KIRBY CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. Such statements involve risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue,” or the negative thereof or other variations thereon or comparable terminology. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornados, COVID-19 or other pandemics, marine accidents, lock delays or closures, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Item 1A-Risk Factors found in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2024. Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements. For purposes of Management’s Discussion, all net earnings per share attributable to Kirby common stockholders are “diluted earnings per share.” Overview The Company is the nation’s largest domestic tank barge operator transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts. The Company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. In addition, the Company participates in the transportation of dry-bulk commodities in United States coastwise trade. Through KDS, the Company provides after-market services and genuine replacement parts for engines, transmissions, reduction gears, electric motors, drives, and controls, specialized electrical distribution and control systems, 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, construction equipment and refrigeration trailers for use in a variety of industrial markets. The Company also manufactures and remanufactures specialized equipment, including pressure pumping units, electric power generation equipment, and specialized electrical distribution and control equipment for oilfield service, railroad and other industrial customers. The following table summarizes key operating results of the Company (in thousands, except per share amounts): Three Months Ended March 31, 2025 2024 Total revenues $ 785,659 $ 808,022 Net earnings attributable to Kirby $ 75,986 $ 70,068 Net earnings per share attributable to Kirby common stockholders – diluted $ 1.33 $ 1.19 Net cash provided by operating activities $ 36,541 $ 123,288 Capital expenditures $ 78,687 $ 81,047 Cash provided by operating activities for the 2025 first quarter decreased in comparison to the 2024 first quarter primarily due to unfavorable working capital changes. This was related to an increase in inventories in the first quarter of 2025 due to the impact of supply delays in KDS resulting in the buildup of inventory for projects, mainly due to power generation orders, that are scheduled to be delivered later in 2025, partially offset by increased net earnings. For the 2025 first quarter, capital expenditures of $78.7 million included $61.8 million in KMT and $16.9 million in KDS and corporate, each more fully described under Cash Flow and Capital Expenditures below. The Company projects that capital expenditures for 2025 will be in the $280 million to $320 million range. Approximately $180 million to $220 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, and facility improvements. Approximately $100 million is associated with growth capital spending in both segments. The Company’s debt-to-capitalization ratio increased to 24.8% at March 31, 2025 compared to 20.7% at December 31, 2024, primarily due to an increase in debt outstanding. Total equity at March 31, 2025 decreased as compared to December 31, 2024 primarily from treasury stock purchases of $101.5 million, partially offset by net earnings attributable to Kirby of $76.0 million. The Company’s debt outstanding as of March 31, 2025 and December 31, 2024 is detailed in Long-Term Financing below. 14 Marine Transportation For the 2025 first quarter, KMT generated 61% of the Company’s revenues compared to 59% for the 2024 first quarter. The segment’s customers include many of the major petrochemical and refining companies that operate in the United States. Products transported include intermediate materials used to produce many of the end products used widely by businesses and consumers — plastics, fiber, paints, detergents, oil additives and paper, among others, as well as residual fuel oil, ship bunkers, asphalt, gasoline, diesel fuel, heating oil, crude oil, natural gas condensate, and agricultural chemicals. Consequently, KMT is directly affected by the volumes produced by the Company’s petroleum, petrochemical, and refining customer base. The following table summarizes the Company’s marine transportation fleet: March 31, 2025 2024 Inland tank barges: Owned 1,074 1,044 Leased 37 34 Total 1,111 1,078 Barrel capacity (in millions) 24.6 23.8 Active inland towboats (quarter average): Owned 215 214 Chartered 76 72 Total 291 286 Coastal tank barges: Owned 28 28 Leased - - Total 28 28 Barrel capacity (in millions) 2.9 2.9 Coastal tugboats: Owned 23 24 Chartered 1 1 Total 24 25 Offshore dry-bulk cargo barges (owned) 3 4 Offshore tugboats and docking tugboat (owned and chartered) 4 5 The Company also owns shifting operations and fleeting facilities for dry cargo barges and tank barges in the Houston Ship Channel and in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana and a shipyard for building towboats and performing routine maintenance near the Houston Ship Channel. Furthermore, the Company owns a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge. During the 2025 first quarter, the Company purchased 14 inland tank barges, chartered five inland tank barges, and retired two inland tank barges, increasing its capacity by approximately 0.4 million barrels. KMT revenues for the 2025 first quarter were flat and operating income increased 4% compared to the 2024 first quarter. Revenues were flat in the 2025 first quarter as compared to the 2024 first quarter as higher term and spot market pricing in the inland and coastal markets was offset by lower fuel rebills in both markets and increased shipyards in the coastal market as compared to the 2024 first quarter. The increase in operating income for the 2025 first quarter was primarily due to higher term and spot pricing in the inland and coastal markets, partially offset by higher levels of planned coastal shipyards and increased inland delay days in the 2025 first quarter. The 2025 and 2024 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast and various lock closures. For the 2025 first quarter, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues. For the 2024 first quarter, the inland tank barge fleet contributed 81% and the coastal fleet contributed 19% of KMT revenues. Inland tank barge utilization levels averaged in the low to mid-90% range during both the 2025 and 2024 first quarters. The 2025 and 2024 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 2025 and 2024 first quarters. 15 During the 2025 first quarter, approximately 70% of KMT inland revenues were under term contracts and 30% were spot contract revenues. During the 2024 first quarter, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. Inland time charters during the 2025 first quarter represented approximately 61% of inland revenues under term contracts compared with 62% in the 2024 first quarter. During the 2025 first quarter, approximately 100% of KMT coastal revenues were under term contracts and none were under spot contracts. During the 2024 first quarter, approximately 96% of KMT coastal revenues were under term contracts and 4% were under spot contracts. Coastal time charters represented approximately 100% of coastal revenues under term contracts during the 2025 first quarter compared to 98% during the 2024 first quarter. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months. The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2025 compared to contracts renewed during the corresponding quarter of 2024: Three Months Ended March 31, 2025 Inland market: Term increase 3% – 5% Spot increase 6% – 8% Coastal market (a): Term increase 24% – 26% Spot increase 18% – 20% (a) Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced. Effective January 1, 2025, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts in the 3% to 5% range, excluding fuel. KMT operating margin was 18.2% for the 2025 first quarter compared to 17.5% for the 2024 first quarter. Distribution and Services The Company, through KDS, provides after-market services and genuine replacement parts for engines, transmissions, reduction gears, electric motors, drives, and controls, specialized electrical distribution and control systems, 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, construction equipment and refrigeration trailers for use in a variety of industrial markets. The Company also manufactures and remanufactures specialized equipment, including pressure pumping units, electric power generation equipment, and specialized electrical distribution and control equipment for oilfield service, railroad and other industrial customers. For the 2025 first quarter, KDS generated 39% of the Company’s revenues, of which 88% were generated from service and parts and 12% 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 2025 first quarter decreased 7% and operating income increased 3% compared with the 2024 first quarter. In the commercial and industrial market, revenues and operating income increased compared to the 2024 first quarter as higher business levels in marine repair were partially offset by lower on-highway activity. For the 2025 first quarter, the commercial and industrial market contributed 52% of KDS revenues. In the power generation market, revenues and operating income decreased compared to the 2024 first quarter as deferred deliveries of equipment due to supply delays impacted 2025 first quarter results. For the 2025 first quarter, the power generation market contributed 34% of KDS revenues. In the oil and gas market, revenues decreased and operating income increased compared to the 2024 first quarter with revenues impacted by lower levels of conventional oilfield activity which resulted in decreased demand for new transmissions and parts, partially offset by deliveries of electric fracturing equipment. Operating income increased in the 2025 first quarter as compared to the 2024 first quarter due to product mix and ongoing cost management initiatives. For the 2025 first quarter, the oil and gas market contributed 14% of KDS revenues. KDS operating margin was 7.3% for the 2025 first quarter compared to 6.6% for the 2024 first quarter. 16 Outlook Overall, the Company expects to deliver improved financial results in 2025. In KMT, barge utilization and customer demand remain favorable and rates continue to increase. In KDS, growth in the power generation market is expected to mostly offset softness in oil and gas markets, and the on-highway service and repair business due to the ongoing trucking recession. The Company remains mindful of the ever-changing economic landscape related to the possible impact of high interest rates, tariffs and possible recessionary headwinds as it moves through 2025. In the inland marine transportation market in 2025, the Company anticipates positive market dynamics due to limited new barge construction. The Company expects barge utilization rates to remain steady for the year with continued improvement in term contract pricing as renewals occur throughout the year. However, the Company continues to see inflationary pressures and there remains an acute mariner shortage in the industry which continues to drive up labor costs. These pressures, along with the increasing cost of equipment, should continue to put upward pressure on spot and term contract prices. In the coastal marine transportation market in 2025, market conditions remain very favorable with steady customer demand. This is expected to keep barge utilization at high levels with improved rates as the availability of equipment is limited across the industry given there are currently no new ATBs under construction. The Company expects mixed results in KDS in 2025 as near-term volatility from supply issues, customers deferring maintenance, and lower overall levels of activity in the oil and gas market are partially offset by increased orders in the power generation market. In commercial and industrial, the demand outlook in marine repair remains steady while on-highway service and repair remains soft. In power generation, the Company anticipates continued strong growth in orders as data center demand and the need for backup power continues to be strong. In oil and gas, the Company expects revenues to be down as the transition from conventional diesel hydraulic fracturing to electric hydraulic fracturing continues to take place. The Company anticipates extended lead times and supply delays for certain original equipment manufacturer products to continue throughout 2025. Acquisitions On March 27, 2025, the Company purchased 14 inland tank barges with a total capacity of 364,000 barrels, including four specialty barges, and four high horsepower towboats from an undisclosed seller for $97.3 million in cash. The 14 tank barges, including four specialty barges, transport petrochemicals and refined products on the Mississippi River System and Gulf Intracoastal Waterway. The average age of the 14 barges was 16 years. On December 31, 2024, the Company purchased an inland tank barge from a leasing company for $2.7 million in cash. The Company had been leasing the barge prior to purchase. On December 30, 2024, the Company purchased three inland tank barges from an undisclosed seller for $9.9 million in cash. 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 $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 was 15 years. Financing of these purchases was through borrowings under the Company’s 2027 Revolving Credit Facility and cash provided by operating activities. Results of Operations The following table sets forth the Company’s KMT and KDS revenues and the percentage of each to total revenues (dollars in thousands): Three Months Ended March 31, 2025 % 2024 % Marine transportation $ 476,149 61 % $ 475,412 59 % Distribution and services 309,510 39 332,610 41 $ 785,659 100 % $ 808,022 100 % 17 Marine Transportation The following table sets forth KMT revenues, costs and expenses, operating income, and operating margin (dollars in thousands): Three Months Ended March 31, 2025 2024 % Change Marine transportation revenues $ 476,149 $ 475,412 — Costs and expenses: Costs of sales and operating expenses 290,987 301,262 (3 ) Selling, general and administrative 40,454 37,121 9 Taxes, other than on income 6,452 6,197 4 Depreciation and amortization 51,672 47,849 8 389,565 392,429 (1 ) Operating income $ 86,584 $ 82,983 4 % Operating margins 18.2 % 17.5 % Marine Transportation Revenues The following table shows the marine transportation markets serviced by the Company, KMT revenue distribution, products moved and the drivers of the demand for the products the Company transports: Markets Serviced 2025 Three Months Revenue Distribution Products Moved Drivers Petrochemicals 50% Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene Consumer non-durables – 70%, Consumer durables – 30% Black Oil 25% Residual Fuel Oil, Coker Feedstock, Vacuum Gas Oil, Asphalt, Carbon Black Feedstock, Crude Oil, Natural Gas Condensate, Ship Bunkers Fuel for Power Plants and Ships, Feedstock for Refineries, Road Construction Refined Petroleum Products 22% Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization Agricultural Chemicals 3% Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia Corn, Cotton and Wheat Production, Chemical Feedstock Usage KMT revenues for the 2025 first quarter were flat and operating income increased 4% compared to the 2024 first quarter. Revenues were flat in the 2025 first quarter as compared to the 2024 first quarter as higher term and spot market pricing in the inland and coastal markets was offset by lower fuel rebills in both markets and increased shipyards in the coastal market as compared to the 2024 first quarter. The increase in operating income for the 2025 first quarter was primarily due to higher term and spot pricing in the inland and coastal markets, partially offset by higher levels of planned coastal shipyards and increased inland delay days in the 2025 first quarter. The 2025 and 2024 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast and various lock closures. For the 2025 first quarter, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues. For the 2024 first quarter, the inland tank barge fleet contributed 81% and the coastal fleet contributed 19% of KMT revenues. Inland tank barge utilization levels averaged in the low to mid-90% range during both the 2025 and 2024 first quarters. The 2025 and 2024 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 2025 and 2024 first quarters. The petrochemical market, which is the Company’s largest market, contributed 50% of KMT revenues for the 2025 first quarter reflecting steady rates, volumes and utilization from Gulf Coast petrochemical plants as compared to the 2024 first quarter. The black oil market, which contributed 25% of KMT revenues for the 2025 first quarter reflected stable demand as refinery utilization and production levels of refined petroleum products and fuel oils increased. During the 2025 first quarter, the Company transported crude oil and natural gas condensate produced from major U.S. shale basins along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of America with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast. 18 The refined petroleum products market, which contributed 22% of KMT revenues for the 2025 first quarter, reflected stable volumes in the inland market with steady refinery utilization and product levels as compared to the 2024 first quarter. The agricultural chemical market, which contributed 3% of KMT revenues for the 2025 first quarter reflected stable demand for transportation of both domestically produced and imported products as compared to the 2024 first quarter. For the 2025 first quarter, inland operations incurred 4,029 delay days, 15% more than the 3,507 delay days that occurred during the 2024 first quarter. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions, or other navigational factors. Delay days reflected poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays during the 2025 and 2024 first quarters. During the 2025 first quarter, approximately 70% of KMT inland revenues were under term contracts and 30% were spot contract revenues. During the 2024 first quarter, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. Inland time charters during the 2025 first quarter represented approximately 61% of inland revenues under term contracts compared with 62% in the 2024 first quarter. During the 2025 first quarter, approximately 100% of KMT coastal revenues were under term contracts and none were under spot contracts. During the 2024 first quarter, approximately 96% of KMT coastal revenues were under term contracts and 4% were under spot contracts. Coastal time charters represented approximately 100% of coastal revenues under term contracts during the 2025 first quarter compared to 98% during the 2024 first quarter. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months. The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2025 compared to contracts renewed during the corresponding quarter of 2024: Three Months Ended March 31, 2025 Inland market: Term increase 3% – 5% Spot increase 6% – 8% Coastal market (a): Term increase 24% – 26% Spot increase 18% – 20% (a) Spot and term contract pricing in the coastal market are contingent on various factors including geographic location, vessel capacity, vessel type, and product serviced. Effective January 1, 2025, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts in the 3% to 5% range, excluding fuel. Marine Transportation Costs and Expenses Costs and expenses for both the 2025 first quarter decreased 1% compared to the 2024 first quarter. Costs of sales and operating expenses for the 2025 first quarter decreased 3% compared with the 2024 first quarter. The decrease during the 2025 first quarter was driven by lower fuel costs, partially offset by inflationary cost pressures including wage increases that went into effect in 2024. The inland marine transportation fleet operated an average of 291 towboats during the 2025 first quarter, of which an average of 76 were chartered, compared to 286 during the 2024 first quarter, of which an average of 72 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 2025 first quarter, inland operations consumed 11.7 million gallons of diesel fuel compared to 11.9 million gallons consumed during the 2024 first quarter. The average price per gallon of diesel fuel consumed during the 2025 first quarter was $2.57 per gallon compared with $2.82 per gallon for the 2024 first quarter. Fuel escalation and de-escalation clauses are typically included in term contracts and are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; however, there is generally a 30 to 120 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel. Selling, general and administrative expenses for the 2025 first quarter increased 9% compared to the 2024 first quarter. The increase in selling, general and administrative expenses for the 2025 first quarter as compared to the 2024 first quarter was primarily due to salary and wage increases that went into effect on July 1, 2024, continued inflationary cost pressures, and an increase in the provision for credit losses related to a certain customer. 19 Marine Transportation Operating Income and Operating Margin KMT operating income for the 2025 first quarter increased 4% compared with the 2024 first quarter. The 2025 first quarter operating margin was 18.2% compared with 17.5% for the 2024 first quarter. The increases in operating income and operating margin were primarily due to higher term and spot contract pricing in the inland and coastal markets, partially offset by higher levels of planned coastal shipyards and increased inland delay days in the 2025 first quarter. Distribution and Services The following table sets forth KDS revenues, costs and expenses, operating income, and operating margin (dollars in thousands): Three Months Ended March 31, 2025 2024 % Change Distribution and services revenues $ 309,510 $ 332,610 (7 )% Costs and expenses: Costs of sales and operating expenses 222,228 249,403 (11 ) Selling, general and administrative 52,019 51,521 1 Taxes, other than on income 2,353 1,828 29 Depreciation and amortization 10,319 7,844 32 286,919 310,596 (8 ) Operating income $ 22,591 $ 22,014 3 % Operating margins 7.3 % 6.6 % Distribution and Services Revenues The following table shows the markets serviced by KDS, the revenue distribution, and the customers for each market: Markets Serviced 2025 Three Months Revenue Distribution Customers Commercial and Industrial 52% Inland River Carriers — Dry and Liquid, Offshore Towing — Dry and Liquid, Offshore Oilfield Services — Drilling Rigs & Supply Boats, Harbor Towing, Dredging, Great Lakes Ore Carriers, Pleasure Crafts, On and Off-Highway Transportation, Pumping Stations, Mining Power Generation 34% Power Generation & Standby Power Generation Equipment, Power Generation Rentals & Related Service, Data Centers Oil and Gas 14% Oilfield Services, Oil and Gas Operators and Producers KDS revenues for the 2025 first quarter decreased 7% compared to the 2024 first quarter. In the commercial and industrial market, revenues and operating income increased compared to the 2024 first quarter as higher business levels in marine repair were partially offset by lower on-highway activity. In the power generation market, revenues and operating income decreased compared to the 2024 first quarter as deferred deliveries of equipment due to supply delays impacted 2025 first quarter results. In the oil and gas market, revenues decreased compared to the 2024 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. Oil and gas operating income increased compared to the 2024 first quarter due to product mix and ongoing cost management initiatives. Distribution and Services Costs and Expenses Costs and expenses for the 2025 first quarter decreased 8% compared with the 2024 first quarter. Costs of sales and operating expenses for the 2025 first quarter decreased 11% compared with the 2024 first quarter, reflecting lower on-highway and conventional oilfield activity as well as deferred power generation equipment shipments due to supply delays. Selling, general and administrative expenses for the 2025 first quarter increased 1% compared to the 2024 first quarter, reflecting salary and wage increases that went into effect July 1, 2024, partially offset by ongoing cost management initiatives. Depreciation and amortization for the 2025 first quarter increased 32% compared to the 2024 first quarter. The increase was primarily due to capital additions during 2024 and the first quarter of 2025 including additions to the equipment rental fleet. 20 Distribution and Services Operating Income and Operating Margin KDS operating income for the 2025 first quarter increased 3% compared with the 2024 first quarter. The 2025 first quarter operating margin was 7.3% compared to 6.6% for the 2024 first quarter. The results reflect increased marine repair activity and deliveries of electric fracturing equipment, partially offset by lower on-highway and conventional oilfield activity. Gain on Disposition of Assets The Company reported a net gain on disposition of assets of $0.1 million for both the 2025 and 2024 first quarters. The net gains were primarily from sales of marine transportation equipment. Other Income and Expenses The following table sets forth other income, noncontrolling interests, and interest expense (dollars in thousands): Three Months Ended March 31, 2025 2024 % Change Other income $ 5,334 $ 3,269 63 % Noncontrolling interests $ (284 ) $ 153 (286 )% Interest expense $ (10,537 ) $ (13,151 ) (20 )% Other Income Other income for the 2025 and 2024 first quarters includes income of $4.8 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. Interest Expense The following table sets forth average debt and average interest rate (dollars in thousands): Three Months Ended March 31, 2025 2024 Average debt $ 949,484 $ 1,064,916 Average interest rate 4.4 % 4.9 % Interest expense for the 2025 first quarter decreased 20% compared with the 2024 first quarter, primarily due to a lower average interest rate in the 2025 first quarter, as well as lower debt levels in the 2025 first quarter. There was no capitalized interest excluded from interest expense during the 2025 or 2024 first quarter. 21 Financial Condition, Capital Resources and Liquidity Balance Sheets The following table sets forth the significant components of the balance sheets (dollars in thousands): March 31, 2025 December 31, 2024 % Change Assets: Current assets $ 1,102,280 $ 1,068,559 3 % Property and equipment, net 4,149,299 4,022,966 3 Operating lease right-of-use assets 157,903 158,990 (1 ) Goodwill 438,748 438,748 — Other intangibles, net 32,275 34,406 (6 ) Other assets 134,096 128,283 5 $ 6,014,601 $ 5,851,952 3 % Liabilities and stockholders’ equity: Current liabilities $ 698,583 $ 734,753 (5 )% Long-term debt, net – less current portion 1,091,032 866,722 26 Deferred income taxes 741,417 739,472 — Operating lease liabilities – less current portion 146,250 148,170 (1 ) Other long-term liabilities 9,565 9,587 — Total equity 3,327,754 3,353,248 (1 ) $ 6,014,601 $ 5,851,952 3 % Current assets as of March 31, 2025 increased 3% compared with December 31, 2024. Trade accounts receivable increased 3% primarily due to higher business activity levels in KMT. Inventories – net increased 10% primarily due to the impact of supply delays in KDS resulting in the buildup of inventory for mainly power generation projects that are scheduled to be delivered later in 2025. Property and equipment, net of accumulated depreciation, at March 31, 2025 increased 3% compared with December 31, 2024. The increase reflected $90.7 million of capital additions (including an increase in accrued capital expenditures of $12.0 million) and a $97.3 million equipment acquisition in the 2025 first quarter, partially offset by $61.6 million of depreciation expense and $0.1 million of property disposals more fully described under Cash Flow and Capital Expenditures below. Operating lease right-of-use assets as of March 31, 2025 decreased 1% compared with December 31, 2024, primarily due to lease amortization expense, partially offset by new leases acquired in the 2025 first quarter. Other intangibles, net, as of March 31, 2025 decreased 6% compared with December 31, 2024, due to amortization during the 2025 first quarter. Other assets as of March 31, 2025 increased 5% compared with December 31, 2024, primarily due to additional deferred major maintenance drydock expenditures incurred during the 2025 first quarter, partially offset by amortization of drydock expenditures. Current liabilities as of March 31, 2025 decreased 5% compared with December 31, 2024. Income taxes payable decreased 14% primarily due to timing of federal income tax payments. Accounts payable increased 8% primarily due to timing of KDS inventory purchases and KMT shipyard payments. Accrued liabilities decreased 20% primarily from payment during the 2025 first quarter of employee incentive compensation accrued during 2024. Long-term debt, net – less current portion, as of March 31, 2025 increased 26% compared with December 31, 2024, primarily reflecting increased borrowings under the 2027 Revolving Credit Facility. Total equity as of March 31, 2025 decreased 1% compared with December 31, 2024. The decrease was primarily due to treasury stock purchases of $101.5 million and tax withholdings of $5.9 million on RSU vestings, partially offset by net earnings attributable to Kirby of $76.0 million, amortization of share-based compensation of $7.8 million, and stock option exercises of $0.3 million. 22 Long-Term Financing The following table summarizes the Company’s outstanding debt (in thousands): March 31, 2025 December 31, 2024 Long-term debt, including current portion: Revolving Credit Facility due July 29, 2027 (a) $ 225,000 $ — Term Loan due July 29, 2027 (a) 70,000 70,000 4.2% senior notes due March 1, 2028 500,000 500,000 3.46% senior notes due January 19, 2033 60,000 60,000 3.51% senior notes due January 19, 2033 240,000 240,000 Credit line due June 30, 2026 — — Bank notes payable 7,337 8,226 1,102,337 878,226 Unamortized debt discounts and issuance costs (3,968 ) (3,278 ) $ 1,098,369 $ 874,948 (a) Variable interest rate of 5.6% at March 31, 2025 and December 31, 2024. 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. In the fourth quarter of 2022, the Company repaid $80 million under the 2027 Term Loan prior to scheduled maturities. In the fourth quarter of 2024, the Company repaid $100 million under the 2027 Term Loan prior to scheduled maturities. As a result, no repayments are required until March 31, 2027. 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 $275.0 million as of March 31, 2025. On February 3, 2022, the Company entered into a note purchase agreement for the 2033 Notes with a group of institutional investors, consisting of $60 million Series A Notes and $240 million Series B Notes, each due January 19, 2033. The Series A Notes were issued on October 20, 2022, and the Series B Notes were issued on January 19, 2023. No principal payments will be required until maturity. The Company has a $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 March 31, 2025. As of March 31, 2025, 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, 2024. Cash Flow and Capital Expenditures The Company generated positive operating cash flows during the 2025 first quarter with net cash provided by operating activities of $36.5 million compared with $123.3 million for the 2024 first quarter, a 70% decrease. The decline in operating cash flows was mainly due to unfavorable changes in inventories in 2025 due to the impact of supply delays in KDS resulting in the buildup of inventory for mainly power generation projects that are scheduled to be delivered later in 2025, partially offset by higher operating income in KMT. The increase in KMT operating income was driven by higher term and spot contract pricing, partially offset by higher levels of planned coastal shipyards and increased inland delay days in the 2025 first quarter. During the 2025 and 2024 first quarter, the Company generated cash of $0.1 million and $2.4 million, respectively, from proceeds from the disposition of assets, and $0.3 million and $1.5 million, respectively, from proceeds from the exercise of stock options. For the 2025 first quarter, cash generated was used for capital expenditures of $78.7 million, including $64.6 million associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements, as well as $14.1 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. In addition, the Company used cash of $97.3 million for an equipment acquisition in the 2025 first quarter. 23 Treasury Stock Purchases During the 2025 first quarter, the Company purchased 1.0 million shares of its common stock for $101.5 million, at an average price of $101.19 per share. Subsequent to March 31, 2025 and through May 9, 2025, the Company purchased an additional 0.3 million shares of its common stock for $26.9 million, at an average price of $92.14 per share. As of May 9, 2025, the Company had approximately 1.6 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. The Company is authorized to purchase its common stock on the New York Stock Exchange and in privately negotiated transactions. When purchasing its common stock, the Company is subject to price, trading volume, and other market considerations. Shares purchased may be used for reissuance upon the exercise of stock options or the granting of other forms of incentive compensation, in future acquisitions for stock, or for other appropriate corporate purposes. For more information about stock purchases in the 2025 first quarter, see Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Liquidity Funds generated from operations are available for acquisitions, capital expenditure projects, common stock purchases, repayments of borrowings, and for other corporate and operating requirements. In addition to net cash flows provided by operating activities, as of May 9, 2025 the Company also had cash and cash equivalents of $49.5 million, availability of $220 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. The Company expects to continue to fund expenditures for acquisitions, capital construction projects, common stock purchases, repayment of borrowings, and for other operating requirements from a combination of available cash and cash equivalents, funds generated from operating activities, and available financing arrangements. The 2027 Revolving Credit Facility’s commitment is in the amount of $500 million and matures July 29, 2027. The $500 million 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The 2033 Notes do not mature until January 19, 2033 and require no prepayments. The 2027 Term Loan is subject to quarterly installments, beginning March 31, 2027, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable on July 29, 2027, assuming no prepayments. The 2027 Term Loan is prepayable, in whole or in part, without penalty. There are numerous factors that may negatively impact the Company’s cash flows in 2025. For a list of significant risks and uncertainties that could impact cash flows, see Note 13, Contingencies and Commitments, of the Notes to Condensed Financial Statements (Unaudited), and Item 1A — Risk Factors and Note 14, Contingencies and Commitments, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Amounts available under the Company’s existing financial arrangements are subject to the Company continuing to meet the covenants of the credit facilities as described in Note 5, Long-Term Debt, of the Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. 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 $32.8 million at March 31, 2025, including $11.6 million in letters of credit and $21.1 million in performance bonds. All of these instruments have an expiration date within two years. The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur in connection with these instruments. KMT term contracts typically contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 120 day delay before contracts are adjusted depending on the specific terms of the contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. The Company’s spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel. 24 The Company has certain mechanisms designed to help mitigate the impacts of rising costs. For example, KMT has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be largely passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which somewhat limits exposure to inflation. To the extent possible, the Company also seeks to include contractual language to address recovery of increased costs related to tariffs in KDS. The repair portion of KDS is based on prevailing current market rates. Item 3. Quantitative and Qualitative Disclosures about Market Risk For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K. The Company’s exposure to market risk has not changed materially since December 31, 2024.