What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-09 · 167 added, 148 removed, 226 unchanged (58% of the section changed)

14 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total revenues

4 unchanged sentences

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 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.

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

For the 2024 first nine months, capital expenditures of $246.0 million included $182.6 million in KMT and $63.4 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 $325 million to $355 million range.

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Approximately $115 million is associated with growth capital spending in both segments.

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.

The Company’s debt-to-capitalization ratio decreased to 22.9% at September 30, 2024 compared to 24.2% at December 31, 2023.

Total equity increased as of September 30, 2024 as compared to December 31, 2023 primarily from net earnings attributable to Kirby of $243.9 million, partially offset by treasury stock purchases of $141.3 million.

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

Marine Transportation

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.

For the 2024 third quarter and first nine months, KMT generated 58% and 59%, respectively, of the Company’s revenues compared to 56% and 55%, respectively, for the 2023 third quarter and first nine months.

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

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The following table summarizes the Company’s marine transportation fleet:

September 30,

Inland tank barges:

8 unchanged sentences

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 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.

During the 2024 first nine months, the Company brought back into service four inland tank barges, purchased 13 inland tank barges, purchased five newly constructed inland tank barges, and retired three inland tank barges, increasing its capacity by approximately 0.5 million barrels.

KMT revenues for the 2024 third quarter and first nine months increased 13% and 14%, respectively, and operating income increased 57% and 62%, respectively, compared to the 2023 third quarter and first nine 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 second and third quarters were modestly impacted by weather and lock delays.

The 2023 third quarter was impacted by lower tank barge utilization as a result of Illinois River lock closures and several refinery outages, as well as lower fuel rebills in the inland market.

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 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.

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

For both the 2023 third quarter and first nine 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 90% range during the 2024 third quarter.

Inland tank barge utilization levels averaged in the low to mid-90% range during the 2023 first quarter, the low 90% range during the 2023 second quarter, and the high 80% range during the 2023 third quarter.

The 2024 second and third quarters were modestly impacted by weather and lock closures.

The 2023 third quarter was impacted by Illinois River lock closures and several refinery outages.

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 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.

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

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

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

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

Inland time charters during the 2024 third quarter and first nine months represented approximately 62% and 61%, respectively, of inland revenues under term contracts compared with 66% and 63% in the 2023 third quarter and first nine months, respectively.

During the 2024 third quarter and first nine months, approximately 99% and 98%, respectively, of KMT coastal revenues were under term contracts and 1% and 2%, respectively, were under spot contracts.

During the 2023 third quarter and first nine months, approximately 90% and 85%, respectively, of KMT coastal revenues were under term contracts and 10% and 15%, respectively, were under spot contracts.

Coastal time charters represented approximately 99% and 98% of coastal revenues under term contracts during the 2024 third quarter and first nine months, respectively, compared to 90% during both the 2023 third quarter and first nine 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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June 30, 2024

September 30, 2024

Inland market:

6 unchanged sentences

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 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.

KMT operating margin was 20.5% and 19.2% for the 2024 third quarter and first nine months, respectively, compared to 14.8% and 13.5% for the 2023 third quarter and first nine months, respectively.

Distribution and Services

1 unchanged sentence

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.

For the 2024 third quarter and first nine months, KDS generated 42% and 41%, respectively, of the Company’s revenues, of which 85% and 80%, respectively, were generated from service and parts and 15% and 20%, 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 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.

KDS revenues for the 2024 third quarter and first nine months increased 3% and decreased 1%, respectively, and operating income decreased 8% and 5%, respectively, compared with the 2023 third quarter and first nine months.

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

For the 2024 third quarter and first nine months, the commercial and industrial market contributed 47% and 46%, respectively, of KDS revenues.

In the power generation market, revenues and operating income decreased compared to the 2023 third quarter as delays in power generation equipment for oil and gas impacted 2024 third quarter results.

Revenues and operating income in the power generation market increased compared to the 2023 first nine months with several large project awards from data center customers as well as other backup power industrial customers.

For the 2024 third quarter and first nine months, the power generation market contributed 32% and 35%, respectively, of KDS revenues.

In the oil and gas market, revenues increased and operating income declined compared to the 2023 third quarter as deliveries of electric fracturing equipment were partially offset by lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts.

Revenues and operating income in the oil and gas market decreased compared to the 2023 first nine months due to lower levels of conventional oilfield activity, partially offset by deliveries of electric fracturing equipment.

For the 2024 third quarter and first nine months, the oil and gas market contributed 21% and 19%, respectively, of KDS revenues.

KDS operating margin was 8.8% and 8.0% for the 2024 third quarter and first nine months, respectively, compared to 9.9% and 8.4% for the 2023 third quarter and first nine months, respectively.

Overall, the Company expects to deliver improved financial results in 2024.

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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.

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 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 and into 2025.

In the inland marine transportation market, the Company’s outlook for the fourth quarter of 2024 anticipates continued positive market dynamics with limited new barge construction in the industry and normal seasonal weather impacts and steady demand with slightly lower refinery utilization.

With these market conditions, the Company expects its barge utilization rates to remain around the 90% range throughout the remainder of the year and continued improvement in term contract pricing as renewals occur during the final quarter of the year.

In coastal marine, market conditions remain favorable with supply and demand in balance across the industry fleet.

Steady customer demand is expected to continue in the fourth quarter with barge utilization in the mid-90% range.

Coastal marine is expected to be impacted by a number of planned shipyards in the fourth quarter.

In the distribution and services segment, the Company anticipates the 2024 fourth quarter will see near-term variability in equipment deliveries due to uncertainty from supply issues, some customer maintenance deferrals, and lower overall levels of activity in oil and gas.

In oil and gas, activity levels are lower but have been stabilizing at these lower levels.

In commercial and industrial, the demand outlook in marine repair remains steady while on-highway service and repair is somewhat weak in the current environment.

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

The Company does anticipate extended lead times for certain OEM products to continue contributing to a volatile delivery schedule of new products in the fourth quarter and into 2025.

The 13 tank barges, including three specialty barges, transport petrochemicals and refined products on the Mississippi River System and Gulf Intracoastal Waterway.

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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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Marine transportation revenues

8 unchanged sentences

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 Second Quarter

2024 Six Months

2024 Third Quarter

2024 Nine Months

Products Moved

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Corn, Cotton and Wheat Production, Chemical Feedstock Usage

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

The 2024 second and third quarters were modestly impacted by weather and lock delays.

The 2023 third quarter was impacted by lower tank barge utilization as a result of Illinois River lock closures and several refinery outages, as well as lower fuel rebills in the inland market.

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 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.

For both the 2024 third quarter and first nine months, the inland tank barge fleet contributed 81% and the coastal

fleet contributed 19% of KMT revenues.

For both the 2023 third quarter and first nine 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 90% range during the 2024 third quarter.

The 2024 second and third quarters were modestly impacted by weather and lock closures.

The 2023 third quarter was impacted by Illinois River lock closures and several refinery outages.

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 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.

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

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

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

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

During the 2024 first nine 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.

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.

The refined petroleum products market, which contributed 21% of KMT revenues for both the 2024 third quarter and first nine months, reflected stable volumes in the inland market with steady refinery utilization and product levels as compared to the 2023 third quarter and first nine months.

The agricultural chemical market, which contributed 2% and 3% of KMT revenues for the 2024 third quarter and first nine months, respectively, reflected stable demand for transportation of both domestically produced and imported products as compared to the 2023 third quarter and first nine months.

For the 2024 third quarter, inland operations incurred 2,061 delay days, 33% more than the 1,548 delay days that occurred during the 2023 third quarter.

For the 2024 first nine months, inland operations incurred 8,902 delay days, 11% more than the 7,990 delay days that occurred during the 2023 first nine 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 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.

Delay days reflected the modest impact of weather and lock delays during the 2024 second and third quarters, Illinois River lock closures during the 2023 third 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 third quarter and first nine months, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues.

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

During the 2024 third quarter and first nine months, approximately 99% and 98%, respectively, of KMT coastal revenues were under term contracts and 1% and 2%, respectively, were under spot contracts.

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

3 unchanged sentences

June 30, 2024

September 30, 2024

Inland market:

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Marine Transportation Costs and Expenses

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.

Costs and expenses for both the 2024 third quarter and first nine months increased 6% compared to the 2023 third quarter and first nine months.

Costs of sales and operating expenses for the 2024 third quarter and first nine months increased 6% and 7%, respectively, compared with the 2023 third quarter and first nine months.

The increase during the 2024 third quarter and first nine months was driven by higher levels of business activity and continued inflationary cost pressures, partially offset by lower fuel costs.

The inland marine transportation fleet operated an average of 287 towboats during the 2024 third quarter, of which an average of 71 were chartered, compared to 274 during the 2023 third quarter, of which an average of 55 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 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.

During the 2024 third quarter, inland operations consumed 11.3 million gallons of diesel fuel compared to 11.6 million gallons consumed during the 2023 third quarter.

The average price per gallon of diesel fuel consumed during the 2024 third quarter was $2.65 per gallon compared with $2.71 per gallon for the 2023 third quarter.

During the 2024 first nine months, inland operations consumed 35.3 million gallons of diesel fuel compared to 35.9 million gallons consumed during the 2023 first nine months.

The average price per gallon of diesel fuel consumed during the 2024 first nine months was $2.77 per gallon compared with $2.97 per gallon for the 2023 first nine 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;

1 unchanged sentence

Spot contracts do not have escalators for fuel.

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.

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

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

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

Marine Transportation Operating Income and Operating Margin

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.

KMT operating income for the 2024 third quarter and first nine months increased 57% and 62%, respectively, compared with the 2023 third quarter and first nine months.

The 2024 third quarter operating margin was 20.5% compared with 14.8% for the 2023 third quarter.

The 2024 first nine months operating margin was 19.2% compared with 13.5% for the 2023 first nine 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.

1 unchanged sentence

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Distribution and services revenues

9 unchanged sentences

Markets Serviced

2024 Second Quarter

2024 Six Months

2024 Third Quarter

2024 Nine Months

Commercial and Industrial

3 unchanged sentences

Oilfield Services, Oil and Gas Operators and Producers

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.

KDS revenues for the 2024 third quarter and first nine months increased 3% and decreased 1%, respectively, compared to the 2023 third quarter and first nine months.

In the commercial and industrial market, revenues increased compared to the 2023 third quarter and first nine 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 third quarter and first nine months mainly due to sales mix.

In the power generation market, revenues and operating income decreased compared to the 2023 third quarter as delays in power generation equipment for oil and gas impacted 2024 third quarter results.

In the oil and gas market, revenues increased and operating income declined compared to the 2023 third quarter as deliveries of electric fracturing equipment were offset by lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts.

Distribution and Services Costs and Expenses

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.

Costs and expenses for the 2024 third quarter and first nine months increased 4% and were flat, respectively, compared with the 2023 third quarter and first nine months.

Costs of sales and operating expenses for the 2024 third quarter and first nine months increased 2% and decreased 3%, respectively, compared with the 2023 third quarter and first nine months, reflecting deliveries of electric fracturing equipment and lower on-highway and conventional oilfield activity.

Selling, general and administrative expenses for the 2024 third quarter and first nine months increased 9% and 5%, respectively, compared to the 2023 third quarter and first nine months, primarily due to continued inflationary cost pressures and salary and wage increases that went into effect July 1, 2024.

Depreciation and amortization for the 2024 third quarter and first nine months increased 78% and 86%, respectively, compared to the 2023 third quarter and first nine months.

The increase was primarily due to capital additions during the 2023 second half and 2024 first nine months including additions to the equipment rental fleet.

Distribution and Services Operating Income and Operating Margin

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.

KDS operating income for the 2024 third quarter and first nine months decreased 8% and 5%, respectively, compared with the 2023 third quarter and first nine months.

The 2024 third quarter operating margin was 8.8% compared to 9.9% for the 2023 third quarter.

The 2024 first nine months operating margin was 8.0% compared to 8.4% for the 2023 first nine months.

The results reflect lower on-highway and conventional oilfield activity partially offset by increased power generation in industrial end markets and marine repair activity.

General Corporate Expenses

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.

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

The 2023 first nine 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 $0.5 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 Company reported a net gain on disposition of assets of $1.6 million for the 2024 third quarter and $1.5 million for the 2023 third quarter.

The Company reported a net gain on disposition of assets of $2.2 million for the 2024 first nine months and $4.2 million for the 2023 first nine 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Noncontrolling interests

Interest expense

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.

Other income for the 2024 and 2023 third quarters includes income of $2.6 million and $1.2 million, respectively, and the 2024 and 2023 first nine months includes income of $7.7 million and $3.6 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 nine 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Average interest rate

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.

Interest expense for the 2024 third quarter and first nine months decreased 7% and 1%, respectively, compared with the 2023 third quarter and first nine months, primarily due to a lower average interest rate in the 2024 third quarter, as well as lower debt levels in the 2024 third quarter and first nine months.

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

Financial Condition, Capital Resources and Liquidity

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The following table sets forth the significant components of the balance sheets (dollars in thousands):

September 30,

Current assets

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Other long-term liabilities

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

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

Trade accounts receivable increased 3% 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 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.

Inventories – net decreased by 4% primarily due to strong deliveries of power generation units and oilfield service equipment during the 2024 first nine months.

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

The increase reflected $244.3 million of capital additions (net of a decrease in accrued capital expenditures of $1.7 million) and a $65.2 million equipment acquisition in the 2024 second quarter, partially offset by $171.3 million of depreciation expense and $13.9 million of property disposals more fully described under Cash Flow and Capital Expenditures below.

Operating lease right-of-use assets as of September 30, 2024 increased 7% compared with December 31, 2023, primarily due to new leases acquired during the 2024 first nine months, partially offset by lease amortization expense.

Other intangibles, net, as of September 30, 2024 decreased 15% compared with December 31, 2023, due to amortization during the 2024 first nine months.

Other assets as of September 30, 2024 decreased 11% 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 nine months.

Current liabilities as of September 30, 2024 increased 3% compared with December 31, 2023.

Income taxes payable increased by $20.2 million primarily due to timing of federal income tax payments.

Accounts payable decreased 8% primarily due to timing of KDS inventory purchases and KMT shipyard payments.

Accrued liabilities decreased 5% 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 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.

Deferred revenue increased 25% primarily due to deposits on equipment expected to be shipped later in 2024 and 2025 in KDS.

Long-term debt, net – less current portion, as of September 30, 2024 decreased 4% compared with December 31, 2023, primarily reflecting reduced borrowings under the 2027 Revolving Credit Facility.

Deferred income taxes as of September 30, 2024 increased 6% compared with December 31, 2023, primarily reflecting the deferred tax provision of $38.7 million.

Total equity as of September 30, 2024 increased 4% compared with December 31, 2023.

The increase was primarily due to the net earnings attributable to Kirby of $243.9 million, amortization of share-based compensation of $12.8 million, and stock option exercises of $8.4 million, partially offset by treasury stock purchases of $141.3 million and tax withholdings of $5.4 million on RSU vestings.

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The following table summarizes the Company’s outstanding debt (in thousands):

September 30,

Long-term debt, including current portion:

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Unamortized debt discounts and issuance costs

(a) Variable interest rate of 6.6% at June 30, 2024 and 6.8% at December 31, 2023.

(a) Variable interest rate of 6.1% at September 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.

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.

In October 2024, the Company repaid $10.0 million under the 2027 Term Loan prior to scheduled maturities.

As a result, no repayments are required until September 30, 2025.

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.

Outstanding letters of credit under the 2027 Revolving Credit Facility were $6,000 and available borrowing capacity was $495.0 million as of September 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 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.

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

As of September 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 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 Company generated positive operating cash flows during the 2024 first nine months with net cash provided by operating activities of $509.1 million compared with $324.2 million for the 2023 first nine months, a 57% increase.

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

The 2023 first nine 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 nine months.

During the 2024 and 2023 first nine months, the Company generated cash of $13.8 million and $21.8 million, respectively, from proceeds from the disposition of assets, and $8.4 million and $3.4 million, respectively, from proceeds from the exercise of stock options.

For the 2024 first nine months, cash generated was used for capital expenditures of $246.0 million, including $166.9 million associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements, as well as $79.1 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 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.

During the 2024 first nine months, the Company purchased 1,354,105 shares of its common stock for $141.3 million, at an average price of $104.33 per share.

Subsequent to September 30, 2024 and through November 8, 2024, the Company purchased an additional 138,085 shares of its common stock for $16.0 million, at an average price of $115.62 per share.

As of November 8, 2024, the Company had approximately 3.0 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.

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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 second quarter, see Part II, Item 2.

For more information about stock purchases in the 2024 third 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 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.

In addition to net cash flows provided by operating activities, as of November 8, 2024 the Company also had cash and cash equivalents of $108.5 million, availability of $500.0 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 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 subject to quarterly installments, beginning September 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.

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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 $31.5 million at June 30, 2024, including $11.6 million in letters of credit and $19.9 million in performance bonds.

The aggregate notional value of these instruments is $31.5 million at September 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