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 June 30, Six Months Ended June 30, 2025 2024 2025 2024 Total revenues $ 855,455 $ 824,390 $ 1,641,114 $ 1,632,412 Net earnings attributable to Kirby $ 94,277 $ 83,854 $ 170,263 $ 153,922 Net earnings per share attributable to Kirby common stockholders – diluted $ 1.67 $ 1.43 $ 2.99 $ 2.62 Net cash provided by operating activities $ 130,463 $ 302,607 Capital expenditures $ 150,160 $ 169,607 Cash provided by operating activities for the 2025 first six months decreased in comparison to the 2024 first six months primarily due to unfavorable working capital changes driven by the timing of accounts receivable collections, accounts payable payments and federal income tax payments, as well as an increase in inventories in the first half of 2025, partially offset by increased net earnings. The increase in inventories was due to the impact of higher business activity levels and supply delays in KDS resulting in the buildup of inventory for projects, mainly due to power generation orders, which are scheduled to be delivered later in 2025 and into 2026. For the 2025 first six months, capital expenditures of $150.2 million included $126.3 million in KMT and $23.9 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 $260 million to $290 million range. Approximately $180 million to $210 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, and facility improvements. Approximately $80 million is associated with growth capital spending in both segments. The Company’s debt-to-capitalization ratio increased to 24.8% at June 30, 2025 compared to 20.7% at December 31, 2024, primarily due to an increase in debt outstanding. Total equity at June 30, 2025 increased as compared to December 31, 2024 primarily from net earnings attributable to Kirby of $170.3 million, partially offset by treasury stock purchases of $132.7 million. The Company’s debt outstanding as of June 30, 2025 and December 31, 2024 is detailed in Long-Term Financing below. 16 Marine Transportation For the 2025 second quarter and first six months, KMT generated 58% and 59%, respectively, of the Company’s revenues compared to 59% for both the 2024 second quarter and first six months. The segment’s customers include many of the major petrochemical and refining companies that operate in the United States. 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: June 30, 2025 2024 Inland tank barges: Owned 1,073 1,059 Leased 36 34 Total 1,109 1,093 Barrel capacity (in millions) 24.5 24.2 Active inland towboats (quarter average): Owned 215 213 Chartered 75 74 Total 290 287 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 4 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 six months, the Company purchased 14 inland tank barges, chartered four inland tank barges, and retired three inland tank barges, increasing its capacity by approximately 0.3 million barrels. KMT revenues for the 2025 second quarter and first six months increased 2% and 1%, respectively, and operating income increased 4% compared to the 2024 second quarter and first six months. The increase in revenues in the 2025 second quarter and first six months as compared to the 2024 second quarter and first six months were due to higher term and spot market pricing in the inland and coastal markets, partially offset by lower fuel rebills in both markets. The increase in operating income for the 2025 second quarter and first six months was primarily due to higher term and spot pricing in the inland and coastal markets. 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 second quarter and first six months, the inland tank barge fleet contributed 81% and 82%, respectively, and the coastal fleet contributed 19% and 18% of KMT revenues, respectively. 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. Inland tank barge utilization levels averaged in the low to mid-90% range during the 2025 and 2024 first and second 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 the 2025 and 2024 first and second quarters. 17 During both the 2025 second quarter and first six months, approximately 70% of KMT inland revenues were under term contracts and 30% were spot contract revenues. 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. Inland time charters during both the 2025 second quarter and first six months represented approximately 60% of inland revenues under term contracts compared with 59% and 60% in the 2024 second quarter and first six months, respectively. During both the 2025 second quarter and first six months, approximately 100% of KMT coastal revenues were under term contracts and none were under spot contracts. 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. Coastal time charters represented approximately 100% of coastal revenues under term contracts during both the 2025 second quarter and first six months compared to 97% during both the 2024 second quarter and first six months. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months. 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 June 30, 2025 Inland market: Term increase 3% – 5% 2% – 4% Spot increase 6% – 8% 6% – 8% Coastal market (a): Term increase 24% – 26% 24% – 26% (a) Term contract pricing in the coastal market is 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 20.1% and 19.2% for the 2025 second quarter and first six months, respectively, compared to 19.6% and 18.5% for the 2024 second quarter and first six months, respectively. 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 second quarter and first six months, KDS generated 42% and 41% of the Company’s revenues, respectively, of which 86% and 87%, respectively, were generated from service and parts and 14% and 13%, 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 2025 second quarter increased 7% compared with the 2024 second quarter. KDS revenues for the 2025 first six months were flat compared with the 2024 first six months. KDS operating income for the 2025 second quarter and first six months increased 20% and 13%, respectively, compared with the 2024 second quarter and first six months. In the commercial and industrial market, revenues and operating income increased compared to the 2024 second quarter and first six months due to higher business levels in marine repair. For the 2025 second quarter and first six months, the commercial and industrial market contributed 48% and 50% of KDS revenues, respectively. In the power generation market, revenues increased compared to the 2024 second quarter and first six months due to increased demand for backup and critical power applications, while operating income decreased due to sales mix. For the 2025 second quarter and first six months, the power generation market contributed 39% and 36% of KDS revenues, respectively. In the oil and gas market, revenues decreased compared to the 2024 second quarter and first six months, 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 in the oil and gas market increased compared to the 2024 second quarter and first six 18 months due to product mix and ongoing cost management initiatives. For the 2025 second quarter and first six months, the oil and gas market contributed 13% and 14% of KDS revenues, respectively. KDS operating margin was 9.8% and 8.6% for the 2025 second quarter and first six months, respectively, compared to 8.7% and 7.7% for the 2024 second quarter and first six months, respectively. 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 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 remainder of the year. Also, 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 term contract prices. In the near term, however, spot market pricing could be pressured due to short-term demand softness. 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 to be 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 but has shown some recent modest improvement. 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. 19 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 June 30, Six Months Ended June 30, 2025 % 2024 % 2025 % 2024 % Marine transportation $ 492,562 58 % $ 484,808 59 % $ 968,711 59 % $ 960,220 59 % Distribution and services 362,893 42 339,582 41 672,403 41 672,192 41 $ 855,455 100 % $ 824,390 100 % $ 1,641,114 100 % $ 1,632,412 100 % Marine Transportation 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, 2025 2024 % Change 2025 2024 % Change Marine transportation revenues $ 492,562 $ 484,808 2 % $ 968,711 $ 960,220 1 % Costs and expenses: Costs of sales and operating expenses 298,789 299,975 — 589,776 601,237 (2 ) Selling, general and administrative 33,415 32,527 3 73,869 69,648 6 Taxes, other than on income 8,124 8,383 (3 ) 14,576 14,580 — Depreciation and amortization 53,182 49,047 8 104,854 96,896 8 393,510 389,932 1 783,075 782,361 — Operating income $ 99,052 $ 94,876 4 % $ 185,636 $ 177,859 4 % Operating margins 20.1 % 19.6 % 19.2 % 18.5 % 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 Second Quarter Revenue Distribution 2025 Six Months Revenue Distribution Products Moved Drivers Petrochemicals 49% 49% Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene Consumer non-durables – 70%, Consumer durables – 30% Black Oil 26% 26% Residual Fuel Oil, Coker Feedstock, Vacuum Gas Oil, Asphalt, Carbon Black Feedstock, Crude Oil, Natural Gas Condensate, Ship Bunkers Fuel for Power Plants and Ships, Feedstock for Refineries, Road Construction Refined Petroleum Products 21% 21% Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization Agricultural Chemicals 4% 4% Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia Corn, Cotton and Wheat Production, Chemical Feedstock Usage KMT revenues for the 2025 second quarter and first six months increased 2% and 1%, respectively, and operating income increased 4% compared to the 2024 second quarter and first six months. The increase in revenues in the 2025 second quarter and first six months as compared to the 2024 second quarter and first six months were due to higher term and spot market pricing in the inland and coastal markets, partially offset by lower fuel rebills in both markets. The increase in operating income for the 2025 second quarter 20 and first six months was primarily due to higher term and spot pricing in the inland and coastal markets. 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 second quarter and first six months, the inland tank barge fleet contributed 81% and 82%, respectively, and the coastal fleet contributed 19% and 18% of KMT revenues, respectively. 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. Inland tank barge utilization levels averaged in the low to mid-90% range during the 2025 and 2024 first and second 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 the 2025 and 2024 first and second quarters. The petrochemical market, which is the Company’s largest market, contributed 49% of KMT revenues for both the 2025 second quarter and first six months reflecting steady rates, volumes and utilization from Gulf Coast petrochemical plants as compared to the 2024 second quarter and first six months. The black oil market, which contributed 26% of KMT revenues for both the 2025 second quarter and first six months reflected stable demand as refinery utilization and production levels of refined petroleum products and fuel oils increased. During the 2025 first six months, the Company transported crude oil and natural gas condensate produced from major U.S. shale basins along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of America 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 21% of KMT revenues for both the 2025 second quarter and first six months, reflected stable volumes in the inland market with steady refinery utilization and product levels as compared to the 2024 second quarter and first six months. The agricultural chemical market, which contributed 4% of KMT revenues for both the 2025 second quarter and first six months reflected stable demand for transportation of both domestically produced and imported products as compared to the 2024 second quarter and first six months. For the 2025 second quarter, inland operations incurred 3,320 delay days compared to 3,334 delay days that occurred during the 2024 second quarter. For the 2025 first six months, inland operations incurred 7,349 delay days, 7% more than the 6,841 delay days that occurred during the 2024 first six months. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions, or other navigational factors. Delay days reflected poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays during the 2025 and 2024 first quarters. During both the 2025 second quarter and first six months, approximately 70% of KMT inland revenues were under term contracts and 30% were spot contract revenues. 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. Inland time charters during both the 2025 second quarter and first six months represented approximately 60% of inland revenues under term contracts compared with 59% and 60% in the 2024 second quarter and first six months, respectively. During both the 2025 second quarter and first six months, approximately 100% of KMT coastal revenues were under term contracts and none were under spot contracts. 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. Coastal time charters represented approximately 100% of coastal revenues under term contracts during both the 2025 second quarter and first six months compared to 97% during both the 2024 second quarter and first six months. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months. 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 June 30, 2025 Inland market: Term increase 3% – 5% 2% – 4% Spot increase 6% – 8% 6% – 8% Coastal market (a): Term increase 24% – 26% 24% – 26% (a) Term contract pricing in the coastal market is 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. 21 Marine Transportation Costs and Expenses Costs and expenses for both the 2025 second quarter and first six months were flat compared to the 2024 second quarter and first six months. Costs of sales and operating expenses for the 2025 second quarter and first six months were flat and decreased 2%, respectively, compared with the 2024 second quarter and first six months. The results for the 2025 second quarter and first six months were driven by lower fuel costs, offset by inflationary cost pressures including wage increases that went into effect in 2024. The inland marine transportation fleet operated an average of 290 towboats during the 2025 second quarter, of which an average of 75 were chartered, compared to 287 during the 2024 second quarter, of which an average of 74 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 second quarter, inland operations consumed 12.8 million gallons of diesel fuel compared to 12.1 million gallons consumed during the 2024 second quarter. The average price per gallon of diesel fuel consumed during the 2025 second quarter was $2.35 per gallon compared with $2.83 per gallon for the 2024 second quarter. During the 2025 first six months, inland operations consumed 24.5 million gallons of diesel fuel compared to 24.0 million gallons consumed during the 2024 first six months. The average price per gallon of diesel fuel consumed during the 2025 first six months was $2.45 per gallon compared with $2.83 per gallon for the 2024 first six months. Fuel escalation and de-escalation clauses are typically included in term contracts and are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; 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 second quarter and first six months increased 3% and 6%, respectively, compared to the 2024 second quarter and first six months. The increase in selling, general and administrative expenses for the 2025 second quarter and first six months as compared to the 2024 second quarter and first six months was primarily due to salary and wage increases that went into effect on July 1, 2024 and continued inflationary cost pressures. The 2025 first six months was also impacted by an increase in the provision for credit losses related to a certain customer during the 2025 first quarter. Depreciation and amortization for both the 2025 second quarter and first six months increased 8% compared to the 2024 second quarter and first six months. The increase was primarily due to capital additions during 2024 and the first six months of 2025, as well as equipment acquisitions. Marine Transportation Operating Income and Operating Margin KMT operating income for both the 2025 second quarter and first six months increased 4% compared with the 2024 second quarter and first six months. The 2025 second quarter operating margin was 20.1% compared with 19.6% for the 2024 second quarter. The 2025 first six months operating margin was 19.2% compared with 18.5% for the 2024 first six months. The increases in operating income and operating margin were primarily due to higher term and spot contract pricing in the inland and coastal markets. 22 Distribution and Services 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, 2025 2024 % Change 2025 2024 % Change Distribution and services revenues $ 362,893 $ 339,582 7 % $ 672,403 $ 672,192 — Costs and expenses: Costs of sales and operating expenses 264,331 253,742 4 486,559 503,145 (3 ) Selling, general and administrative 50,054 45,919 9 102,073 97,440 5 Taxes, other than on income 2,391 1,900 26 4,744 3,728 27 Depreciation and amortization 10,682 8,585 24 21,001 16,429 28 327,458 310,146 6 614,377 620,742 (1 ) Operating income $ 35,435 $ 29,436 20 % $ 58,026 $ 51,450 13 % Operating margins 9.8 % 8.7 % 8.6 % 7.7 % Distribution and Services Revenues The following table shows the markets serviced by KDS, the revenue distribution, and the customers for each market: Markets Serviced 2025 Second Quarter Revenue Distribution 2025 Six Months Revenue Distribution Customers Commercial and Industrial 48% 50% 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 39% 36% Power Generation & Standby Power Generation Equipment, Power Generation Rentals & Related Service, Data Centers Oil and Gas 13% 14% Oilfield Services, Oil and Gas Operators and Producers KDS revenues for the 2025 second quarter increased 7% compared with the 2024 second quarter. KDS revenues for the 2025 first six months were flat compared with the 2024 first six months. KDS operating income for the 2025 second quarter and first six months increased 20% and 13%, respectively, compared with the 2024 second quarter and first six months. In the commercial and industrial market, revenues and operating income increased compared to the 2024 second quarter and first six months due to higher business levels in marine repair. In the power generation market, revenues increased compared to the 2024 second quarter and first six months due to increased demand for backup and critical power applications, while operating income decreased due to sales mix. In the oil and gas market, revenues decreased compared to the 2024 second quarter and first six months, 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 in the oil and gas market increased compared to the 2024 second quarter and first six months due to product mix and ongoing cost management initiatives. Distribution and Services Costs and Expenses Costs and expenses for the 2025 second quarter and first six months increased 6% and decreased 1%, respectively, compared with the 2024 second quarter and first six months. Costs of sales and operating expenses for the 2025 second quarter and first six months increased 4% and decreased 3%, respectively, compared with the 2024 second quarter and first six months. The increase for the 2025 second quarter reflected higher deliveries of power generation equipment, while the decrease for the 2025 first six months reflected lower on-highway and conventional oilfield activity as well as fewer power generation equipment shipments in the 2025 first quarter due to supply delays. 23 Selling, general and administrative expenses for the 2025 second quarter and first six months increased 9% and 5% compared to the 2024 second quarter and first six months, reflecting salary and wage increases that went into effect July 1, 2024 and higher business activity levels. Depreciation and amortization for the 2025 second quarter and first six months increased 24% and 28%, respectively, compared to the 2024 second quarter and first six months. The increase was primarily due to capital additions during 2024 and the first six months of 2025 including additions to the equipment rental fleet. Distribution and Services Operating Income and Operating Margin KDS operating income for the 2025 second quarter and first six months increased 20% and 13%, respectively, compared with the 2024 second quarter and first six months. The 2025 second quarter operating margin was 9.8% compared to 8.7% for the 2024 second quarter. The 2025 first six months operating margin was 8.6% compared to 7.7% for the 2024 first six months. The results reflect increased marine repair activity and deliveries of electric fracturing equipment, partially offset by lower conventional oilfield activity. Gain on Disposition of Assets The Company reported a net gain on disposition of assets of $1.7 million and $0.5 million for the 2025 and 2024 second quarters, respectively. The Company reported a net gain on disposition of assets of $1.8 million and $0.6 million for the 2025 and 2024 first six months, respectively. 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 June 30, Six Months Ended June 30, 2025 2024 % Change 2025 2024 % Change Other income $ 4,812 $ 3,088 56 % $ 10,146 $ 6,357 60 % Noncontrolling interests $ (101 ) $ (128 ) (21 )% $ (385 ) $ 25 (1640 )% Interest expense $ (12,730 ) $ (12,819 ) (1 )% $ (23,267 ) $ (25,970 ) (10 )% Other Income Other income for the 2025 and 2024 second quarters includes income of $4.3 million and $2.7 million, respectively, and the 2025 and 2024 first six months includes income of $9.1 million and $5.1 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 June 30, Six Months Ended June 30, 2025 2024 2025 2024 Average debt $ 1,147,306 $ 1,062,620 $ 1,048,395 $ 1,063,768 Average interest rate 4.6 % 4.8 % 4.5 % 4.8 % Interest expense for the 2025 second quarter and first six months decreased 1% and 10%, respectively, compared with the 2024 second quarter and first six months, primarily due to a lower average interest rate in the 2025 second quarter and first six months. Interest expense excludes capitalized interest for the 2025 first six months of $0.5 million. There was no capitalized interest excluded from interest expense during the 2024 first six months. 24 Financial Condition, Capital Resources and Liquidity Balance Sheets The following table sets forth the significant components of the balance sheets (dollars in thousands): June 30, 2025 December 31, 2024 % Change Assets: Current assets $ 1,185,033 $ 1,068,559 11 % Property and equipment, net 4,135,050 4,022,966 3 Operating lease right-of-use assets 157,041 158,990 (1 ) Goodwill 438,748 438,748 — Other intangibles, net 33,123 34,406 (4 ) Other assets 130,970 128,283 2 $ 6,079,965 $ 5,851,952 4 % Liabilities and stockholders’ equity: Current liabilities $ 679,457 $ 734,753 (8 )% Long-term debt, net – less current portion 1,111,332 866,722 28 Deferred income taxes 747,060 739,472 1 Operating lease liabilities – less current portion 142,105 148,170 (4 ) Other long-term liabilities 10,121 9,587 6 Total equity 3,389,890 3,353,248 1 $ 6,079,965 $ 5,851,952 4 % Current assets as of June 30, 2025 increased 11% compared with December 31, 2024. Trade accounts receivable increased 15% primarily due to higher business activity levels in both KMT and KDS. Inventories – net increased 8% primarily due to the impact of higher business activity levels and supply delays in KDS resulting in the buildup of inventory for mainly power generation projects that are scheduled to be delivered later in 2025 and into 2026. Property and equipment, net of accumulated depreciation, at June 30, 2025 increased 3% compared with December 31, 2024. The increase reflected $150.6 million of capital additions (including an increase in accrued capital expenditures of $0.4 million) and a $97.3 million equipment acquisition in the 2025 first quarter, partially offset by $125.1 million of depreciation expense and $10.7 million of property disposals more fully described under Cash Flow and Capital Expenditures below. Operating lease right-of-use assets as of June 30, 2025 decreased 1% compared with December 31, 2024, primarily due to lease amortization expense, partially offset by new leases acquired in the 2025 first six months. Other intangibles, net, as of June 30, 2025 decreased 4% compared with December 31, 2024, due to amortization during the 2025 first six months partially offset by a $3.0 million intellectual property intangible asset acquired in the 2025 second quarter. Other assets as of June 30, 2025 increased 2% compared with December 31, 2024, primarily due to additional deferred major maintenance drydock expenditures incurred during the 2025 first six months, partially offset by amortization of drydock expenditures. Current liabilities as of June 30, 2025 decreased 8% compared with December 31, 2024. Income taxes payable decreased 97% primarily due to timing of federal income tax payments. Accrued liabilities decreased 14% primarily from payment during the 2025 first six months of employee incentive compensation accrued during 2024. Long-term debt, net – less current portion, as of June 30, 2025 increased 28% compared with December 31, 2024, primarily reflecting increased borrowings under the 2027 Revolving Credit Facility. Total equity as of June 30, 2025 increased 1% compared with December 31, 2024. The increase was primarily due to net earnings attributable to Kirby of $170.3 million, amortization of share-based compensation of $11.1 million, and stock option exercises of $0.3 million, partially offset by treasury stock purchases of $132.7 million and tax withholdings of $6.0 million on RSU vestings. 25 Long-Term Financing The following table summarizes the Company’s outstanding debt (in thousands): June 30, 2025 December 31, 2024 Long-term debt, including current portion: Revolving Credit Facility due July 29, 2027 (a) $ 245,000 $ — 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 6,433 8,226 1,121,433 878,226 Unamortized debt discounts and issuance costs (3,668 ) (3,278 ) $ 1,117,765 $ 874,948 (a) Variable interest rate of 5.6% at June 30, 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 $255.0 million as of June 30, 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 June 30, 2025. As of June 30, 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 six months with net cash provided by operating activities of $130.5 million compared with $302.6 million for the 2024 first six months, a 57% decrease. The decline in operating cash flows was mainly due to the timing of accounts receivable collections, accounts payable payments and federal income tax payments, as well as an increase in inventories in 2025, partially offset by increased net earnings. The increase in inventories was due to the impact of higher business activity levels and supply delays in KDS resulting in the buildup of inventory for projects, mainly due to power generation orders, which are scheduled to be delivered later in 2025 and into 2026. The increase in net earnings was driven by higher term and spot contract pricing in KMT and improved KDS business activity levels in the commercial and industrial market. During the 2025 and 2024 first six months, the Company generated cash of $11.6 million and $9.1 million, respectively, from proceeds from the disposition of assets, and $0.3 million and $4.1 million, respectively, from proceeds from the exercise of stock options. For the 2025 first six months, cash generated was used for capital expenditures of $150.2 million, including $130.1 million associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements, as well as $20.1 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 six months. 26 Treasury Stock Purchases During the 2025 first six months, the Company purchased 1.3 million shares of its common stock for $132.7 million, at an average price of $99.41 per share. Subsequent to June 30, 2025 and through August 8, 2025, the Company purchased an additional 0.2 million shares of its common stock for $24.5 million, at an average price of $99.78 per share. As of August 8, 2025, the Company had approximately 1.3 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 second 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 August 8, 2025 the Company also had cash and cash equivalents of $41 million, availability of $360 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 $27.4 million at June 30, 2025, including $11.6 million in letters of credit and $15.8 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. 27 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.