taxes, other than on income 6,197 7,307 (15 ) Depreciation and amortization 47,849 45,142 6 392,429 369,459 6 Operating income $ 82,983 $ 43,036 93 % Operating margins 17.5 % 10.4 % Marine Transportation Revenues The following table shows the marine transportation markets serviced by the Company, KMT revenue distribution, products moved and the drivers of the demand for the products the Company transports: Markets Serviced 2024 First Quarter Revenue Distribution Products Moved Drivers Petrochemicals 51% Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene Consumer non-durables – 70%, Consumer durables – 30% Black Oil 26% Residual Fuel Oil, Coker Feedstock, Vacuum Gas Oil, Asphalt, Carbon Black Feedstock, Crude Oil, Natural Gas Condensate, Ship Bunkers Fuel for Power Plants and Ships, Feedstock for Refineries, Road Construction Refined Petroleum Products 20% Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization Agricultural Chemicals 3% Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia Corn, Cotton and Wheat Production, Chemical Feedstock Usage KMT revenues for the 2024 first quarter increased 15% and operating income increased 93% compared to the 2023 first quarter. The increase in revenues for the 2024 first quarter was primarily due to higher term and spot pricing in the inland and coastal markets. The 2024 and 2023 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast and various lock closures. For the 2024 first quarter, the inland tank barge fleet contributed 81% and the coastal fleet contributed 19% of KMT revenues. For the 2023 first quarter, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues. Inland tank barge utilization levels averaged in the low to mid-90% range during both the 2024 and 2023 first quarters. The 2024 and 2023 first quarters were impacted by high winds and heavy fog along the Gulf Coast and lock delays. Coastal tank barge utilization levels averaged in the mid to high 90% range during both the 2024 and 2023 first quarters. The petrochemical market, which is the Company’s largest market, contributed 51% of KMT revenues for the 2024 first quarter, reflecting increased rates, volumes and utilization from Gulf Coast petrochemical plants as a result of improved economic conditions and a reduced supply of barges across the industry due to a heavier than normal maintenance cycle as compared to the 2023 first quarter. The black oil market, which contributed 26% of KMT revenues for the 2024 first quarter, reflected stable demand as refinery utilization and production levels of refined petroleum products and fuel oils increased. During the 2024 first quarter, the Company transported crude oil and natural gas condensate produced from major U.S. shale basins along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast and Canadian and Bakken crude downriver from the Midwest to the Gulf Coast. 18 The refined petroleum products market, which contributed 20% of KMT revenues for the 2024 first quarter, reflected stable volumes in the inland market with steady refinery utilization and product levels as compared to the 2023 first quarter. The agricultural chemical market, which contributed 3% of KMT revenues for the 2024 first quarter, reflected improved demand for transportation of both domestically produced and imported products as compared to the 2023 first quarter. For the 2024 first quarter, inland operations incurred 3,507 delay days, 15% fewer than the 4,125 delay days that occurred during the 2023 first quarter. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions, or other navigational factors. Delay days reflected poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays during the 2024 and 2023 first quarters. During the 2024 first quarter, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. During the 2023 first quarter, approximately 55% of KMT inland revenues were under term contracts and 45% were spot contract revenues. Inland time charters during the 2024 first quarter represented approximately 62% of inland revenues under term contracts compared with 60% in the 2023 first quarter. During the 2024 first quarter, approximately 96% of KMT coastal revenues were under term contracts and 4% were under spot contracts. During the 2023 first quarter, approximately 75% of KMT coastal revenues were under term contracts and 25% were under spot contracts. Coastal time charters represented approximately 98% and 90% of coastal revenues under term contracts during the 2024 and 2023 first quarters, respectively. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months. The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2024 compared to contracts renewed during the corresponding quarter of 2023: Three Months Ended March 31, 2024 Inland market: Term increase 9% – 12% Spot increase 14% – 17% Coastal market (a): Term increase 19% – 21% Spot increase 30% – 32% (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, 2024, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 9.5%, excluding fuel. Marine Transportation Costs and Expenses Costs and expenses for the 2024 first quarter increased 6% compared to the 2023 first quarter. Costs of sales and operating expenses for the 2024 first quarter increased 7% compared with the 2023 first quarter. The increase during the 2024 first quarter reflected improved business activity levels and inflationary cost pressures, partially offset by lower fuel costs. The inland marine transportation fleet operated an average of 286 towboats during the 2024 first quarter, of which an average of 72 were chartered, compared to 282 during the 2023 first quarter, of which an average of 66 were chartered. The Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements, taking into account variability in demand or anticipated demand, addition or removal of tank barges from the fleet, chartered towboat availability, and weather or water conditions. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements. During the 2024 first quarter, inland operations consumed 11.9 million gallons of diesel fuel compared to 12.2 million gallons consumed during the 2023 first quarter. The average price per gallon of diesel fuel consumed during the 2024 first quarter was $2.82 per gallon compared with $3.31 per gallon for the 2023 first quarter. Fuel escalation and de-escalation clauses are typically included in term contracts and are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; however, there is generally a 30 to 120 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel. Selling, general and administrative expenses for the 2024 first quarter increased 6% compared to the 2023 first quarter due to higher business activity levels and inflationary cost pressures. The increase for the 2024 first quarter was also due to salary and wage increases that went into effect July 1, 2023. 19 Marine Transportation Operating Income and Operating Margin KMT operating income for the 2024 first quarter increased 93% compared with the 2023 first quarter. The 2024 first quarter operating margin was 17.5% compared with 10.4% for the 2023 first quarter. The increases in operating income and operating margin were primarily due to higher term and spot contract pricing in the inland and coastal markets as a result of improving business activity levels, high utilization and a reduced supply of barges across the industry due to a heavier than normal maintenance cycle. Distribution and Services The following table sets forth KDS revenues, costs and expenses, operating income, and operating margin (dollars in thousands): Three Months Ended March 31, 2024 2023 % Change Distribution and services revenues $ 332,610 $ 337,949 (2 )% Costs and expenses: Costs of sales and operating expenses 249,403 259,864 (4 ) Selling, general and administrative 51,521 49,197 5 Taxes, other than on income 1,828 1,851 (1 ) Depreciation and amortization 7,844 4,245 85 310,596 315,157 (1 ) Operating income $ 22,014 $ 22,792 (3 )% Operating margins 6.6 % 6.7 % Distribution and Services Revenues The following table shows the markets serviced by KDS, the revenue distribution, and the customers for each market: Markets Serviced 2024 First Quarter Revenue Distribution Customers Commercial and Industrial 43% Inland River Carriers — Dry and Liquid, Offshore Towing — Dry and Liquid, Offshore Oilfield Services — Drilling Rigs & Supply Boats, Harbor Towing, Dredging, Great Lakes Ore Carriers, Pleasure Crafts, On and Off-Highway Transportation, Pumping Stations, Mining Power Generation 41% Power Generation & Standby Power Generation Equipment, Power Generation Rentals & Related Service, Data Centers Oil and Gas 16% Oilfield Services, Oil and Gas Operators and Producers KDS revenues for the 2024 first quarter decreased 2% compared to the 2023 first quarter. In the commercial and industrial market, revenues decreased compared to the 2023 first quarter, as higher business levels in marine repair were offset by lower on-highway activity. Operating income in the commercial and industrial market was up slightly compared to the 2023 first quarter mainly due to sales mix. In the power generation market, revenues and operating income increased compared to the 2023 first quarter with several large project awards from data center customers. In the oil and gas market, revenues and operating income declined compared to the 2023 first quarter due to lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts, partially offset by deliveries of electric fracturing equipment. Distribution and Services Costs and Expenses Costs and expenses for the 2024 first quarter decreased 1% compared with the 2023 first quarter. Costs of sales and operating expenses for the 2024 first quarter decreased 4% compared with the 2023 first quarter, reflecting lower on-highway and conventional oilfield activity. Selling, general and administrative expenses for the 2024 first quarter increased 5% compared to the 2023 first quarter, primarily due to continued inflationary cost pressures and salary and wage increases that went into effect July 1, 2023. 20 Distribution and Services Operating Income and Operating Margin KDS operating income for the 2024 first quarter decreased 3% compared with the 2023 first quarter. The 2024 first quarter operating margin was 6.6% compared to 6.7% for the 2023 first quarter. The results reflect increased power generation and marine repair activity offset by lower on-highway and conventional oilfield activity. General Corporate Expenses General corporate expenses for the 2024 first quarter decreased compared to the 2023 first quarter primarily due strategic review and shareholder engagement costs included in 2023 first quarter results. Gain on Disposition of Assets The Company reported a net gain on disposition of assets of $0.1 million for the 2024 first quarter and $2.2 million for the 2023 first quarter. The net gains were primarily from sales of marine transportation equipment. Other Income and Expenses The following table sets forth other income, noncontrolling interests, and interest expense (dollars in thousands): Three Months Ended March 31, 2024 2023 % Change Other income $ 3,269 $ 6,443 (49 )% Noncontrolling interests $ 153 $ 77 99 % Interest expense $ (13,151 ) $ (13,221 ) (1 )% Other Income Other income for the 2024 and 2023 first quarters includes income of $2.4 million and $1.2 million, respectively, for all components of net benefit costs except the service cost component related to the Company’s defined benefit plans. The 2023 first quarter also includes interest income associated with an Internal Revenue Service refund. Interest Expense The following table sets forth average debt and average interest rate (dollars in thousands): Three Months Ended March 31, 2024 2023 Average debt $ 1,064,916 $ 1,201,841 Average interest rate 4.9 % 4.4 % Interest expense for the 2024 first quarter decreased 1% compared with the 2023 first quarter, primarily due to lower average debt partially offset by a higher average interest rate. There was no capitalized interest excluded from interest expense during the 2024 or 2023 first quarter. 21 Financial Condition, Capital Resources and Liquidity Balance Sheets The following table sets forth the significant components of the balance sheets (dollars in thousands): March 31, 2024 December 31, 2023 % Change Assets: Current assets $ 1,175,478 $ 1,135,161 4 % Property and equipment, net 3,883,321 3,861,105 1 Operating lease right-of-use assets 149,412 152,216 (2 ) Goodwill 438,748 438,748 — Other intangibles, net 40,797 42,927 (5 ) Other assets 88,081 92,040 (4 ) $ 5,775,837 $ 5,722,197 1 % Liabilities and stockholders’ equity: Current liabilities $ 650,394 $ 675,795 (4 )% Long-term debt, net – less current portion 1,051,822 1,008,527 4 Deferred income taxes 705,834 696,557 1 Operating lease liabilities – less current portion 136,980 138,811 (1 ) Other long-term liabilities 14,066 15,830 (11 ) Total equity 3,216,741 3,186,677 1 $ 5,775,837 $ 5,722,197 1 % Current assets as of March 31, 2024 increased 4% compared with December 31, 2023. Trade accounts receivable increased 1% primarily due to higher business activity levels in KMT. Inventories – net decreased by 2% primarily due to strong deliveries of power generation units during the 2024 first quarter. Prepaid expenses and other current assets decreased 2% primarily due to the amortization of prepaid insurance premiums. Property and equipment, net of accumulated depreciation, at March 31, 2024 increased 1% compared with December 31, 2023. The increase reflected $79.5 million of capital additions (net of a decrease in accrued capital expenditures of $1.6 million), partially offset by $55.5 million of depreciation expense and $1.8 million of property disposals more fully described under Cash Flow and Capital Expenditures below. Other intangibles, net, as of March 31, 2024 decreased 5% compared with December 31, 2023, primarily due to amortization during the 2024 first quarter. Other assets as of March 31, 2024 decreased by 4% compared with December 31, 2023, primarily due to amortization of drydock expenditures, partially offset by additional deferred major maintenance drydock expenditures incurred during the 2024 first quarter. Current liabilities as of March 31, 2024 decreased 4% compared with December 31, 2023. Income taxes payable increased by $9.8 million as the Company expects to utilize its remaining federal net operating losses during 2024 due to improved profitability. Accounts payable decreased 7% primarily due to timing of inventory purchases. Accrued liabilities decreased 15% primarily from payment during the 2024 first quarter of employee incentive compensation bonuses accrued during 2023. Deferred revenue increased 14% primarily due to deposits on equipment expected to be shipped later in 2024 in KDS. Long-term debt, net – less current portion, as of March 31, 2024 increased 4% compared with December 31, 2023, primarily reflecting borrowings under the 2027 Revolving Credit Facility. Deferred income taxes as of March 31, 2024 increased 1% compared with December 31, 2023, primarily reflecting the deferred tax provision of $9.4 million. Total equity as of March 31, 2024 increased 1% compared with December 31, 2023. The increase was primarily due to the net earnings attributable to Kirby of $70.1 million, amortization of share-based compensation of $6.4 million, and stock option exercises of $1.5 million, partially offset by treasury stock purchases of $41.8 million and tax withholdings of $5.3 million on RSU vestings. 22 Long-Term Financing The following table summarizes the Company’s outstanding debt (in thousands): March 31, 2024 December 31, 2023 Long-term debt, including current portion: Revolving Credit Facility due July 29, 2027 (a) $ 87,000 $ 44,000 Term Loan due July 29, 2027 (a) 170,000 170,000 4.2% senior notes due March 1, 2028 500,000 500,000 3.46% senior notes due January 19, 2033 60,000 60,000 3.51% senior notes due January 19, 2033 240,000 240,000 Credit line due June 30, 2024 — — Bank notes payable 8,643 8,068 1,065,643 1,022,068 Unamortized debt discounts and issuance costs (5,178 ) (5,473 ) $ 1,060,465 $ 1,016,595 (a) Variable interest rate of 6.6% at March 31, 2024 and 6.8% at December 31, 2023. On July 29, 2022, the Company entered into the 2027 Credit Agreement with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank that allows for a $500 million 2027 Revolving Credit Facility and a $250 million 2027 Term Loan with a maturity date of July 29, 2027. 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 2033 Notes with a group of institutional investors, consisting of $60 million Series A Notes and $240 million Series B Notes, each due January 19, 2033. The Series A Notes were issued on October 20, 2022, and the Series B Notes were issued on January 19, 2023. No principal payments will be required until maturity. The Company has a $10 million Credit Line with Bank of America for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2024. Outstanding letters of credit under the $10 million credit line were $7.3 million and available borrowing capacity was $2.7 million as of March 31, 2024. As of March 31, 2024, the Company was in compliance with all covenants under its debt instruments. For additional information about the Company’s debt instruments, see Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Cash Flow and Capital Expenditures The Company generated positive operating cash flows during the 2024 first quarter with net cash provided by operating activities of $123.3 million compared with $16.5 million for the 2023 first quarter, a 648% increase. The improvement in operating cash flows was due to higher revenues and operating income in KMT and KDS and a favorable change in trade accounts receivable, primarily due to timing of collections. Increases in KMT revenues and operating income were driven by higher term and spot contract pricing during the 2024 first quarter. During the 2024 and 2023 first quarters, the Company generated cash of $2.4 million and $8.0 million, respectively, from proceeds from the disposition of assets, and $1.5 million and $0.1 million, respectively, from proceeds from the exercise of stock options. For the 2024 first quarter, cash generated was used for capital expenditures of $81.0 million, including $10.8 million for specialized inland equipment construction and $70.2 million primarily for upgrading existing marine equipment, constructing new electric fracturing equipment, and for KMT and KDS facility improvements. 23 Treasury Stock Purchases During the 2024 first quarter, the Company purchased 498,505 shares of its common stock for $41.8 million, at an average price of $83.82 per share. Subsequent to March 31, 2024 and through May 3, 2024, the Company purchased an additional 35,378 shares of its common stock for $3.8 million, at an average price of $108.81 per share. As of May 3, 2024, the Company had approximately 4.0 million shares available under its existing purchase authorizations. Historically, treasury stock purchases have been financed through operating cash flows and borrowings under the Company’s revolving credit facility. The Company is authorized to purchase its common stock on the New York Stock Exchange and in privately negotiated transactions. When purchasing its common stock, the Company is subject to price, trading volume, and other market considerations. Shares purchased may be used for reissuance upon the exercise of stock options or the granting of other forms of incentive compensation, in future acquisitions for stock, or for other appropriate corporate purposes. For more information about stock purchases in the 2024 first quarter, see Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Liquidity Funds generated from operations are available for acquisitions, capital expenditure projects, common stock purchases, repayments of borrowings, and for other corporate and operating requirements. In addition to net cash flows provided by operating activities, as of May 3, 2024 the Company also had cash and cash equivalents of $58.0 million, availability of $446.0 million under its 2027 Revolving Credit Facility, and $2.7 million available under its credit line. Neither the Company, nor any of its subsidiaries, is obligated on any debt instrument, swap agreement, or any other financial instrument or commercial contract which has a rating trigger, except for the pricing grid on its 2027 Credit Agreement. The Company expects to continue to fund expenditures for acquisitions, capital construction projects, common stock purchases, repayment of borrowings, and for other operating requirements from a combination of available cash and cash equivalents, funds generated from operating activities, and available financing arrangements. The 2027 Revolving Credit Facility’s commitment is in the amount of $500 million and matures July 29, 2027. The $500 million 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The 2033 Notes do not mature until January 19, 2033 and require no prepayments. The 2027 Term Loan in the amount of $250 million is subject to quarterly installments, beginning June 30, 2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable on July 29, 2027, assuming no prepayments. The 2027 Term Loan is prepayable, in whole or in part, without penalty. There are numerous factors that may negatively impact the Company’s cash flows in 2024. For a list of significant risks and uncertainties that could impact cash flows, see Note 13, Contingencies and Commitments, of the Notes to Condensed Financial Statements (Unaudited), and Item 1A — Risk Factors and Note 14, Contingencies and Commitments, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Amounts available under the Company’s existing financial arrangements are subject to the Company continuing to meet the covenants of the credit facilities as described in Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. 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 in connection with these instruments. KMT term contracts typically contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 120 day delay before contracts are adjusted depending on the specific terms of the contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. The Company’s spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel. 24 The Company has certain mechanisms designed to help mitigate the impacts of rising costs. For example, KMT has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be largely passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which somewhat limits exposure to inflation. The repair portion of KDS is based on prevailing current market rates. Item 3. Quantitative and Qualitative Disclosures about Market Risk For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K. The Company’s exposure to market risk has not changed materially since December 31, 2023.