What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-06 · 155 added, 132 removed, 219 unchanged (57% of the section changed)

11 unchanged sentences

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 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, and specialized electrical distribution and control equipment.

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

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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.

Cash provided by operating activities for the 2024 first six months increased in comparison to the 2023 first six months primarily due to higher business activity levels.

For the 2024 first six months, capital expenditures of $169.6 million included $123.1 million in KMT and $46.5 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 $300 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 $200 million to $240 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, 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.

The Company’s debt-to-capitalization ratio was 24.3% at June 30, 2024 compared to 24.2% at December 31, 2023.

Total equity increased as of June 30, 2024 as compared to December 31, 2023 primarily from net earnings attributable to Kirby of $153.9 million, partially offset by treasury stock purchases of $85.5 million.

The Company’s debt outstanding as of June 30, 2024 and December 31, 2023 is detailed in Long-Term Financing below.

Marine Transportation

For the 2024 first quarter, KMT generated 59% of the Company’s revenues compared to 55% for the 2023 first quarter.

For both the 2024 second quarter and first six months, KMT generated 59% of the Company’s revenues compared to 55% for both the 2023 second quarter and first six months.

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

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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.

During the 2024 first six months, the Company brought back into service three inland tank barges, purchased 13 inland tank barges, purchased a newly constructed inland specialty tank barge, chartered one inland tank barge, and retired one inland tank barge, increasing its capacity by approximately 0.4 million barrels.

KMT revenues for both the 2024 second quarter and first six months increased 14% and operating income increased 48% and 66%, respectively, compared to the 2023 second quarter and first six months.

The increase in revenues was primarily due to higher term and spot pricing in the inland and coastal markets.

The 2024 second quarter was modestly impacted by heavy rains, which briefly closed the Houston Ship Channel, and the closure of two major locks on the lower Mississippi River for repairs.

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.

For both the 2024 second quarter and first six months, the inland tank barge fleet contributed 81% and the coastal fleet contributed 19% of KMT revenues.

For both the 2023 second quarter and first six months, 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 first and second quarters and the 2023 first quarter, and the low 90% range during the 2023 second quarter.

The 2024 second quarter was modestly impacted by heavy rains, which briefly closed the Houston Ship Channel, and the closure of two major locks on the lower Mississippi River for repairs.

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

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.

Coastal tank barge utilization levels averaged in the mid to high 90% range during both the 2024 and 2023 first and second quarters.

During both the 2024 second quarter and first six months, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues.

During both the 2023 second quarter and first six months, approximately 55% of KMT inland revenues were under term contracts and 45% were spot contract revenues.

Inland time charters during the 2024 second quarter and first six months represented approximately 59% and 60%, respectively, of inland revenues under term contracts compared with 62% and 61% in the 2023 second quarter and first six months, respectively.

During the 2024 second quarter and first six months, approximately 100% and 98%, respectively, of KMT coastal revenues were under term contracts and none and 2%, respectively, were under spot contracts.

During the 2023 second quarter and first six months, approximately 85% and 80%, respectively, of KMT coastal revenues were under term contracts and 15% and 20%, respectively, were under spot contracts.

Coastal time charters represented approximately 97% of coastal revenues under term contracts during both the 2024 second quarter and first six months compared to 90% during both the 2023 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.

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March 31, 2024

June 30, 2024

Inland market:

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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.

KMT operating margin was 19.6% and 18.5% for the 2024 second quarter and first six months, respectively, compared to 15.0% and 12.8% for the 2023 second quarter and first six months, respectively.

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 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, and specialized electric distribution and control equipment.

For both the 2024 second quarter and first six months, KDS generated 41% of the Company’s revenues, of which 83% and 78%, respectively, were generated from service and parts and 17% and 22%, 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 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.

KDS revenues for the 2024 second quarter and first six months decreased 3% and 2%, respectively, and operating income decreased 1% and 2%, respectively, compared with the 2023 second quarter and first six months.

In the commercial and industrial market, revenues increased compared to the 2023 second quarter and first six months, as higher business levels in marine repair were partially offset by lower on-highway activity.

Operating income in the commercial and industrial market was up compared to the 2023 second quarter and first six months mainly due to sales mix.

For the 2024 second quarter and first six months, the commercial and industrial market contributed 49% and 46%, respectively, of KDS revenues.

In the power generation market, revenues and operating income increased compared to the 2023 second quarter and first six months with several large project awards from data center customers as well as other backup power industrial customers.

For the 2024 second quarter and first six months, the power generation market contributed 32% and 36%, respectively, of KDS revenues.

In the oil and gas market, revenues and operating income declined compared to the 2023 second quarter and first six months 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 second quarter and first six months, the oil and gas market contributed 19% and 18%, respectively, of KDS revenues.

KDS operating margin was 8.7% and 7.7% for the 2024 second quarter and first six months, respectively, compared to 8.5% and 7.6% for the 2023 second quarter and first six months, respectively.

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

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.

In KDS, demand for products and services remains steady, and the Company continues to receive new orders in manufacturing.

The Company remains mindful of the ever-changing economic landscape related to the impact of continued high interest rates, and possible recessionary headwinds as it moves through 2024.

In the inland marine transportation market, the Company anticipates continued positive market dynamics for the remainder of 2024 with steady customer demand and limited new barge construction in the industry.

In addition, many industry units are scheduled for maintenance in 2024 and 2025.

The Company expects inland barge utilization rates to remain in the low to mid-90% range throughout the remainder of the year.

In coastal marine, strong customer demand is expected throughout the year with barge utilization in the low to mid-90% range.

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.

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.

In commercial and industrial, the demand outlook in marine repair is strong while on-highway is somewhat weak with the exception of Thermo King refrigeration products and services.

In power generation, the Company anticipates continued strong growth as data center demand and the need for backup power is strong.

In oil and gas, activity levels are lower but seem to be bottoming with improved revenues and operating income in the 2024 second quarter as compared to the 2024 first quarter.

The Company anticipates extended lead times for certain OEM products to continue contributing to a volatile delivery schedule of new products in 2024 and into 2025.

On May 15, 2024, the Company completed the purchase of 13 inland tank barges, with a total capacity of 347,000 barrels, and two high horsepower towboats from an undisclosed seller for approximately $65.2 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.

The average age of the 13 barges was 15 years.

Financing of the equipment acquisition was 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.

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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,

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:

2024 First Quarter

2024 Second Quarter

2024 Six Months

Products Moved

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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.

KMT revenues for both the 2024 second quarter and first six months increased 14% and operating income increased 48% and 66%, respectively, compared to the 2023 second quarter and first six months.

The increase in revenues for the 2024 second quarter and first six months was primarily due to higher term and spot pricing in the inland and coastal markets.

The 2024 second quarter was modestly impacted by heavy rains, which briefly closed the Houston Ship Channel, and the closure of two major locks on the lower Mississippi River for repairs.

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.

For both the 2024 second quarter and first six months, the inland tank barge fleet

contributed 81% and the coastal fleet contributed 19% of KMT revenues.

For both the 2023 second quarter and first six months, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues.

The 2024 second quarter was modestly impacted by heavy rains, which briefly closed the Houston Ship Channel, and the closure of two major locks on the lower Mississippi River for repairs.

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.

Coastal tank barge utilization levels averaged in the mid to high 90% range during both the 2024 and 2023 first and second quarters.

The petrochemical market, which is the Company’s largest market, contributed 52% and 51% of KMT revenues for the 2024 second quarter and first six months, respectively, 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 second quarter and first six months.

The black oil market, which contributed 25% and 26% of KMT revenues for the 2024 second quarter and first six months, respectively, reflected stable demand as refinery utilization and production levels of refined petroleum products and fuel oils increased.

During the 2024 first six months, 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.

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.

Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast.

The refined petroleum products market, which contributed 20% of KMT revenues for both the 2024 second quarter and first six months, reflected stable volumes in the inland market with steady refinery utilization and product levels as compared to the 2023 second quarter and first six months.

The agricultural chemical market, which contributed 3% of KMT revenues for both the 2024 second quarter and first six months, reflected improved demand for transportation of both domestically produced and imported products as compared to the 2023 second quarter and first six months.

For the 2024 second quarter, inland operations incurred 3,334 delay days, 44% more than the 2,317 delay days that occurred during the 2023 second quarter.

For the 2024 first six months, inland operations incurred 6,841 delay days, 6% more than the 6,442 delay days that occurred during the 2023 first six months.

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.

Delay days reflected the modest impact of heavy rains, which briefly closed the Houston Ship Channel, and the closure of two major locks on the lower Mississippi River for repairs during the 2024 second quarter and poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays during the 2024 and 2023 first quarters.

During both the 2024 second quarter and first six months, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues.

During both the 2023 second quarter and first six months, approximately 55% of KMT inland revenues were under term contracts and 45% were spot contract revenues.

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

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March 31, 2024

June 30, 2024

Inland market:

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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.

Costs and expenses for the 2024 second quarter and first six months increased 8% and 7%, respectively, compared to the 2023 second quarter and first six months.

Costs of sales and operating expenses for the 2024 second quarter and first six months increased 9% and 8%, respectively, compared with the 2023 second quarter and first six months.

The increase during the 2024 second quarter and first six months reflected improved business activity levels and inflationary cost pressures, partially offset by lower fuel costs.

The inland marine transportation fleet operated an average of 287 towboats during the 2024 second quarter, of which an average of 74 were chartered, compared to 281 during the 2023 second 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.

During the 2024 second quarter, inland operations consumed 12.1 million gallons of diesel fuel compared to 12.2 million gallons consumed during the 2023 second quarter.

The average price per gallon of diesel fuel consumed during the 2024 second quarter was $2.83 per gallon compared with $2.87 per gallon for the 2023 second quarter.

During the 2024 first six months, inland operations consumed 24.0 million gallons of diesel fuel compared to 24.4 million gallons consumed during the 2023 first six months.

The average price per gallon of diesel fuel consumed during the 2024 first six months was $2.83 per gallon compared with $3.09 per gallon for the 2023 first six months.

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;

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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.

Selling, general and administrative expenses for the 2024 second quarter and first six months decreased 3% and increased 2%, respectively, compared to the 2023 second quarter and first six months.

The decrease in selling, general and administrative expenses for the 2024 second quarter as compared to the 2023 second quarter was primarily due to lower legal costs, which was partially offset by higher business activity levels and inflationary cost pressures.

The increase in selling, general and administrative expenses for the 2024 first six months as compared to the 2023 first six months was primarily due to higher business activity levels and inflationary cost pressures, which was partially offset by lower legal costs.

Both the 2024 second quarter and first six months were also impacted by salary and wage increases that went into effect July 1, 2023.

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.

KMT operating income for the 2024 second quarter and first six months increased 48% and 66%, respectively, compared with the 2023 second quarter and first six months.

The 2024 second quarter operating margin was 19.6% compared with 15.0% for the 2023 second quarter.

The 2024 first six months operating margin was 18.5% compared with 12.8% for the 2023 first six months.

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.

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The following table sets forth KDS 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,

Distribution and services revenues

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Markets Serviced

2024 First Quarter

2024 Second Quarter

2024 Six Months

Commercial and Industrial

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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.

KDS revenues for the 2024 second quarter and first six months decreased 3% and 2%, respectively, compared to the 2023 second quarter and first six months.

Operating income in the commercial and industrial market was up compared to the 2023 second quarter and first six months mainly due to sales mix.

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.

Costs and expenses for the 2024 second quarter and first six months decreased 3% and 2%, respectively, compared with the 2023 second quarter and first six months.

Costs of sales and operating expenses for the 2024 second quarter and first six months decreased 6% and 5%, respectively, compared with the 2023 second quarter and first six months, reflecting lower on-highway and conventional oilfield activity.

Selling, general and administrative expenses for the 2024 second quarter and first six months increased 1% and 3%, respectively, compared to the 2023 second quarter and first six months, primarily due to continued inflationary cost pressures and salary and wage increases that went into effect July 1, 2023.

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.

KDS operating income for the 2024 second quarter and first six months decreased 1% and 2%, respectively, compared with the 2023 second quarter and first six months.

The 2024 second quarter operating margin was 8.7% compared to 8.5% for the 2023 second

The 2024 first six months operating margin was 7.7% compared to 7.6% for the 2023 first six months.

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.

General corporate expenses for the 2024 second quarter and first six months decreased compared to the 2023 second quarter and first six months primarily due to lower legal and insurance costs.

The 2023 first six months also included costs related to strategic review and shareholder engagement.

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 Company reported a net gain on disposition of assets of $0.5 million for both the 2024 and 2023 second quarters.

The Company reported a net gain on disposition of assets of $0.6 million for the 2024 first six months and $2.7 million for the 2023 first six months.

The net gains were primarily from sales of marine transportation equipment.

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The following table sets forth other income, noncontrolling interests, and interest expense (dollars in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Noncontrolling interests

Interest expense

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.

Other income for the 2024 and 2023 second quarters includes income of $2.7 million and $1.2 million, respectively, and the 2024 and 2023 first six months includes income of $5.1 million and $2.4 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 six months 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,

Three Months Ended June 30,

Six Months Ended June 30,

Average interest rate

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.

Interest expense for the 2024 second quarter and first six months increased 4% and 2%, respectively, compared with the 2023 second quarter and first six months, primarily due to a higher average interest rate in the 2024 second quarter and first six months, as well as higher debt levels in the 2024 second quarter.

There was no capitalized interest excluded from interest expense during the 2024 or 2023 first six months.

Financial Condition, Capital Resources and Liquidity

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Other long-term liabilities

Current assets as of March 31, 2024 increased 4% compared with December 31, 2023.

Current assets as of June 30, 2024 increased 3% compared with December 31, 2023.

Trade accounts receivable increased 4% 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.

Inventories – net decreased by 2% primarily due to strong deliveries of power generation units during the 2024 first six months.

Property and equipment, net of accumulated depreciation, at June 30, 2024 increased 3% compared with December 31, 2023.

The increase reflected $171.6 million of capital additions (including an increase in accrued capital expenditures of $2.0 million) and a $65.2 million equipment acquisition in the 2024 second quarter, partially offset by $112.8 million of depreciation expense and $10.4 million of property disposals more fully described under Cash Flow and Capital Expenditures below.

Other intangibles, net, as of June 30, 2024 decreased 10% compared with December 31, 2023, due to amortization during the 2024 first six months.

Other assets as of June 30, 2024 decreased 3% 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 six months.

Current liabilities as of June 30, 2024 increased 1% compared with December 31, 2023.

Income taxes payable increased by $8.7 million as the Company expects to utilize its remaining federal net operating losses during 2024 due to improved profitability.

Accounts payable decreased 1% 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.

Accrued liabilities decreased 8% primarily from payment during the 2024 first quarter of employee incentive compensation 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.

Long-term debt, net – less current portion, as of June 30, 2024 increased 3% compared with December 31, 2023, primarily reflecting borrowings under the 2027 Revolving Credit Facility.

Deferred income taxes as of June 30, 2024 increased 3% compared with December 31, 2023, primarily reflecting the deferred tax provision of $23.9 million.

Total equity as of June 30, 2024 increased 2% compared with December 31, 2023.

The increase was primarily due to the net earnings attributable to Kirby of $153.9 million, amortization of share-based compensation of $9.4 million, and stock option exercises of $4.1 million, partially offset by treasury stock purchases of $85.5 million and tax withholdings of $5.3 million on RSU vestings.

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Unamortized debt discounts and issuance costs

(a) Variable interest rate of 6.6% at March 31, 2024 and 6.8% at December 31, 2023.

(a) Variable interest rate of 6.6% at June 30, 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.

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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.

Future repayments under the 2027 Term Loan are excluded from short term liabilities because the Company intends to use availability under the 2027 Revolving Credit Facility to repay these amounts upon maturity.

Outstanding letters of credit under the 2027 Revolving Credit Facility were $6,000 and available borrowing capacity was $426.0 million as of June 30, 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.

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The Company has a $15 million Credit Line with Bank of America for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2026.

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.

Outstanding letters of credit under the Credit Line were $6.8 million and available borrowing capacity was $8.2 million as of June 30, 2024.

As of June 30, 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.

The Company generated positive operating cash flows during the 2024 first six months with net cash provided by operating activities of $302.6 million compared with $227.9 million for the 2023 first six months, a 33% increase.

The improvement in operating cash flows was due to higher revenues and operating income in KMT and a favorable change in inventories, primarily due to timing of shipments.

The 2023 first six months includes the receipt of the Internal Revenue Service refund of $70.4 million plus accrued interest in April 2023.

Increases in KMT revenues and operating income were driven by higher term and spot contract pricing during the 2024 first six months.

During the 2024 and 2023 first six months, the Company generated cash of $9.1 million and $20.5 million, respectively, from proceeds from the disposition of assets, and $4.1 million and $0.1 million, respectively, from proceeds from the exercise of stock options.

For the 2024 first six months, cash generated was used for capital expenditures of $169.6 million, including $111.1 million associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements, as well as $58.5 million for growth spending in both segments.

The growth spending is related to inland equipment construction and equipment for use in a variety of KDS markets including electric fracturing equipment, generators, and other related equipment.

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.

During the 2024 first six months, the Company purchased 870,770 shares of its common stock for $85.5 million, at an average price of $98.15 per share.

Subsequent to June 30, 2024 and through August 8, 2024, the Company purchased an additional 98,854 shares of its common stock for $11.1 million, at an average price of $111.85 per share.

As of August 8, 2024, the Company had approximately 3.6 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.

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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.

For more information about stock purchases in the 2024 second quarter, see Part II, Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

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.

In addition to net cash flows provided by operating activities, as of August 8, 2024 the Company also had cash and cash equivalents of $53.5 million, availability of $444.9 million under its 2027 Revolving Credit Facility, and $8.2 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.

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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.

The aggregate notional value of these instruments is $31.5 million at June 30, 2024, including $11.6 million in letters of credit and $19.9 million in performance bonds.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis