UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2020
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File no. 1-07615
Kirby CorpCorporationoration
(Exact name of registrant as specified in its charter)
Nevada | 74-1884980 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
55 Waugh Drive, Suite 1000 | |
Houston, Texas | 77007 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
713-435-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | KEX | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ ☐No No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2020,2023, based on the closing sales price of such stock on the New York Stock Exchange on June 30, 2020,2023, was $3,178,530,000.4.5 billion. For purposes of this computation, all executive officers, directors and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such executive officers, directors and 10% beneficial owners are affiliates.
As of February 19, 2021,16, 2024, 60,085,00058,522,000 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive proxy statement in connection with the Annual Meeting of Stockholders to be held April 27, 2021,26, 2024, to be filed with the Commission pursuant to Regulation 14A, and the related annual report for the fiscal year ended December 31, 2023, to be provided to the Company's stockholders pursuant to Rule 14a-3(b) are incorporated by reference into PartParts II and III of this reportreport..
KIRBY CORPORATION
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PART II | |||
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | ||
Item 7A. Quantitative and Qualitative Disclosures about Market Risk | 47 | ||
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 47 | ||
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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 48 | ||
PART III | |||
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PART IV | |||
Item 15. Exhibits and Financial Statement | 78 | ||
79 |
3
PART I
Item 1. Business
|
Kirby Corporation (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, and in Alaska and Hawaii.coasts. The Company, through its marine transportation segment (“KMT”), transports petrochemicals, black oil, refined petroleum products, and agricultural chemicals by tank barge. The Company also operates four offshore dry-bulk cargo barges, four offshore tugboats and one docking tugboat transporting dry-bulk commodities in the United States coastal trade. Through its distribution and services segment (“KDS”), the Company providessells after-market service and genuine replacement parts for engines, transmissions, reduction gears, and relatedpower generation equipment used in oilfield services, marine, power generation, on-highwayoil and othergas and commercial and industrial applications. The Company also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks for use in a variety of power generation and industrial markets, andequipment, manufactures and remanufactures oilfield service equipment, including pressure pumping units, and manufactures electric power generation equipment for land-based oilfield service customers.
Unless the context otherwise requires, all references herein to the Company include the Company and its subsidiaries.
The Internet address of the Company’s website is http://www.kirbycorp.com. The Company makes available free of charge through its website, all of its filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K,10‑K, Quarterly Reports on Form 10-Q,10‑Q, Current Reports on Form 8-K8‑K and amendments to those reports, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.
The following documents are available on the Company’s website in the Investor Relations section under Corporate Governance:
• | Audit Committee Charter | • | Corporate Governance Guidelines |
• | Compensation Committee Charter | • | Clawback Policy |
• | ESG and Nominating Committee Charter | • | Insider Trading Policy |
• | Business Ethics Guidelines |
The Company is required to make prompt disclosure of any amendment to or waiver of any provision of its Business Ethics Guidelines that applies to any director or executive officer or to its chief executive officer, chief financial officer, chief accounting officer or controller or persons performing similar functions. The Company will make any such disclosure that may be necessary by posting the disclosure on its website in the Investor Relations section under Corporate Governance.
The Company, through its subsidiaries, conducts operations in two reportable business segments: marine transportation and distribution and services.
The Company, through its marine transportation segment,KMT, is a provider of marine transportation services, operating tank barges and towing vessels transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts, and in Alaska and Hawaii.coasts. The Company transports petrochemicals, black oil, refined petroleum products, and agricultural chemicals by tank barge. The Company operates offshore dry-bulk barge and tugboat units engaged in the offshore transportation of dry-bulk cargoes in the United States coastal trade. The segment is a provider of transportation services for its customers and, in almost all cases, does not assume ownership of the products that it transports. All of the Company’s vessels operate under the United States flag and are qualified for domestic trade under the Jones Act.
The Company, through its distributionKDS, sells after-market services and services segment, sells genuine replacement parts provides service mechanics to overhaul and repairfor engines, transmissions, reduction gears, electric motors, drives, and controls, specialized electrical distribution and control systems, energy storage battery systems, and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, industrial compressors, railcar movers and high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, and manufacturers cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for land-based oilfield service and railroad customers.
The Company has approximately 5,4005,450 employees, the large majority of whom are in the United States.
4
KMT is primarily a provider of transportation services by tank barge for the inland and coastal markets. As of December 31, 2020,2023, the equipment owned or operated by the marine transportation segmentKMT consisted of 1,0661,076 inland tank barges with 24.123.7 million barrels of capacity, and an average of 248281 inland towboats during the 2020 fourth quarter of 2023, as well as 4428 coastal tank barges with 4.22.9 million barrels of capacity, 4425 coastal tugboats, four offshore dry-bulk cargo barges, four offshore tugboats and one docking tugboat with the following specifications and capacities:
Class of equipment | Number in class | Average age (in years) | Barrel capacities | |||||||||
Inland tank barges (owned and leased): | ||||||||||||
Regular double hull: | ||||||||||||
20,000 barrels and under | 347 | 14.0 | 4,053,000 | |||||||||
Over 20,000 barrels | 665 | 12.3 | 19,114,000 | |||||||||
Specialty double hull | 54 | 35.3 | 913,000 | |||||||||
Total inland tank barges | 1,066 | 14.0 | 24,080,000 | |||||||||
Inland towboats (owned and chartered): | ||||||||||||
800 to 1300 horsepower | 38 | 35.1 | ||||||||||
1400 to 1900 horsepower | 30 | 24.0 | ||||||||||
2000 to 2400 horsepower | 135 | 11.1 | ||||||||||
2500 to 3200 horsepower | 31 | 12.7 | ||||||||||
3300 to 4800 horsepower | 11 | 27.3 | ||||||||||
Greater than 5000 horsepower | 3 | 17.4 | ||||||||||
Total inland towboats | 248 | 17.4 | ||||||||||
Coastal tank barges (owned and leased): | ||||||||||||
30,000 barrels and under | 2 | 26.1 | 37,000 | |||||||||
50,000 to 70,000 barrels | 9 | 15.4 | 437,000 | |||||||||
80,000 to 90,000 barrels | 17 | 16.5 | 1,422,000 | |||||||||
100,000 to 110,000 barrels | 6 | 14.5 | 630,000 | |||||||||
120,000 to 150,000 barrels | 3 | 19.0 | 416,000 | |||||||||
Over 150,000 barrels | 7 | 7.7 | 1,210,000 | |||||||||
Total coastal tank barges | 44 | 15.2 | 4,152,000 | |||||||||
Coastal tugboats (owned and chartered): | ||||||||||||
1000 to 1900 horsepower | 4 | 32.5 | ||||||||||
2000 to 2900 horsepower | 1 | 45.1 | ||||||||||
3000 to 3900 horsepower | 7 | 38.2 | ||||||||||
4000 to 4900 horsepower | 10 | 13.0 | ||||||||||
5000 to 6900 horsepower | 14 | 10.1 | ||||||||||
Greater than 7000 horsepower | 8 | 13.8 | ||||||||||
Total coastal tugboats | 44 | 18.3 |
Deadweight Tonnage | ||||||||||||
Offshore dry-bulk cargo barges (owned) | 4 | 22.1 | 67,000 | |||||||||
Offshore tugboats and docking tugboat (owned and chartered) | 5 | 29.5 |
Class of equipment |
| Number in |
|
| Average age |
|
| Barrel |
| |||
Inland tank barges (owned and leased): |
|
|
|
|
|
|
|
|
| |||
Regular double hull: |
|
|
|
|
|
|
|
|
| |||
20,000 barrels and under |
|
| 384 |
|
|
| 15.9 |
|
|
| 4,499,000 |
|
Over 20,000 barrels |
|
| 637 |
|
|
| 14.6 |
|
|
| 18,301,000 |
|
Specialty double hull |
|
| 55 |
|
|
| 37.6 |
|
|
| 924,000 |
|
Total inland tank barges |
|
| 1,076 |
|
|
| 16.2 |
|
|
| 23,724,000 |
|
|
|
|
|
|
|
|
|
|
| |||
Inland towboats (owned and chartered): |
|
|
|
|
|
|
|
|
| |||
800 to 1300 horsepower |
|
| 29 |
|
|
| 34.7 |
|
|
|
| |
1400 to 1900 horsepower |
|
| 31 |
|
|
| 25.0 |
|
|
|
| |
2000 to 2400 horsepower |
|
| 165 |
|
|
| 12.8 |
|
|
|
| |
2500 to 3200 horsepower |
|
| 42 |
|
|
| 10.9 |
|
|
|
| |
3300 to 4800 horsepower |
|
| 9 |
|
|
| 23.4 |
|
|
|
| |
Greater than 5000 horsepower |
|
| 5 |
|
|
| 24.1 |
|
|
|
| |
Total inland towboats |
|
| 281 |
|
|
| 16.7 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |||
Coastal tank barges (owned): |
|
|
|
|
|
|
|
|
| |||
30,000 barrels and under |
|
| 2 |
|
|
| 29.0 |
|
|
| 37,000 |
|
50,000 to 70,000 barrels |
|
| 3 |
|
|
| 18.3 |
|
|
| 111,000 |
|
80,000 to 90,000 barrels |
|
| 8 |
|
|
| 19.9 |
|
|
| 677,000 |
|
100,000 to 110,000 barrels |
|
| 6 |
|
|
| 17.5 |
|
|
| 630,000 |
|
120,000 to 150,000 barrels |
|
| 3 |
|
|
| 22.0 |
|
|
| 416,000 |
|
Over 150,000 barrels |
|
| 6 |
|
|
| 8.1 |
|
|
| 1,046,000 |
|
Total coastal tank barges |
|
| 28 |
|
|
| 17.6 |
|
|
| 2,917,000 |
|
|
|
|
|
|
|
|
|
|
| |||
Coastal tugboats (owned and chartered): |
|
|
|
|
|
|
|
|
| |||
2000 to 2900 horsepower |
|
| 1 |
|
|
| 48.1 |
|
|
|
| |
3000 to 3900 horsepower |
|
| 1 |
|
|
| 21.0 |
|
|
|
| |
4000 to 4900 horsepower |
|
| 7 |
|
|
| 19.0 |
|
|
|
| |
5000 to 6900 horsepower |
|
| 10 |
|
|
| 7.8 |
|
|
|
| |
Greater than 7000 horsepower |
|
| 6 |
|
|
| 13.5 |
|
|
|
| |
Total coastal tugboats |
|
| 25 |
|
|
| 14.4 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| Deadweight |
| |||
Offshore dry-bulk cargo barges (owned) |
|
| 4 |
|
|
| 25.1 |
|
|
| 67,000 |
|
|
|
|
|
|
|
|
|
|
| |||
Offshore tugboats and docking tugboat (owned and chartered) |
|
| 5 |
|
|
| 32.5 |
|
|
|
|
The 248281 inland towboats, 4425 coastal tugboats, four offshore tugboats and one docking tugboat provide the power source and the 1,0661,076 inland tank barges, 4428 coastal tank barges and four offshore dry-bulk cargo barges provide the freight capacity for the marine transportation segment.KMT. When the power source and freight capacity are combined, the unit is called a tow. The Company’s inland tows generally consist of one towboat and from one to up to 25 tank barges, depending upon the horsepower of the towboat, the waterway infrastructure capacity and conditions, and customer requirements. The Company’s coastal and offshore tows primarily consist of one tugboat and one tank barge or dry-bulk cargo barge.
5
The United States inland waterway system, composed of a network of interconnected rivers and canals that serve the nation as water highways, is one of the world’s most efficient transportation systems. The nation’s inland waterways are vital to the United States distribution system, with over 1.1one billion short tons of cargo moved annually on United States shallow draft waterways. The inland waterway system extends approximately 26,000 miles, 12,000 miles of which are generally considered significant for domestic commerce, through 38 states, with 635 shallow draft ports. These navigable inland waterways link the United States heartland to the world.
The United States coastal waterway system consists of ports along the Atlantic, Gulf and Pacific coasts, as well as ports in Alaska, Hawaii and on the Great Lakes. Like the inland waterways, the coastal trade is vital to the United States distribution system, particularly the regional distribution of refined petroleum products from refineries and storage facilities to a variety of destinations, including other refineries, distribution terminals, power plants and ships. In addition to distribution directly from refineries and storage facilities, coastal tank barges are used frequently to distribute products from pipelines. Many coastal markets receive refined petroleum products principally from coastal tank barges. Smaller volumes of petrochemicals are distributed from Gulf Coast plants to end users andwhereas black oil, including crude oil and natural gas condensate, is distributed regionally from refineries and terminals along the United States coast to refineries, power plants and distribution terminals.
Based on cost, safety, and safety,level of emissions, barge transportation is often the most efficient and safest means of surface transportation of bulk commodities when compared to railroads and trucks. The cargo capacity of a 27,500 barrel inland tank barge is the equivalent of 46 railroad tank cars or 144 tractor-trailer tank trucks. A typical Company lower Mississippi River linehaul tow of 15 barges has the carrying capacity of approximately 216 railroad tank cars plus six locomotives, or approximately 1,050 tractor-trailer tank trucks. The Company’s inland tank barge fleet capacity of 24.123.7 million barrels equates to approximately 40,30039,700 railroad tank cars or approximately 126,000124,000 tractor-trailer tank trucks. Furthermore, barging is much more energy efficient. One ton of bulk product can be carried 647675 miles by inland barge on one gallon of fuel on a typical tow, compared to 477472 miles by railcar or 145151 miles by truck.truck for typical transits. From an emissions perspective, transport by rail and tractor-trailer tank trucks emit approximately 40% and 800%, respectively, more CO2 per ton mile of cargo transported than by inland tank barge. In the coastal trade, the carrying capacity of a 100,000 barrel tank barge is the equivalent of approximately 165 railroad tank cars or approximately 525 tractor-trailer tank trucks. The Company’s coastal tank barge fleet capacity of 4.22.9 million barrels equates to approximately 6,9504,800 railroad tank cars or approximately 21,75015,300 tractor-trailer tank trucks. Marine transportation generally involves less urban exposure than railroad or truck transportation and operates on a system with few crossing junctures and often in areas relatively remote from population centers. These factors generally help to reduce the number of waterway incidents.
The Company operates within the United States inland tank barge industry, a diverse and independent mixture of approximately 3025 large integrated transportation companies and small operators, as well as captive fleets owned by refining and petrochemical companies. The inland tank barge industry provides marine transportation of bulk liquid cargoes for customers and, in the case of captives, for their own account, throughout the Mississippi River and its tributaries and on the Gulf Intracoastal Waterway. The most significant markets in this industry include the transportation of petrochemicals, black oil, refined petroleum products, and agricultural chemicals. The Company operates in each of these markets. The use of marine transportation by the petroleum and petrochemical industry is a major reason for the location of United States refineries and petrochemical facilities on navigable inland waterways. Texas and Louisiana currently account for approximately 80% of the United States production of petrochemicals. Much of the United States farm belt is likewise situated with access to the inland waterway system, relying on marine transportation of farm products, including agricultural chemicals. The Company’s principal distribution system encompasses the Gulf Intracoastal Waterway from Brownsville, Texas, to Port St. Joe, Florida, the Mississippi River System and the Houston Ship Channel. The Mississippi River System includes the Arkansas, Illinois, Missouri, Ohio, Red, Tennessee, Yazoo, Ouachita and Black Warrior Rivers and the Tennessee-Tombigbee Waterway.
The number of tank barges that operate on the inland waterways of the United States declinedincreased from an estimated 4,2002,750 in 1982 to 2,900 in 1993, remained relatively constant at 2,900 until 2002, decreased to 2,750 from 2002 through 2006 then increased over the years to approximately 3,8504,000 by the end of 2015 and 2016, and slightly decreased to an estimated 3,825 at the end of 2017. By the end of 2019, the number of tank barges increased to near 4,000, and remained flat during 2020. The Company believes the decrease from 4,200 in 1982 to 2,750 in 2006 primarily resulted from: the increasing age of the domestic tank barge fleet, resulting in scrapping; rates inadequate to justify new construction; a reduction in tax incentives, which previously encouraged speculative construction of new equipment; stringent operating standards to adequately cope with safety and environmental risk; the elimination of government regulations and programs supporting the many small refineries and the proliferation of oil traders which created a strong demand for tank barge services; an increase in the average capacity per barge; and an increase in environmental regulations that mandate expensive equipment modification, which some owners were unwilling or unable to undertake given capital constraints and the age of their fleets. The cost of tank barge hull work for required periodic United States Coast Guard (“USCG”) certifications, as well as general safety and environmental concerns, force operators to periodically reassess their ability to recover maintenance costs.2019. The increase from 2,750 tank barges in 2006 to approximately 3,8504,000 by the end of 20162019 primarily resulted from increased barge construction and deferred retirements due to strong demand and resulting capacity shortages. The number of industry tank barges has remained relatively constant from 20162019 through the end of 2020.2023. The Company’s 1,0661,076 inland tank barges represent approximately 27% of the industry’s 4,000approximately 4,007 inland tank barges.
For 2018,2022, the Company estimatedestimates that industry-wide, 7522 new tank barges were placed in service and 100 tank bargesretirements, net of reactivations, were retired.flat. For 2019,2023, the Company estimatedestimates that industry-wide 15027 new tank barges were placed in service and 100 tank barges were retired. For 2020, the Company estimated that industry-wide approximately 150 new tank barges were placed in service and 15048 tank barges were retired. During 2018 and 2019, demand for2021, the Company’s inland tank barge transportation and industry barge utilization rates increased above 90% dueimproved to a favorable pricing environment for customers’ products, new petrochemical industry capacity that ledthe mid-to high 80% range by the fourth quarter as the economy began to increased movements of petrochemicals, and higher volumes of crude oil movedrecover from the Northern U.S.COVID-19 pandemic. During 2022, the Company’s inland barge utilization improved to the Gulf Coast. During 2020, tank barge utilization decreased from the low to mid-90%90% range in the 2020 first quarter to the high 60% range during the 2020 fourth quarterreflecting increased activity levels as a result of a reductionhigher refinery and petrochemical plant utilization. During 2023, the Company’s inland barge utilization remained in demand due to the COVID-19 pandemic.low 90% range as improved activity levels were offset by lock closures and several
6
refinery outages. The Company estimates that approximately 3525 to 30 new tank barges werehave currently been ordered for delivery in 2021.2024. Generally, the risk of an oversupply of tank barges may be mitigated by increased petrochemical, black oil and refined petroleum products volumes from increased production from current facilities, plant expansions, the opening of new facilities, and the fact that the inland tank barge industry has approximately 350600 tank barges overthat are 30 years old or older and approximately 260400 of those are over 40 years old or older, which could lead to retirement of these older tank barges. The average age of the nation’s inland tank barge fleet is approximately 1518 years.
The Company’s inland marine transportation segmentdivision of KMT also owns a shifting operation and fleeting facility for dry cargo barges and tank barges on the Houston Ship Channel, in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana, and a shipyard for building inland towboats and providing routine maintenance on marine vessels. The Company also owns a two-thirds interest in Osprey Line, L.L.C. (“Osprey”), a transporter of project cargoes and cargo containers by barge on the United States inland waterway system.
The Company also operates in the United States coastal tank barge industry, operating tank barges in the 195,000 barrels or less category. This market is composed of approximately 20 large integrated transportation companies and small operators. The 195,000 barrels or less category coastal tank barge industry primarily provides regional marine transportation distribution of bulk liquid cargoes along the United States’ Atlantic, Gulf and Pacific coasts, in Alaska and Hawaii, and to a lesser extent, on the Great Lakes. Products transported are primarily refined petroleum products and black oil from refineries and storage facilities to a variety of destinations, including other refineries, distribution terminals, power plants and ships, the regional movement of crude oil and natural gas condensate to Gulf Coast, Northeast and West Coast refineries, and the movement of petrochemicals primarily from Gulf Coast petrochemical facilities to end users.
The number of coastal tank barges that operate in the 195,000 barrels or less category is approximately 280,264, of which the Company operates 4428 or approximately 16%11%. The average age of the nation’s coastal tank barge fleet is approximately 1415 years. In June 2018, theThe Company purchased a 155,000 barrelis aware of no specialized coastal articulated tank barge and tugboat unitunits (“ATB”) that were delivered in 2023 with no further ATBs currently under construction from another operator that was delivered to the Company in the 2018 fourth quarter. The Company is aware of one small specialized coastal ATB under construction by a competitor for delivery in 2021.construction. The coastal tank barge fleet has approximately 20 tank barges that are over 25 years old.old industry-wide. The number of older tank barges, coupled with low industry-wide barge utilization levels and ballast water treatment regulations, could lead to further retirements of these older tank barges in the next few years.
The tank barge industry remainsis very competitive. Competition in this business is based on price and reliability, and with many of the industry’s customers emphasizing enhanced vetting requirements, an increased emphasis on safety, the environment, and quality, frequently requiringhigh-quality service consistent with the customer’s operational standards. Customers also require that their supplier of tank barge services have the capabilityability to handle a variety of tank barge requirements. These requirements, includeincluding distribution capabilitycapabilities throughout the inland waterway system and coastal markets, with high levels of flexibility, and an emphasis on safety, environmental responsibility and financial responsibility, as well as adequateappropriate insurance and high quality of service consistent with the customer’s own operational standards.
In the inland markets, the Company’s direct competitors are primarily noncaptive inland tank barge operators. “Captive” fleets are owned by refining and petrochemical companies which occasionally compete in the inland tank barge market, but primarily transport cargoes for their own account. The Company is the largest inland tank barge carrier, both in terms of number of barges and total fleet barrel capacity. The Company’s inland tank barge fleet has grown from 71 tank barges in 1988 to 1,0661,076 tank barges as of December 31, 2020,2023, or approximately 27% of the estimated total number of domestic inland tank barges.
In the coastal markets, the Company’s direct competitors are the operators of United States tank barges in the 195,000 barrels or less category. Coastal tank barges in the 195,000 barrels or less category have the ability to enter the majority of coastal ports. Ocean-going tank barges and United States product tankers in the 300,000 barrels plus category, excluding the fleet of large tankers dedicated to Alaska crude oil transportation, occasionally compete in the 195,000 barrels or less market to move large volumes of refined petroleum products within the Gulf of Mexico with occasional movements from the Gulf Coast to the East Coast, along the West Coast and from Texas and Louisiana to Florida. However, access to United States ports of the approximately 45 such vessels, because of their size, their access to portsproduct tankers is limited by terminal size and draft restrictions.
While the Company competes primarily with other tank barge companies, it also competes with companies who operate refined product and petrochemical pipelines, railroad tank cars, and tractor-trailer tank trucks. As noted above, the Company believes that both inland and coastal marine transportation of bulk liquid products enjoy a substantial cost advantage over railroad and truck transportation.transportation on a barrel per mile basis. The Company believes that refined product and crude oil pipelines, although often a less expensive form of transportation than inland and coastal tank barges, are not as adaptable to diverse products and are generally limited to fixed point-to-point distribution of commodities in high volumes over extended periods of time.
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The Company transports petrochemicals, black oil, refined petroleum products, and agricultural chemicals by tank barge throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts, and in Alaska and Hawaii.coasts. During 2020,2023, the Company’s inland marine transportation operation moved over 4556 million tons of liquid cargo on the United States inland waterway system.
Petrochemicals. Bulk liquid petrochemicals transported include such products as benzene, styrene, methanol, acrylonitrile, xylene, naphtha and caustic soda, allsoda. These products are consumed in the production of paper, fiber and plastics. Pressurized products, including butadiene, isobutane, propylene, butane and propane, all requiring pressurized conditions to remain in stable liquid form, are transported in pressure barges. The transportation of petrochemical products represented 52%51% of the segment’s 20202023 revenues. Customers shipping these products are petrochemical and refining companies.
Black Oil. Black oil transported includes such products as residual fuel oil, No. 6 fuel oil, coker feedstock, vacuum gas oil, asphalt, carbon black feedstock, crude oil, natural gas condensate and ship bunkers (engine fuel). Such products represented 26% of the segment’s 20202023 revenues. Black oil customers are refining companies, marketers, and end users that require the transportation of black oil between refineries and storage terminals, to other refineries and to power plants. Ship bunker customers are oil companies and oil traders in the bunkering business.
Refined Petroleum Products. Refined petroleum products transported include the various blends of finished gasoline, gasoline blendstocks, jet fuel, No. 2 oil, heating oil and diesel fuel, and represented 19%20% of the segment’s 20202023 revenues. The Company also classifies ethanol in the refined petroleum products category. Customers are oil and refining companies, marketers and ethanol producers.
Agricultural Chemicals. Agricultural chemicals transported represented 3% of the segment’s 20202023 revenues. Agricultural chemicals include anhydrous ammonia and nitrogen-based liquid fertilizer, as well as industrial ammonia. Agricultural chemical customers consist mainly of domestic and foreign producers of such products.
Demand for tank barge transportation services is driven by the production volumes of the bulk liquid commodities. Marine transportation demand for the segment’s four primary commodity groups, petrochemicals, black oil, refined petroleum products and agricultural chemicals, is based on differing circumstances. While the demand drivers of each commodity are different, the Company has the flexibility, in certain cases, of reallocating inland equipment and coastal equipment among the petrochemical, refined petroleum products and black oil markets as needed.
Petrochemical products are used in both consumer non-durable and durable goods. Bulk petrochemical volumes have historically tracked the general domestic economy and correlate to the United States Gross Domestic Product. From late 2010 through 2015,During 2021, inland petrochemical tank barge utilization remained relatively stableimproved from the mid-70% range during the 2021 first quarter to the mid-to high 80% range in the 90% to 95% range.2021 fourth quarter as the economy recovered from the impact of COVID-19. During 2016,2022, the Company’s inland barge utilization declinedimproved to the high 80% range on average with periods of barge utilization in the low 80% range. During 2017 and 2018, barge utilization ranged from the mid-80% to the mid-90% range, reaching the mid-90% range in the late 2017 third quarter from the impact of Hurricanes Harvey and Irma, and in the low to mid-90% range during the 2017 fourth quarter and the majority of 2018 and 2019 as a result of a favorable pricing environment for customers’ products, new petrochemical industry capacity that led toreflecting increased movements of petrochemicals, and the continued retirement of older barges from the segment’s fleet. During 2020, Gulf Coast petrochemical plants saw reduced productionactivity levels as a result of lower demand duehigher refinery and petrochemical plant utilization. During 2023, the Company’s inland barge utilization improved to the COVID-19 pandemic thereby decreasing marine transportation volumes of basic petrochemicals to both domestic consumerslow 90% range as improved activity levels were partially offset by lock closures and terminals for export destinations. In addition, during the 2020 third quarter, the petrochemical complex along the Gulf Coast was impacted by hurricanes and tropical storms, further reducing barge volumes and closing critical waterways for extended periods of time. As a result, barge utilization decreased from the low to mid-90% range during the 2020 first quarter to the high 60% range in the 2020 fourth quarter.several refinery outages. Coastal tank barge utilization for the transportation of petrochemicals remained steadyincreased from the low 90% range in 2022 to the mid-to-high 80%mid 90% range for 2018 through 2020during 2023 due to a high percentage of term contracts.
The demand for black oil, including ship bunkers, varies by type of product transported. Demand for transportation of residual oil, a heavy by-product of refining operations, varies with refinery utilization and usage of feedstocks. During the majority of 2015, inland black oil tank barge utilization remained strong, in the 90% to 95% range, due to strong demand driven by steady refinery production levels from major customers and the export of diesel fuel and heavy fuel oil. With the decline in the price of crude oil in late 2014 and the low price throughout 2015 and 2016, crude oil and natural gas condensate movements by tank barge were at reduced levels industry-wide. During 2015 and 2016, the Company and the industry were generally successful in repositioning barges from that trade to other markets. During 2018 and 2019, 2021 through 2023, the Company continued to transport crude oil and natural gas condensate produced from the Eagle Ford and Permian Basin shale formations in Texas, both along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment, and continued to transport Utica crude oil and natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast, albeit, at reduced levels as some of the product was transported by newly constructed pipelines. During 2021, volumes recovered from the lows seen in 2020 the Company experienced a further decrease in volumes being transported along these routes as a result of reduced demand due to the COVID-19 pandemic and oil price volatility during the year.economic activity improved. During 2018, strong demand for crude oil and natural gas condensate movements resulted in2021, inland black oil tank barge utilization averaged in the mid-90% range, and increased into the mid-to high 90%mid-70% range during 2019.the first nine months of 2021 and recovered to the high 80% range in the 2021 fourth quarter. During 2020, the COVID-19 pandemic resulted in reduced demand for crude oil and natural gas condensate movements and resulted in a decrease in2022, inland black oil tank barge utilization from the low to mid-90% range during the 2020 first halffurther improved to the mid-60% to low 70%high 90% range duringin the 2020 second half.2022 fourth quarter. During 2023, inland black oil tank barge utilization averaged in the high 90% range. Coastal black oil tank barge utilization increased fromaveraged in the lowmid 90% range in 2018 to2022 and the high 90% range in 2019 due to the retirement of coastal barges throughout the industry and declined slightly to the mid 90% range in 2020, despite the reduced demand as a result of the COVID-19 pandemic2023 as utilization was supported by a highhigher percentage of term contracts. Inland and coastal asphalt shipments are generally seasonal, with higher volumes shipped during April through November, months when weather allows for efficient road construction.
Refined petroleum product volumes are driven by United States gasoline and diesel fuel consumption, principally vehicle usage, air travel, and weather conditions. Volumes can also be affected by gasoline inventory imbalances within the United States. Generally, gasoline and No. 2 oil are exported from the Gulf Coast where refining capacity exceeds demand. The Midwest is a net importer of such
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products. Volumes were also driven by diesel fuel transported to terminals along the Gulf Coast for export to South America. Ethanol, produced in the Midwest, is moved from the Midwest to the Gulf Coast. In the coastal trade, tank barges are frequently used regionally to transport refined petroleum products from a coastal refinery or terminals served by pipelines to the end markets. Many coastal areas rely upon access to refined petroleum products by using marine transportation in the distribution chain. Coastal refined petroleum products tank barge utilization declined from the 90% to 95% range for the majority of 2015 to the low to mid-80% range for the majority of 2016, and declined throughout 2017 from the low 80% range in first quarter to the low 60% range in the fourth quarter, all predominately from the industry-wide oversupply of coastal tank barge capacity. In 2018 and 2019, barge utilization increased from the mid-60% range to the low 70% range primarily due to the retirement of out-of-service coastal barges during the 2017 fourth quarter and improved customer demand resulting in higher barge utilization in the spot market in 2019. In 2020,2022, coastal refined petroleum products tank barge utilization declined toaveraged in the low 60%90% range. During 2023, coastal refined petroleum products tank barge utilization averaged in the high 90% range dueas activity levels continued to the COVID-19 pandemic and the resulting reduction in demand.
Demand for marine transportation of domestic and imported agricultural fertilizer is seasonal and directly related to domestic nitrogen-based liquid fertilizer consumption, driven by the production of corn, cotton and wheat. During periods of high natural gas prices, the manufacturing of nitrogen-based liquid fertilizer in the United States is curtailed. During these periods, imported products, which normally involve longer barge trips, replace the domestic products to meet Midwest and South Texas demands. Such products are delivered to the numerous small terminals and distributors throughout the United States farm belt.
KMT operated a fleet of 1,0661,076 inland tank barges and an average of 248281 inland towboats during the 20202023 fourth quarter, as well as 4428 coastal tank barges and 4425 coastal tugboats. The segment also operatesoperated four offshore dry-bulk cargo barges, four offshore tugboats and one docking tugboat transporting dry-bulk commodities in United States coastal trade.
Inland Operations. The segment’s inland operations are conducted through a wholly owned subsidiary, Kirby Inland Marine, LP (“Kirby Inland Marine”). Kirby Inland Marine’s operations consist of the Canal, Linehaul and River fleets, as well as barge fleeting services.
The Canal fleet transports petrochemical feedstocks, processed chemicals, pressurized products, black oil, and refined petroleum products along the Gulf Intracoastal Waterway, the Mississippi River below Baton Rouge, Louisiana, and the Houston Ship Channel. Petrochemical feedstocks and certain pressurized products are transported from one plant to another plant for further processing. Processed chemicals and certain pressurized products are moved to waterfront terminals and chemical plants. Black oil is transported to waterfront terminals and products such as No. 6 fuel oil are transported directly to the end users. Refined petroleum products are transported to waterfront terminals along the Gulf Intracoastal Waterway for distribution.
The Linehaul fleet transports petrochemical feedstocks, chemicals, agricultural chemicals and lube oils along the Gulf Intracoastal Waterway, Mississippi River and the Illinois and Ohio Rivers. Loaded tank barges are staged in the Baton Rouge area from Gulf Coast refineries and petrochemical plants, and are transported from Baton Rouge, Louisiana to waterfront terminals and plants on the Mississippi, Illinois and Ohio Rivers, and along the Gulf Intracoastal Waterway, on regularly scheduled linehaul tows. BargesTank barges are dropped off and picked up going up and down river.
The River fleet transports petrochemical feedstocks, chemicals, refined petroleum products, agricultural chemicals and black oil along the Mississippi River System above Baton Rouge. The River fleet operates unit tows, where a towboat and generally a dedicated group of barges operate on consecutive voyages between loading and discharge points. Petrochemical feedstocks and processed chemicals are transported to waterfront petrochemical and chemical plants, while black oil, refined petroleum products and agricultural chemicals are transported to waterfront terminals.
The inland transportation of petrochemical feedstocks, chemicals and pressurized products is generally consistent throughout the year. Transportation of refined petroleum products, certain black oil and agricultural chemicals is generally more seasonal. Movements of black oil, such as asphalt, generally increase in the spring through fall months. Movements of refined petroleum products, such as gasoline blends, generally increase during the summer driving season, while heating oil movements generally increase during the winter months. Movements of agricultural chemicals generally increase during the spring and fall planting seasons.
The marine transportation inland operation moves and handles a broad range of sophisticated cargoes. To meet the specific requirements of the cargoes transported, the inland tank barges may be equipped with self-contained heating systems, high-capacity pumps, pressurized tanks, refrigeration units, stainless steel tanks, aluminum tanks or specialty coated tanks. Of the 1,0661,076 inland tank barges currently operated, 818826 are petrochemical and refined petroleum products barges, 162157 are black oil barges, 7683 are pressure barges and 10 are refrigerated anhydrous ammonia barges. Of the 1,0661,076 inland tank barges, 1,0291,043 are owned by the Company and 3733 are leased.
The fleet of 248281 inland towboats for the 2023 fourth quarter ranges from 800 to 6,100 horsepower. Of the 248281 inland towboats, 210214 are owned by the Company and 3867 are chartered. Towboats in the 800 to 2,100 horsepower classes provide power for barges used by the Canal and Linehaul fleets on the Gulf Intracoastal Waterway and the Houston Ship Channel. Towboats in the 1,400 to 3,200 horsepower classes provide power for both the River and Linehaul fleets on the Gulf Intracoastal Waterway and the Mississippi River System. Towboats above 3,600 horsepower are typically used on the Mississippi River System to move River fleet unit tows and provide Linehaul fleet towing. Based on the capabilities of the individual towboats used in the Mississippi River System, the tows range in size from 10,000 to 30,000 tons.
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Marine transportation services for inland movements are conducted under term contracts, which have contract terms of 12 months or longer, or spot contracts, which have contract terms of less than 12 months, with customers with whom the Company has traditionally had long-standing relationships. Typically, term contracts range from one to three years, some of which have renewal options. During 2018, 2019, and 20202021, approximately 65% of inland marine transportation revenues were under term contracts and 35% were under spot contract revenues.
All of the Company’s inland tank barges used in the transportation of bulk liquid products are of double hull construction and are capable of controlling vapor emissions during loading and discharging operations in compliance with occupational safety and health regulations and air quality regulations.
The Company has the ability to offer to its customers optimized distribution capabilities throughout the Mississippi River System and the Gulf Intracoastal Waterway. Such capabilities offer economies of scale resulting from the ability to matchmatching tank barges, towboats, products, and destinations efficiently to meet its customers’ requirements.
Through the Company’s proprietary vessel management computer system, the Company'sCompany’s barge and towboat fleet is dispatched from a centralized dispatch group. The towboats are equipped with cellular and satellite positioning and communication systems that automatically transmit the location of the towboat to the Company’s customer service department. Electronic orders are communicated to vessel personnel with reports of towing activities communicatedfed back electronically back to the customer service department. The electronic interface between the customer service department and the vessel enables matching of customer needs to barge capabilities, thereby promoting efficient utilization of the tank barge and towboat fleet. The Company’s customers are able to access information concerning the movement of their cargoes, including barge locations, through the Company’s website and proprietary electronic customer service portal.
Kirby Inland Marine operates the largest commercial tank barge fleeting service (barge storage facilities) in numerous ports, including Houston, Corpus Christi, Freeport and Orange, Texas, Baton Rouge, Covington, Lake Charles and New Orleans, Louisiana, Mobile, Alabama, and Greenville, Mississippi. Included in the fleeting service is a shifting operation and fleeting service for dry cargo barges and tank barges on the Houston Ship Channel, in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana. Kirby Inland Marine provides shifting and fleeting servicesservice for its own barges, as well as for customers and third party carriers, transferring barges within the areas noted, as well as fleeting barges.
Kirby Inland Marine also provides shore-based barge tankermen to the Company and third parties. Services to the Company and third parties cover the Gulf Coast, mid-Mississippi Valley, and the Ohio River Valley.
San Jac Marine, LLC (“San Jac”), a subsidiary of Kirby Inland Marine, owns and operates a shipyard in Channelview, Texas which builds marine vessels for both inland and coastal applications, and provide maintenance and repair services. Kirby Inland Marine also builds inland towboats and performs routine maintenance and repairs at the San Jac shipyard.
The Company owns a two-thirds interest in Osprey, which transports project cargoes and cargo containers by barge on the United States inland waterway system.
Coastal Operations. The segment’s coastal operations are conducted through wholly owned subsidiaries, Kirby Offshore Marine, LLC (“Kirby Offshore Marine”) and Kirby Ocean Transport Company (“Kirby Ocean Transport”).
Kirby Offshore Marine provides marine transportation of refined petroleum products, petrochemicals and black oil in coastal regions of the United States. The coastal operations consist of the Atlantic and Pacific Divisions.
The coastal transportation of refined petroleum products and black oil is impacted by seasonality and is partially dependent on the area of operations. Operations along the West Coast of the United States and in Alaska have been subject to more seasonal variations in demand than the operations along the East Coast and Gulf Coast regions of the United States. Seasonality generally does not impact the Hawaiian market. Movements of refined petroleum products such as various blends of gasoline are strongest during the summer driving season while heating oil generally increases during the winter months.
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The coastal fleet consists of 4428 tank barges with 4.22.9 million barrels of capacity, primarily transporting refined petroleum products, black oil and petrochemicals. The Company owns 43all 28 of the coastal tank barges and leases one barge.barges. Of the 4428 coastal tank barges, currently operating, 3120 are refined petroleum products and petrochemical barges and 138 are black oil barges. The Company operates 4425 coastal tugboats ranging from 1,0002,400 to 11,000 horsepower, of which 40all 24 are owned by the Company and four are chartered.
Coastal marine transportation services are typically conducted under long-termterm contracts, primarily one year or longer, some of which have renewal options, for customers with which the Company has traditionally had long-standing relationships. During both 2018 and 2019,2021, approximately 80% of the coastal marine transportation revenues were under term contracts and 20% were under spot contract revenues.contracts. During 2020,2022, approximately 75% of the coastal marine transportation revenues were under term contracts and 25% were under spot contracts. During 2023, approximately 85% of the coastal marine transportation revenues were under term contracts and 15% were under spot contract revenues.
Kirby Offshore Marine also operates a fleet of two offshore dry-bulk barge and tugboat units involved in the transportation of sugar and other dry products between Florida and East Coast ports. These vessels primarily operatehave typically operated under long-termterm contracts of affreightment.
Kirby Ocean Transport owns and operates a fleet of two offshore dry-bulk barges, two offshore tugboats and one docking tugboat. Kirby Ocean Transport operates primarily under term contracts of affreightment, including a contract that expires in 2022 with Duke Energy Florida (“DEF”) to transport coal across the Gulf of Mexico to DEF’s power generation facility at Crystal River, Florida.
Kirby Ocean Transport is also engaged in the transportation of coal, fertilizer, sugar and other bulk cargoes on a short-termspot basis between domestic ports and occasionally the transportation of grain from domestic ports to ports primarily in the Caribbean Basin.
Marine transportation inland and coastal services are conducted under term or spot contracts for customers with whom the Company has traditionally had long-standing relationships. Typically, term contracts range from one to three years, some of which have renewal options. The majority of the marine transportation contracts with its customers by revenue are for terms of one year. Most have been customers of the Company’s marine transportation segmentKMT for many years and management anticipates continued relationships; however, there is no assurance that any individual contract will be renewed.
The Company enters into agreements with a specific customerits customers to transport cargo from a designated origin to a designated destination at a set rate (affreightment) or at a daily rate (time charter). The rate may or may not include escalation provisions to recover changes in specific costs such as fuel. Time charter or contracts of affreightment of one year or greater are considered term contract revenues and agreements of less than a year are included in spot contract revenues. Time charters, which insulate the Company from revenue fluctuations caused by weather and navigational delays and temporary market declines, represented approximately 66%63% of the marine transportation’s inland revenues under term contracts during 2020, 62% of revenue under term contracts during 20192023, and 59%58% of the revenue under term contracts during 2018. A spot contract is2022 and 2021. Spot contracts typically involve an agreement with a customer to move cargo from a specific origin to a designated destination for a rate negotiated at the time the cargo movement takes place. Spot contract rates are at the current “market” rate and are subject to market volatility.
The Company typically maintains a higher mix of term contracts to spot contracts to provide the Company with a reasonably predictable revenue stream while maintaining spot market exposure to take advantage of new business opportunities and existing customers’ peak demands. During 2020, 2019, and 2018,2021, approximately 65% of inland marine transportation revenues were under term contracts and 35% were under spot contract revenues.contracts. During both 2022 and 2023, approximately 60% of inland marine transportation revenues were under term contracts and 40% were under spot contracts. Coastal time charters represented approximately 90%85% of the marine transportation’s coastal revenues under term contracts in 20202021 and approximately 85%90% of coastal revenues under term contracts in 20192022 and 2018.
No single customer of the marine transportation segmentKMT accounted for 10% or more of the Company’s revenues in 2020, 2019,2023, 2022, or 2018.2021.
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For the commercial and industrial market, the Company sells Original Equipment Manufacturers (“OEM”) replacement parts and new diesel engines, provides service mechanics and maintains facilities to overhaul and repair diesel engines and ancillary products for marine and on-highway transportation companies, and industrial companies. The Company provides engineering and field services, OEM replacement parts and safety-related products to power generation operators and to the nuclear industry, manufactures engine generator and pump packages for power generation operators and municipalities, offers power generation systems customized for specific commercial and industrial applications, and rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets.
For the oil and gas market, the Company sells OEM replacement parts, sells and services diesel engines, pumps and transmissions, manufactures and remanufactures pressure pumping units, manufactures cementing and pumping equipment, as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems. Customers include oilfield service companies, and oil and gas operators and producers.
No single customer of KDS accounted for 10% or more of the Company’s revenues in 2023, 2022, or 2021. KDS also provides service to KMT, which accounted for approximately 3% of KDS’s 2023 and 2022 revenues, and 2% of the segment's 2021 revenues. Such revenues are eliminated in consolidation and not included in the table below.
The following table sets forth the revenues for KDS (dollars in thousands):
|
| Year Ended December 31, |
| |||||||||||||||||||||
|
| 2023 |
|
| % |
|
| 2022 |
|
| % |
|
| 2021 |
|
| % |
| ||||||
Service and parts |
| $ | 1,071,297 |
|
|
| 78 | % |
| $ | 962,187 |
|
|
| 82 | % |
| $ | 813,875 |
|
|
| 88 | % |
Manufacturing |
|
| 298,406 |
|
|
| 22 |
|
|
| 205,600 |
|
|
| 18 |
|
|
| 109,867 |
|
|
| 12 |
|
| $ | 1,369,703 |
|
|
| 100 | % |
| $ | 1,167,787 |
|
|
| 100 | % |
| $ | 923,742 |
|
|
| 100 | % |
Commercial and Industrial Operations
The Company serves the marine, on-highway, power generation, and other commercial and industrial markets primarily in the United States. The commercial and industrial operations represented approximately 59% of the segment’s 2023 revenues.
The Company is engaged in the overhaul and repair of medium-speed and high-speed marine diesel engines and reduction gears, line boring, block welding services and related parts sales for customers in the marine industry. Medium-speed diesel engines have an engine speed of 400 to 1,000 revolutions per minute (“RPM”) with a horsepower range of 800 to 32,000. High-speed diesel engines have an engine speed of over 1,000 RPM and a horsepower range of 50 to 8,375. The Company services medium-speed and high-speed diesel engines utilized in the inland and offshore barge industries. It also services marine equipment and offshore drilling equipment used in the offshore petroleum exploration and oilfield service industry, marine equipment used in the offshore commercial fishing industry, harbor docking vessels, commercial ferries, vessels owned by the United States government and large pleasure crafts.
The Company has marine repair operations throughout the United States providing in-house and in-field repair capabilities and related parts sales. The Company’s emphasis is on service to its customers, and it sends its crews from any of its locations to service customers’ equipment anywhere in the world. The medium-speed operations are located in Houma, Louisiana, Chesapeake, Virginia,
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Paducah, Kentucky, Seattle, Washington, and Tampa, Florida, serving as the authorized distributor for EMD Power Products (“EMD”) throughout the United States. The Company is also a distributor and representative for certain Alfa Laval products in the Midwest and on the East Coast, Gulf Coast, and West Coast. All of the marine locations are authorized distributors for Falk Corporation reduction gears and Oil States Industries, Inc. clutches. The Chesapeake, Virginia operation concentrates on East Coast inland and offshore dry-bulk, tank barge and harbor docking operators, and the United States government. The Houma, Louisiana operation concentrates on the inland and offshore barge and oilfield services industries. The Tampa, Florida operation concentrates on Gulf of Mexico offshore dry-bulk, tank barge and harbor docking operators. The Paducah, Kentucky operation concentrates on the inland river towboat and barge operators and the Great Lakes carriers. The Seattle, Washington operation concentrates on the offshore commercial fishing industry, the offshore barge industry, the United States government, and other customers in Alaska, Hawaii and the Pacific Rim.
The high-speed marine operations are located in Houston, Texas, in three facilities under leases that expire in July 2021, December 2025 and December 2027. Kirby Inland Marine’s operating locations are on the Mississippi River atHouma, Baton Rouge, Belle Chasse and New Orleans,Iberia, Louisiana, Paducah, Kentucky, Mobile, Alabama, Lodi and Greenville, Mississippi, threeThorofare, New Jersey, and several locations in Florida. The Company serves as a factory-authorized marine dealer for Caterpillar diesel engines in multiple states. The Company also operates factory-authorized full service marine distributorships/dealerships for Cummins, Detroit Diesel, John Deere, MTU, and Volvo Penta, and Kohler diesel engines, as well as Falk, Lufkin and Twin Disc marine gears. High-speed diesel engines provide the main propulsion for a significant amount of the United States flagged commercial vessels and large pleasure craft vessels, other marine applications, including engines for power generators and barge pumps.
The Company distributes, sells parts for and services diesel engines and transmissions for on-highway use and provides in-house and in-field service capabilities. The Company is the largest on-highway distributor for Allison Transmission and Detroit Diesel/Daimler Truck North America, providing parts, service and warranty on engines, transmissions and related equipment in Arkansas, Colorado, Florida, Louisiana, New Mexico, New York, Oklahoma, Texas, Wyoming, and the country of Colombia. The Company also provides similar service for off-highway use and additionally has distributor rights for Deutz and Isuzu diesel engines. Off-highway applications are primarily surface and underground mining equipment, including loaders, crawlers, crushers, power screens, pumps, cranes, generators, and haul trucks, as well as equipment rental.
The Company is engaged in the overhaul and repair of diesel engines and generators, and related parts sales for power generation customers. The Company is also engaged in the sale and distribution of diesel engine parts, engine modifications, generator modifications, controls, governors and diesel generator packages to the nuclear industry. The Company services users of diesel engines that provide emergency standby, peak and base load power generation. The Company also sells power generation systems that are customized for specific applications and the rental of power generation systems.
The Company has power generation operations throughout the United States providing in-house and in-field repair capabilities and products for power generation applications. Through its Rocky Mount, North Carolina operation, the Company serves as the exclusive worldwide distributor of EMD products to the nuclear industry, the worldwide distributor for Woodward, Inc. products to the nuclear industry, the worldwide distributor of Cooper Machinery Services (“Cooper”) products to the nuclear industry and owns the assets and technology necessary to support the Nordberg medium-speed diesel engines used in nuclear applications. In addition, the Rocky Mount operation is an exclusive distributor for Norlake Manufacturing Company transformer products to the nuclear industry, an exclusive distributor of Hannon Company generator and motor products to the nuclear industry, and a non-exclusive distributor of analog Weschler Instruments metering products and an exclusive distributor of digital Weschler metering products to the nuclear industry. The Company is also a non-exclusive distributor of Ingersoll Rand air start equipment to the nuclear industry worldwide.
The Company sells pre-packaged and fabricated power generation systems for emergency, standby and auxiliary power for commercial and industrial applications. The Company also offers rental generator systems from 50 to 2,000 kilowatts of power to a broad range of customers. The Company also is engaged in the rental of industrial compressors, high capacity lift trucks, and refrigeration trailers. In addition, the Company provides accessory products such as cables, hoses, fuel cells, air dryers, air compressor boosters and ground heaters. Lastly, the Company is a dealer for Thermo King refrigeration systems for trucks, railroad cars and other land transportation markets in Texas and Colorado.
Commercial and Industrial Customers
The results of the distribution and services industry are largely tied to the industries it serves and, therefore, are influenced by the cycles of such industries. The Company’s major marine customers include inland and offshore barge operators, oilfield service companies, offshore fishing companies, other marine transportation entities, the United States government and large pleasure crafts. Since the marine business is linked to the relative health of the inland towboat, offshore and coastal tugboat, harbor docking tugboat, offshore oilfield service, oil and gas drilling, offshore commercial fishing industries, Great Lakes ore vessels, dredging vessels, coastal ferries, United States government vessels and the pleasure craft industry, there is no assurance that its present gross revenues can be maintained in the future.
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The Company’s on-highway customers are long-haul and short-haul trucking companies, commercial and industrial companies with truck fleets, buses owned by municipalities and private companies. Off-highway companies include surface and underground mining operations with a large variety of equipment.
The Company’s power generation customers are domestic utilities and the worldwide nuclear power industry, municipalities, universities, medical facilities, data centers, petrochemical plants, manufacturing facilities, shopping malls, office complexes, residential and other industrial users.
The Company’s rental customers are primarily commercial and industrial companies, and residential customers with short-term rental requirements.
Commercial and Industrial Competitive Conditions
The Company’s primary marine competitors are independent distribution and services companies and other factory-authorized distributors, authorized service centers and authorized marine dealers. Certain operators of diesel powered marine equipment also elect to maintain in-house service capabilities. While price is a major determinant in the competitive process, reputation, consistent quality, expeditious service, experienced personnel, access to parts inventories and market presence are also significant factors. A substantial portion of the Company’s business is obtained by competitive bids. However, the Company has entered into service agreements with certain operators of diesel powered marine equipment, providing such operators with one source of support and service for all of their requirements at pre-negotiated prices.
The Company is one of a limited number of authorized resellers of EMD, Caterpillar, Cummins, Detroit Diesel, John Deere, MTU and Volvo Penta parts. The Company is also the marine distributor for Falk and Lufkin reduction gears throughout the United States.
The Company’s primary power generation competitors are other independent diesel service companies and manufacturers. While price is a major determinant in the competitive process, reputation, consistent quality, expeditious service, experienced personnel, access to parts inventories and market presence are also significant factors. A substantial portion of the Company’s business is obtained by competitive bids.
As noted above, the Company is the exclusive worldwide distributor of EMD, Cooper, Woodward, Nordberg, Norlake and Hannon parts for the nuclear industry, and non-exclusive distributor of Weschler parts and Ingersoll Rand air start equipment for the nuclear industry. Specific regulations relating to equipment used in nuclear power generation require extensive testing and certification of replacement parts. OEM parts need to be properly tested and certified for nuclear applications.
Oil and Gas Operations
The Company is engaged in the distribution and service of high-speed diesel engines, pumps and transmissions, and the manufacture and remanufacture of oilfield service equipment. The oil and gas operations represented approximately 41% of the segment’s 2023 revenues. The Company offers custom fabricated oilfield service equipment that is fully tested and field ready. The Company manufactures and remanufactures oilfield service equipment, including pressure pumping units, nitrogen pumping units, cementers, hydration equipment, mud pumps and blenders, coil tubing, well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems. The Company sells OEM replacement parts, and sells and services diesel engines, electric drives, motors and controls, pumps and transmissions, and offers in-house and in-field service capabilities. The Company is the largest off-highway distributor for Allison Transmission and a major distributor for MTU in North America.
The Company’s manufacturing and remanufacturing facilities and service facilities are based in Houston, Texas on or nearand Oklahoma City, Oklahoma, both key oil and gas producing regions.
Oil and Gas Customers
The Company’s major oil and gas customers include large and mid-cap oilfield service providers, oil and gas operators and producers. The Company has long standing relationships with most of its customers. Since the Houston Ship Channel, oneoil and gas business is linked to the oilfield services industry, and oil and gas operators and producers, there is no assurance that its present gross revenues can be maintained in Miami, Florida, one in Gibson, Louisiana, one in Lake Charles, Louisiana, several properties in Westwego, Louisiana, one in Corpus Christi, Texas,the future. The results of the Company’s oil and two in Orange, Texas. The New Orleans, Gibson, Westwego, Houston,gas distribution and Orange facilitiesservices operations are ownedlargely tied to the industries it serves and, therefore, are influenced by the Company,cycles of such industries.
Oil and Gas Competitive Conditions
The Company’s primary competitors in the Baton Rouge, Corpus Christi, Lake Charles, Greenville,oil and Miami facilitiesgas market are leased. Kirby Offshore Marine’s operating facilitiesother oilfield equipment manufacturers and remanufacturers, and equipment service companies. While price is a major determinant in the competitive process, equipment availability, reputation,
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consistent quality, expeditious service, experienced personnel, access to parts inventories and market presence are located in Staten Island, New York, Seattle, Washington and Honolulu, Hawaii. Allalso significant factors. A substantial portion of Kirby Offshore Marine’s operating facilities are leased, including piers and wharf facilities and office and warehouse space. San Jac’s operating locationthe Company’s business is near the Houston Ship Channel.
General. The Company’s operations, products, and services are subject to various government regulations, which vary based upon its operations across and within its business segments.
In KMT, the Company’s marine transportation operations are subject to regulation by the USCG,United States Coast Guard (“USCG”), federal laws, state laws, the laws of other countries when operating in their waters, and certain international conventions. The agencies establish safety requirements and standards and are authorized to investigate incidents.
Most of the Company’s tank barges are inspected by the USCG and carry certificates of inspection. The Company’s inland and coastal towing vessels and coastal dry-bulk barges are also subject to USCG regulations. The USCG has enacted safety regulations governing the inspection, standards, and safety management systems of towing vessels. The regulations also create many new requirements for design, construction, equipment, and operation of towing vessels. The USCG regulations supersede the jurisdiction of the United States Occupational Safety and Health Administration (“OSHA”) and any state regulations on vessel design, construction, alteration, repair, maintenance, operation, equipping, personnel qualifications and manning. The regulations requiring towing vessels to obtain a certificate of inspection became effective for existing towing vessels on July 20, 2018. Other portions of the regulations arewere phased in following the July 20, 2018 effective date through July 19, 2022.
All of the Company’s coastal tugboats and coastal tank and dry-bulk barges are built to American Bureau of Shipping (“ABS”) classification standards and/or statutory requirements issued by the USCG, and are inspected periodically by ABS andand/or the USCG to maintain the vessels in class and compliant with all U.S. statutory requirements, as applicable to the vessel. The crews employed by the Company aboard inland and coastal vessels, including captains, pilots, engineers, tankermen and ordinary seamen, are licensed by the USCG.
The Company is required by various governmental agencies to obtain licenses, certificates and permits for its vessels depending upon such factors as the cargo transported, the waters in which the vessels operate and other factors. The Company believes that its vessels have obtained and can maintain all required licenses, certificates and permits required by such governmental agencies for the foreseeable future. The Company’s failure to maintain these authorizations could adversely impact its operations.
The Company believes that additional security and environmental related regulations relating to contingency planning requirements could be imposed on the marine industry. Generally, the Company endorses the anticipated additional regulations and believes it is currently operating to standards at least equal to anticipated additional regulations.
Jones Act. The Jones Act is a federal cabotage law that restricts domestic marine transportation in the United States to vessels built and registered in the United States and manned, owned and operated by United States citizens. For a corporation to qualify as a United States citizenscitizen for the purpose of domestic trade, it ishas to be 75% owned and controlled by United States citizens within the meaning of the Jones Act. The Company monitors its citizenship status and meets the requirements of the Jones Act for its owned and operated vessels.
Compliance with United States ownership requirements of the Jones Act is important to the operations of the Company, and a violation of the Jones Act could have a material negative effect on the Company and its vessels’ ability to operate. The Company monitors the citizenship of its employees and stockholders and complies with United States build requirements.
User Taxes. Federal legislation requires that inland marine transportation companies pay a user tax based on propulsion fuel used by vessels engaged in trade along the inland waterways that are maintained by the United States Army Corps of Engineers. Such user taxes are designed to help defray the costs associated with replacing major components of the inland waterway system, such as locks and dams. A significant portion of the inland waterways on which the Company’s vessels operate is maintained by the Army Corps of Engineers.
The Company presently pays a federal fuel user tax of 29.1 cents per gallon consisting of a 0.1 cent per gallon leaking underground storage tank tax and 29 cents per gallon waterways user tax.
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Security Requirements. The Maritime Transportation Security Act of 2002 requires, among other things, submission to and approval by the USCG of vessel and waterfront facility security plans (“VSP” and “FSP”, respectively). The Company maintains approved VSP and FSP and is operating in compliance with the plans for all of its vessels and facilities that are subject to the requirements.
The Company’s operations are affected by various regulations and legislation enacted for protection of the environment by the United States government, as well as many coastal and inland waterway states and international jurisdictions to the extent that the Company’s vessels transit in international waters.waters or the Company operates in such jurisdictions. Government regulations require the Company to obtain permits, licenses and certificates for the operation of its vessels.vessels and its facilities in both KMT and KDS. Failure to maintain necessary permits or approvals could require the Company to incur costs or temporarily suspend operation of one or more of its vessels.vessels or other facilities. Violations of these laws may result in civil and criminal penalties, fines, or other sanctions.
Water Pollution Regulations. The Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977 (“Clean Water Act”), the Comprehensive Environmental Response, Compensation and Liability Act of 1981 (“CERCLA”) and the Oil Pollution Act of 1990 (“OPA”) impose strict prohibitions against the discharge of oil and its derivatives or hazardous substances into the navigable waters of the United States. These acts impose civil and criminal penalties for any prohibited discharges and impose substantial strict liability for cleanup of these discharges and any associated damages. Certain states also have water pollution laws that prohibit discharges into waters that traverse the state or adjoin the state, and impose civil and criminal penalties and liabilities similar in nature to those imposed under federal laws.
The OPA and various state laws of similar intent substantially increased over historic levels the statutory liability of owners and operators of vessels for oil spills, both in terms of limit of liability and scope of damages.
The Company manages its exposure to losses from potential discharges of pollutants through the use of well-maintained and equipped vessels, through safety, training and environmental programs, and through the Company’s insurance program. There can be no assurance, however, that any new regulations or requirements or any discharge of pollutants by the Company will not have an adverse effect on the Company.
Clean Water Act. The Clean Water Act establishes the National Pollutant Discharge Elimination System (“NPDES”) permitting program which regulates discharges into navigable waters of the United States. The United States Environmental Protection Agency (“EPA”) regulates the discharge of ballast water and other substances in United States waters under the Clean Water Act. Pursuant to the NPDES program, effective February 6, 2009, the EPA issued regulations requiring vessels 79 feet in length or longer to comply with a Vessel General Permit authorizing ballast water discharges and other discharges incidental to the operation of the vessels. The EPA regulations also imposed technology and water quality based effluent limits for certain types of discharges and established specific inspection, monitoring, recordkeeping and reporting requirements for vessels to ensure effluent limitations are met. The Vessel Incidental Discharge Act (“VIDA”), signed into law on December 4, 2018, established a new framework for the regulation of vessel incidental discharges under the Clean Water Act. VIDA requires the EPA to develop national performance standards for those discharges within two years of enactment and requires the USCG to develop implementation, compliance, and enforcement regulations within two years of the EPA’s promulgation of standards. Under VIDA, all provisions of the Vessel General Permit which became effective December 19, 2013, remain in force and effect until the USCG regulations are finalized. The Company maintains Vessel General Permits and has established recordkeeping and reporting procedures in compliance with the EPA'sEPA’s interim requirements.
The USCG adopted regulations on ballast water management treatment systems establishing a standard for the allowable concentration of living organisms in certain vessel ballast water discharged in waters of the United States under the National Invasive Species Act. The regulations include requirements for the installation of engineering equipment to treat ballast water by establishing an approval process for ballast water management systems (“BWMS”). The BWMS implementation was suspended until December 2016 at which time the USCG approved manufacturers’ systems that met the regulatory discharge standard equivalent to the International Maritime Organization’s D-2 standard. The phase-in schedule for those existing vessels requiring a system to install a BWMS is dependent on vessel build date, ballast water capacity, and drydock schedule. Compliance with the ballast water treatment regulations requires the installation of equipment on some of the Company’s vessels to treat ballast water before it is discharged. The installation of BWMS equipment willhas required and continues to require significant capital expenditures atin accordance with the next scheduled drydockingcompliance schedule established by the USCG in 33 CFR 151 to complete the installation of the approved system on those existing vessels that require a system in order to comply with the BWMS regulations.
Financial Responsibility Requirement. Commencing with the Federal Water Pollution Control Act of 1972, as amended, vessels over 300 gross tons operating in the Exclusive Economic Zone of the United States have been required to maintain evidence of financial ability to satisfy statutory liabilities for oil and hazardous substance water pollution. This evidence is in the form of a Certificate of Financial Responsibility (“COFR”) issued by the USCG. The majority of the Company’s tank barges are subject to this COFR
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requirement, and the Company has fully complied with this requirement since its inception. The States of Alaska, California, and Washington have implemented state financial responsibility requirements. Currently, the States of California and Alaska require a COFR and the State of Washington is in the process of implementing a COFR requirement to be effective during the course of 2024. The Company does not foresee any current or future difficulty in maintaining the COFR certificates or meeting financial responsibility requirements under current federal or state rules.
Clean Air Regulations. The Federal Clean Air Act of 1979 (“CAA”) requires states to draft State Implementation Plans (“SIPs”) under the National Ambient Air Quality Standards designed to reduce atmospheric pollution for six common air pollutants to levels mandated by this act. The EPA designates areas in the United States as meeting or not meeting the standards. Several SIPs implement the regulation of barge loading and discharging emissions at waterfront facilities as a measure to meet the CAA standard. The implementation of these regulations requires a reduction of hydrocarbon emissions released into the atmosphere during the loading of most petroleum products and the degassing and cleaning of barges for maintenance or change of cargo. These regulations require vessel operators that operate in states with areas of nonattainment of air quality standards under the CAA to install vapor control equipment on their barges. The Company expects that future emission regulations will be developed and will apply this same technology to many chemicals that are handled by barge. Most of the Company’s barges engaged in the transportation of petrochemicals, chemicals and refined petroleum products are already equipped with vapor control systems. KDS, particularly in its oil and gas equipment service and manufacturing and the power generation businesses, must closely adhere to federal regulatory requirements relating to emissions for stationary and non-road engines. Although a risk exists that new regulations could require significant capital expenditures by the Company and otherwise increase the Company’s costs, the Company believes that, based upon the regulations that have been proposed thus far, no material capital expenditures beyond those currently contemplated by the Company and no material increase in costs are likely to be required.
Contingency Plan Requirement. The OPA and several state statutes of similar intent require the majority of the vessels and terminals operated by the Company to maintain approved oil spill contingency plans as a condition of operation. The Company has approved plans that comply with these requirements. The OPA also requires development of regulations for hazardous substance spill contingency plans. The USCG has not yet promulgated these regulations; however, the Company anticipates that they will not be more difficult to comply with than the oil spill plans.
Occupational Health Regulations. The Company’s inspected vessel operations are primarily regulated by the USCG for occupational health standards. Uninspected vessel operations, and the Company’s shore-based personnel, and employees in the Company’s KDS segment are subject to OSHA regulations. The Company believes that it is in compliance with the provisions of the regulations that have been adopted and does not believe that the adoption of any further regulations will impose additional material requirements on the Company. There can be no assurance, however, that claims will not be made against the Company for work related illness or injury, or that the further adoption of health regulations will not adversely affect the Company.
Insurance. The Company’s marine transportation operations are subject to the hazards associated with operating vessels carrying large volumes of bulk cargo in a marine environment. These hazards include the risk of loss of or damage to the Company’s vessels, damage to third parties as a result of collision, fire or explosion, adverse weather conditions, loss or contamination of cargo, personal injury of employees and third parties, and pollution and other environmental damages. The Company maintains hull, liability, general liability, workers compensation and pollution liability insurance coverage against these hazards. For shipyard operations, the Company has ship repairer’s liability and builder’s risk insurance. The Company uses a Texas domiciled wholly owned insurance subsidiary, Adaptive KRM, LLC, to provide cost effective risk transfer options to insure certain exposures of the Company and certain of its subsidiaries in its marine transportationKMT and distribution and services segments.KDS. The Company also maintains insurance in the commercial insurance market to address liabilities arising in connection with its distribution and services segment.
Environmental Protection. The Company has a number ofutilizes several programs that were implemented to further its commitment to environmental responsibility in its operations. In additionEnvironmental compliance audits, performed with internal and external resources, are performed regularly on the Company's operations. Additionally, the Company employs third party expertise to internalconduct safety performance, safety management system, and environmental audits one such program is environmental audits ofon its barge cleaning vendors principally directed at management of cargo residues and barge cleaning wastes. Another is the participation by theshipyard vendors. The Company participates in the American Waterways Operators Responsible Carrier program, which is orienteddrives continuous improvement towards continuously reducing the barge industry’s impact on the environment, includingenvironment. It is also a member of the distribution services area.
Safety. The Company manages its exposure to the hazards associated with its business through safety, training and preventive maintenance efforts. The Company emphasizes its safety commitment through programs oriented toward extensive monitoring of safety performance for the purpose of identifying trends and initiating corrective action, and for continuously improving employee safety behavior and performance.
Training. The Company believes that among the major elements of a successful and productive work forceworkforce are effective training programs. The Company also believes that training in the proper performance of a job enhances both the safety and quality of the service provided. New technology, regulatory compliance, personnel safety, quality and environmental concerns create additional demands for training. Refer to Human Capital below for further discussion regarding training programs the Company has developed and instituted.
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Quality. Kirby Inland Marine has made a substantial commitment to the implementation, maintenance, and improvement of quality assurance systems. Kirby Offshore Marine is certified under ABS ISM standards. These Quality Assurance Systems and certification have enabled both shore and vessel personnel to effectively manage the changes which occur in the working environment, as well as enhancing the Company’s safety and environmental performance.
Year Ended December 31, | ||||||||||||||||||||||||
2020 | % | 2019 | % | 2018 | % | |||||||||||||||||||
Service and parts | $ | 711,051 | 93 | % | $ | 939,246 | 75 | % | $ | 1,059,270 | 71 | % | ||||||||||||
Manufacturing | 56,092 | 7 | 312,071 | 25 | 428,284 | 29 | ||||||||||||||||||
$ | 767,143 | 100 | % | $ | 1,251,317 | 100 | % | $ | 1,487,554 | 100 | % |
EmploymentEmployment. . The Company has approximately 5,4005,450 employees, the large majority of whom are in the United States. The large majority of non-vessel employees work full-time. Vessel employees work varying schedules according to their assignments. The Company has approximately 150110 general corporate employees.
KMT has approximately 3,4003,070 employees, of which approximately 2,7002,350 are vessel crew members. None of the segment’s inland operations are subject to collective bargaining agreements. The segment’s coastal operations include approximately 600413 vessel employees, some of which are subject to collective bargaining agreements in certain geographic areas. Approximately 250217 Kirby Offshore Marine vessel crew members employed in the Atlantic Division are subject to a collective bargaining agreement with the Richmond Terrace Bargaining Unit in effect through August 31, 2022.2025. In addition, approximately 125108 vessel crew members of Penn Maritime Inc., a wholly owned subsidiary of Kirby Offshore Marine, are represented by the Seafarers International Union under a collective bargaining agreement in effect through April 30, 2022.
KDS has approximately 1,8502,270 employees. None of the United Holdings and Kirby Engine Systems operations are subject to collective bargaining agreements. Approximately 5550 S&S employees in New Jersey are subject to a collective bargaining agreement with the Local 15C, International Union of Operating Engineers, AFL-CIO that expires in October 2023.2028. The remaining S&S employees are not subject to collective bargaining agreements.
Training Development, and Promotions.Development. Centralized trainingThe Company strives to provide its employees with a rewarding work environment, including the opportunity for success and an opportunity for personal and professional development. The development of its people is provided through the Operations Personnel and Training Department, which is charged with developing, conducting and maintaining training programs for the benefit of all ofa key factor in the Company’s operating entities. It is also responsible for ensuring thatemployee retention and satisfaction. Its technical and skill training programs are both consistenthas always been a differentiator and effective. has facilitated the recruitment of new trainees.
For the marine business, the Company’s training facility includes state-of-the-art equipment and instruction aids, including a full bridge wheelhouse simulator, a working towboat, two tank barges, and a tank barge simulator for tankermen training. During 2020,2023, approximately 1,0001,750 certificates were issued for the completion of courses at the training facility, of which approximately 300930 were USCG approved classes and the balance were employee development and Company required classes, including leadership, communication, and navigation courses. The Company uses the Seaman’s Church Institute as an additional training resource for its wheelhouse crewmembers. The marine segment provides a clear career progression for vessel personnel from entry level deckhand to captain and regularly reviews promotions from one level to another.
In distribution and services, the Company facilitatesoperates regional training courses via online coursescenters providing instructor-led, skill-based training classes to certify its technicians to work on diesel engines, transmissions, and instructor-led classes that cover a range of skill related topics generator knowledge, introduction to hydraulic systems, introduction to electrical diagrams, introduction to transformers, and Electrical Generation Systems Association journeyman study, as well as numerous courses led by our OEM partners. The distribution and services segmentpower generation equipment. KDS has multiple career progressions within its numerous job groups.
The Company's leadership and managerial training includes an online training curriculum that is available to both supervisory employees and those employees that aspire to move into such roles in the future. It includes a series of classes focused on management essentials which provide in-depth education in specific subjects such as leadership, strategic thinking, coaching and people development, decision making, problem solving, and communication.
In addition, the Company facilitates a number ofmany training courses that cover a range of topics that increaseenhance specific skill sets, increase productivity, and educate employees about safety and enhance team morale across both business segments. Training classes include environmental, health, and safety classes, legal compliance, classesleadership, and general business skills related courses. Environmental, health, and safety topics include defensive and distracted driving, first aid basic and medical emergencies, global safety principles, oil management, and hazardous substances training. Legal complianceCompliance topics include anti-corruption and anti-human trafficking training, cybersecurity awareness, business ethics, compliance, and promoting diversity. Skill related topics include business writing, risk-based thinking, initiating and planning a project, and transitioning into a project management role.
Diversity, Equity, and Inclusion. The Company believes that its culture of inclusion and diversity contributes to a strong workforce that meets its customer’s expectations and business objectives. The Company works diligently to attract the best talent from a diverse range of sources in order to meet the current and future demands of its business. The Company has established relationships with trade schools, world-class universities, professional associations and industry groups to proactively attract talent.
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The Company has also implemented several measures and development programs that include training to help increase awareness and drive inclusive behaviors, identifying areas for improvement and providing oversight for hiring, promotions, and mentoring. In 2021, the Company instituted an organization-wide training initiative that expanded the understanding and awareness of diversity and inclusion. Over 5,000 employees successfully completed this training. In 2022, the Company tied diversity objectives as a factor in its safety, operations and ESG components of its short-term performance goals under the Annual Incentive Plan.
Succession Planning. Succession planning is a key responsibility of the CEO and Chiefthe Vice President – Human Resources Officer. Whileand is a critical annual process for the process is ongoing allCompany’s senior management and its Board. Senior management reviews their succession plans regularly throughout the year succession planning is reported annually toand on an annual basis provides the Board an in-depth review of Directors. Succession plans address all senior executive positionsthe top three levels of management. This process looks at qualifications, time in role, readiness to ensure smooth transition and to facilitate ongoing conversations related to promotion, andadvance, diversity, and to address any potential talent gaps.
Culture, Engagement, and Engagement.Social Responsibility. The Company recognizes the importance of employee engagement and inclusion and has implemented a regular process of surveying its employees to obtain their feedback on both what is working well and areas of improvement. TheOne of the main take-aways from the initial2023 survey was 90% of employees surveyed agree that Company employees areKirby is committed to safety, understand the Company’s strategic direction, andEmployee Safety. In addition, employees believe the Company’s overall focus is onCompany operates with strong values, has a strong safety culture, and would recommend working for the customer. Employees voiced their desireCompany to see more opportunity for community involvement and communication from senior management. This feedback led to specific initiatives including an increased use of town halls both in person and virtual and the establishment of an employee led community involvement committee for 2021. Another initiative developed following the Company’s culture survey was the development of the Company’s core values. The core values are a product of a cross functional team that used the employee responses from the culture survey to reflect the common values of the Company. The core values are principles that are communicated and owned throughout the organization.
Diversity. The Company hasprovides its employees with a diversity committee whose purpose isrewarding work environment, which includes access to continuously improve its diversityresources for personal and professional development. The Company often participates in community organizations, service projects and matches employee charitable contributions. Through the Kirby Disaster Relief Fund, the Company supports employees in need following natural disasters and other qualified hardships. The Company provides employees with tuition reimbursement and college scholarships for the children of non-executive employees. In 2019addition to standard health and 2020, committeewelfare benefits, the Company offers wellness incentives and initiatives included trainingthat encourages employees to help increase awareness and drive inclusive behaviors, identifying areas for improvement and providing oversight for hiring, promotions and mentoring as needed.
The executive officers of the Company are as follows:
Name | Age | Positions and Offices | ||
David W. Grzebinski | 62 | President and Chief Executive Officer | ||
Raj Kumar | 51 | Executive Vice President and Chief Financial Officer | ||
Christian G. O’Neil | 51 | President – Kirby Inland Marine, Kirby Offshore Marine, | ||
Dorman L. Strahan | 67 | President – Kirby Engine Systems | ||
Ronald A. Dragg | 60 | Vice President, Controller and Assistant Secretary | ||
Amy D. Husted | 55 | Vice President, General Counsel and Secretary | ||
Julie M. Kruger | 43 | Vice President – Human Resources | ||
Scott P. Miller | 45 | Vice President and Chief Information Officer | ||
Kurt A. Niemietz | 51 | Vice President – Investor Relations and Treasurer | ||
William M. Woodruff | 63 | Vice President – Public and Governmental Affairs |
No family relationship exists among the executive officers or among the executive officers and the directors. Officers are elected to hold office until the annual meeting of directors, which immediately follows the annual meeting of stockholders, or until their respective successors are elected and have qualified.
David W. Grzebinski is a Chartered Financial Analyst and holds a Master of Business Administration degree from Tulane University and a degree in chemical engineering from the University of South Florida. He has served as President and Chief Executive Officer since April 2014. He served as President and Chief Operating Officer from January 2014 to April 2014 and as Chief Financial Officer from March 2010 to April 2014. He served as Chairman of Kirby Offshore Marine from February 2012 to April 2013 and served as Executive Vice President from March 2010 to January 2014. Prior to joining the Company in February 2010, he served in various operational and financial positions since 1988 with FMC Technologies Inc. (“FMC”), including Controller, Energy Services, Treasurer, and Director of Global SAP and Industry Relations. Prior to joining FMC, he was employed by Dow Chemical Company in manufacturing, engineering and financial roles.
Raj Kumar is a Chartered Financial Analystmember of CPA Australia and holds a Master of Business Administration degree from theColumbia University of Torontoin New York City and a Bachelor of Business in Accounting degree from Deakin University in mechanical engineering from Queens University.Australia. He has served as Executive Vice President and Chief Financial Officer since February 2018. He served as Executive Vice President – Finance from January 2018 to February 2018.November 2021. Prior to joining the Company, Mr. HarveyKumar served as ExecutiveVice President and
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Chief Financial Officer of Dril-Quip, Inc. from 2020 to 2021, Vice President and Chief FinancialAccounting Officer of Walter Energy, Inc. from 20122019 to 2017, Senior2020, and Vice President and Chief Financial Officer of Resolute Forest Products Inc. (“Resolute”)Treasurer from 20082017 to 2011, and2019. Prior to joining Dril-Quip, he served as Executive Vice President Finance at Frank’s International from 2015 to 2017. Prior to that, he served as a segment controller at LyondellBasell and Chief Financial Officer of Bowaterin Division CFO, treasury, strategic planning and corporate development positions at FMC and Dell Inc., a predecessor company of Resolute, from 2004 to 2008.
Christian G. O’Neil holds a Master of Business Administration degree from Rice University, a doctorate of jurisprudence from Tulane University and a bachelor of arts degree from Southern Methodist University. He has served as President of Kirby Inland Marine and Kirby Offshore Marine since January 2018, and as President of San Jac Marine, LLC since October 2018.2018, and President of Kirby Offshore Wind, LLC since March 2021. He served as Executive Vice President and Chief Operating Officer of Kirby Inland Marine and Kirby Offshore Marine from May 2016 to January 2018. He also served as Executive Vice President – Commercial Operations of Kirby Inland Marine and Kirby Offshore Marine from April 2014 to May 2016, Vice President – Human Resources of the Company from May 2012 to April 2014, Vice President – Sales for Kirby Inland Marine from 2009 to 2012 and President of Osprey from 2006 through 2008. He has also served in various sales and business development roles at the Company and Osprey. Prior to joining the Company, he served as Sales Manager and Fleet Manager at Hollywood Marine, Inc. (“Hollywood Marine”) after joining Hollywood Marine in 1997 which was subsequently merged into the predecessor of Kirby Inland Marine.
Dorman L. Strahan attended Nicholls State University and has served the Company as President of Kirby Engine Systems since May 1999, President of Marine Systems since 1986 and President of Engine Systems since 1996. After joining the Company in 1982 in connection with the acquisition of Marine Systems, he served as Vice President of Marine Systems until 1985.
Ronald A. Dragg is a Certified Public Accountant and holds a Master of Science in Accountancy degree from the University of Houston and a degree in finance from Texas A&M University. He has served the Company as Vice President, Controller and Assistant Secretary since April 2014. He also served as Vice President and Controller from January 2007 to April 2014, as Controller from November 2002 to January 2007, Controller – Financial Reporting from January 1999 to October 2002, and Assistant Controller – Financial Reporting from October 1996 to December 1998. Prior to joining the Company, he was employed by Baker Hughes Incorporated.
Amy D. Husted holds a doctorate of jurisprudence from South Texas College of Law and a Bachelor of Science degree in political science from the University of Houston. She has served the Company as Vice President, General Counsel and Secretary since April 2019. She also served as Vice President and General Counsel from January 2017 to April 2019, Vice President – Legal from January 2008 to January 2017 and Corporate Counsel from November 1999 through December 2007. Prior to joining the Company, she served as Corporate Counsel of Hollywood Marine from 1996 to 1999 after joining Hollywood Marine in 1994.
Julie M. Kruger holds a Bachelor of Science degree from Texas A&M University. She has served the Company as Vice President Human Resources since March 2023. She served as Senior Director Human Resources from May 2020 to March 2023. Prior to joining the Company, she served in a variety of roles in human resources at increasing levels of leadership at Key Energy Services from July 2007 to February 2020, including as Vice President Human Resources from March 2019 to February 2020 and Senior Human Resources Director from November 2016 to March 2019.
Scott P. Miller holds a Bachelor of Science in Management of Information Systems from Louisiana State University and a Master of Business Administration degree from the University of Houston. He has served as Vice President and Chief Information Officer since April 2019. Prior to joining the Company, he was employed by Key Energy Services, Inc. from May 2006 to March 2019, serving in various senior leadership roles including Managing Director of Strategy, Vice President and Chief Information Officer from March 2013 to December 2015 and as Senior Vice President, Operations Services and Chief Administrative Officer from January 2016 to March 2019.
Kurt A. Niemietz holds a Master of Business Administration degree from St. Mary’s University and a degree in accounting from the University of Texas at San Antonio. He has served the Company as Vice President - Investor Relations and Treasurer since July 2022. He also served as Vice President and Treasurer sincefrom April 2019.2019 to July 2022. Prior to joining the Company, he was employed by Pacific Drilling from 2013 to 2019, serving in various roles of increasing responsibility, including Treasurer from 2017 to 2019, and in various financial positions with FMC, from 2006 to 2013. Prior to joining FMC, he was employed by Austin, Calvert & Flavin as a buy-side equity analyst.
William M. Woodruff holds a doctorate of jurisprudence from the University of Houston Law Center and a bachelor of science degree from Texas A&M University. He has served as Vice President – Public and Governmental Affairs since October 2017. He served as Director – Public & Government Affairs from 2014 to October 2017 after joining the Company as Director – Government Affairs in 2004. Prior to joining the Company, he was a maritime lawyer in private practice and Vice President and General Counsel of Coastal Towing, Inc.
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Item 1A. Risk Factors
In addition to the other information set forth elsewhere in this annual report, the following risk factors should be considered carefully when evaluating the Company, as its businesses, results of operations, or financial condition could be materially adversely affected by any of these risks. The following discussion does not attempt to cover factors, such as trends in the United States and global economies or the level of interest rates, among others, that are likely to affect most businesses.
Marine Transportation Segment Risk Factors
The Inland Waterway infrastructure is aging and may result in increased costs and disruptions to the Company’s marine transportation segment.KMT. Maintenance of the United States inland waterway system is vital to the Company’s operations. The system is composed of over 12,000 miles of commercially navigable waterway, supported by over 240 locks and dams designed to provide flood control, maintain pool levels of water in certain areas of the country and facilitate navigation on the inland river system. The United States inland waterway infrastructure is aging, with more than half of the locks over 50 years old. As a result, due to the age of the locks, scheduled and unscheduled maintenance outages may be more frequent in nature, resulting in delays and additional operating expenses. One-halfCurrently, 35% of the cost of new construction and major rehabilitation of locks and dams is paid by marine transportation companies through a 29 cent per gallon diesel fuelwaterway user tax and the remaining 50%65% of waterway infrastructure and improvement is paid from general federal tax revenues. Failure of the federal government to adequately fund infrastructure maintenance and improvements in the future would have a negative impact on the Company’s ability to deliver products for its customers on a timely basis. In addition, any additional user taxes that may be imposed in the future to fund infrastructure improvements would increase the Company’s operating expenses.
The Company could be adversely impacted by a marine accident or spill event. A marine accident or spill event could close a portion of the inland waterway system or a coastal area of the United States for an extended period of time. Although statistically marine transportation is the safest means of surface transportation of bulk commodities, accidents do occur, both involving Company equipment and equipment owned by other marine operators.
The Company transports a wide variety of petrochemicals, black oil, refined petroleum products and agricultural chemicals throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts and in Alaska and Hawaii.coasts. The Company manages its exposure to losses from potential unauthorized discharges of pollutants through the use of well-maintained and equipped tank barges and towing vessels, through safety, training and environmental programs, and through the Company’s insurance program, but a discharge of pollutants by the Company could have an adverse effect on the Company. Risks may arise for which the Company may not be insured. Claims covered by insurance are subject to deductibles, the aggregate amount of which could be material, and certain policies impose limitations on coverage. Existing insurance coverage may not be able to be renewed at commercially reasonable rates or coverage capacity for certain risks may not be available or adequate to cover future claims. If a loss occurs that is partially or completely uninsured, or the carrier is unable or unwilling to cover the claim, the Company could be exposed to liability.
The Company’s marine transportation segmentKMT is dependent on its ability to adequately crew its towing vessels. The Company’s vessels are crewed with employees who are licensed or certified by the USCG, including its captains, pilots, engineers and tankermen. The success of the Company’s marine transportation segmentKMT is dependent on the Company’s ability to adequately crew its vessels. As a result, the Company invests significant resources in training its crews and providing crew members an opportunity to advance from a deckhand to the captain of a Company towboat or tugboat. Inland crew members generally work rotations such as 20 days on, 10 days off rotation, or a 30 days on, 15 days off rotation. For the coastal fleet, crew members are generally required to work rotations such as 14 days on, 14 days off rotation, a 21 days on, 21 days off rotation or a 30 days on, 30 days off rotation, dependent upon the location. The nature of crewmember work schedules and assignments away from home for extended periods require special recruiting and at times it can be difficult to find candidates. With ongoing retirements and competitive labor pressure in the marine transportation segment,KMT, the Company continues to monitor and implement market competitive pay practices. The Company also utilizes an internal development program to train Maritime Academy graduates for vessel leadership positions.
KMT has approximately 3,4003,070 employees, of which approximately 2,7002,350 are vessel crew members. None of the segment’s inland operations are subject to collective bargaining agreements. The segment’s coastal operations include approximately 600413 vessel employees, of whom approximately 375325 are subject to collective bargaining agreements in certain geographic areas. Any work stoppages or labor disputes could adversely affect coastal operations in those areas. To date,While the COVID-19 pandemic caused some crewing issues, the Company has beenwas able to manage crewing of its vessels despite the COVID-19 pandemic,operations with only minimallimited vessel delays and disruption of services, but withincluding some loss of revenue which have primarily impacted our offshore vessels.and incremental costs in the Company’s inland and coastal businesses. The Company continuesexpects that it would be able to updatesimilarly manage its processes relatingoperations in the future were an event of similar impact to management of COVID-19 and provide related employee education as new information and guidance becomes available.
The Company’s marine transportation segmentKMT is subject to the Jones Act. The Company’s marine transportation segment KMT competes principally in markets subject to the Jones Act, a federal cabotage law that restricts domestic marine transportation in the United States to vessels built and registered in the United States, and manned, owned and operated by United States citizens. The Company presently meets all of the requirements of the Jones Act for its owned and operated vessels. The loss of Jones Act status could have a significant negative effect on the Company. The requirements that the Company’s vessels be United States built and manned by United States citizens, the crewing requirements and material requirements of the USCG, and the
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application of United States labor and tax laws increases the cost of United States flagged vessels compared to comparable foreign flagged vessels. The Company’s business could be adversely affected if the Jones Act or international trade agreements or laws were to be modified or waived as to permit foreign flagged vessels to operate in the United States as these vessels are not subject to the same United States government imposed regulations, laws, and restrictions. Since the events of September 11, 2001, the United States government has taken steps to increase security of United States ports, coastal waters and inland waterways. The Company believes that it is unlikely that the current cabotage provisions of the Jones Act would be eliminated or significantly modified in a way that has a material adverse impact on the Company in the foreseeable future.
The Secretary of Homeland Security is vested with the authority and discretion to waive the Jones Act to such extent and upon such terms as the Secretary may prescribe whenever the Secretary deems that such action is necessary in the interest of national defense. On September 8, 2017, following Hurricanes Harvey and Irma, the Department of Homeland Security issued a waiver of the Jones Act for a 7-day period for shipments from New York, Pennsylvania, Texas and Louisiana to South Carolina, Georgia, Florida and Puerto Rico. The waiver was specifically tailored to address the transportation of refined petroleum products due to disruptions in hurricane-affected areas. On September 11, 2017, the waiver was extended for 11 days and expanded to include additional states. Following Hurricane Maria, on September 28, 2017, the Department of Homeland Security issued a waiver of the Jones Act for movement of products shipped from United States coastwise points to Puerto Rico through October 18, 2017. Two limited waivers of the Jones Act were granted in connection with the shutdown of the Colonial Pipeline in May 2021. In connection with recovery from Hurricane Fiona, in September and October 2022, two limited waivers of the Jones Act were granted to allow diesel and liquefied natural gas deliveries to Puerto Rico. Waivers of the Jones Act, whether in response to natural disasters or otherwise, could result in increased competition from foreign tank vessel operators, which could negatively impact the marine transportation segment.
The Company’s marine transportation segmentKMT is subject to extensive regulation by the USCG, federal laws, other federal agencies, various state laws, the laws of other countries when operating in their waters, and certain international conventions, as well as numerous environmental regulations. The majority of the Company’s vessels are subject to inspection by the USCG and carry certificates of inspection. The crews employed by the Company aboard vessels are licensed or certified by the USCG. The Company’s marine transportation operations are subject to laws of other countries when operating in their waters. The Company is required by various governmental agencies to obtain licenses, certificates and permits for its owned and operated vessels. The Company’s operations are also affected by various United States and state regulations and legislation enacted for protection of the environment. The Company incurs significant expenses and capital expenditures to comply with applicable laws and regulations and any significant new regulation or legislation, including climate change laws or regulations, could have an adverse effect on the Company.
The Company’s marine transportation segmentKMT is subject to natural gas and crude oil prices as well as the volatility of their prices as well as the volatility in production of refined products and petrochemicals in the United States. For 2020, 52%2023, 51% of the marine transportation segment’sKMT’s revenues were from the movement of petrochemicals, including the movement of raw materials and feedstocks from one refinery or petrochemical plant to another, as well as the movement of more finished products to end users and terminals for export. DuringAs a result of the COVID-19 pandemic and petrochemical and refinery plant shutdowns, 2020 and 2021 petrochemical and refined products volumes decreased relative to 20192019. Volumes began to recover in 2021 and 2018,have continued to increase in 2022 and 2023 as a result of reduced demand due to the COVID-19 pandemic and petrochemical and refinery plant shutdowns. However, theeconomic activity improved. The United States petrochemical industry continues to benefit from a low-cost domestically produced natural gas feedstock advantage, producing strong volumes of raw materials and intermediate products for transportation between Gulf Coast petrochemical plants and the transportation of more finished products to terminals for both domestic consumers and for export destinations. In addition, approximately seveneight new United States petrochemical projects, including expansion of existing plants, or new plants, arewere completed during 2022, with an additional five projects completed during 2023 and four scheduled to be completed during 2021, whichin 2024. These projects should provide additional movements for the marine transportation segment.KMT. Higher natural gas and crude oil prices are generally better for the Company’s businesses,businesses; however, higher natural gas prices and other factors could negatively impact the United States petrochemical industry and its production volumes, which could negatively impact the Company.
Demand for tank barge transportation services is driven by the production of volumes of the bulk liquid commodities such as petrochemicals, black oil and refined petroleum products that the Company transports by tank barge. This production can depend on the prevailing level of natural gas and crude oil prices, as well as the volatility of their prices. In general, lower energy prices are good for the United States economy and typically translate into increased petrochemical and refined product demand and therefore increased demand for tank barge transportation services. However, during 2016 and 2017 lower crude oil prices resulted in a decline in domestic crude oil and natural gas condensate production and reduced volumes to be transported by tank barge. The Company estimates that at the beginning of 2015 there were approximately 550 inland tank barges and 35 coastal tank barges in the 195,000 barrels or less category transporting crude oil and natural gas condensate. At the end of 2016, the Company estimated that approximately 140 inland tank barges and approximately 10 coastal tank barges in the 195,000 barrels or less category were transporting such products, a reduction of approximately 410 inland tank barges and 25 coastal tank barges that moved into other markets. At the end of 2017, the Company estimated that approximately 250 inland tank barges and approximately three coastal tank barges were transporting crude and natural gas condensate. At the end of 2018, the Company estimates that approximately 375 inland tank barges and approximately three coastal tank barges were transporting crude and natural gas condensate. As ofBy the end of 2019, the Company estimates that approximatelynumber of tank barges had declined to 335 inland tank barges and approximately five coastal tank barges were transporting crude and natural gas condensate. During 2020, the COVID-19 pandemic and oil price volatility resulted in a sharp decrease in volumes of crude and natural gas condensate being transported. As of the end of 2020, the Company estimates that2021, approximately 100160 to 150170 inland tank barges and one coastal tank barge were transporting crude and natural gas condensate. As of the end of 2022, the Company estimates that approximately 170 to 200 inland tank barges were transporting crude and natural gas condensate. As of the end of 2023, the Company estimates that approximately 190 to 220 inland tank barges were transporting crude and natural gas condensate. Volatility in the price of natural gas and crude oil can also result in heightened uncertainty which may lead to decreased production and delays in new petrochemical and refinery plant construction. Increased competition for
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available black oil and petrochemical barge moves caused by reduced crude oil and natural gas condensate production could have an adverse impact on the Company’s marine transportation segmentKMT including as a result of lower spot and term contract rates and/or reluctance to enter into or extend term contracts.
The Company’s marine transportation segmentKMT could be adversely impacted by the construction of tank barges by its competitors.barges. At the present time, there are an estimated 4,0004,007 inland tank barges in the United States, of which the Company operates 1,066,1,076, or 27%. The number of tank barges peaked at an estimated 4,200 in 1982, slowly declined to 2,750 by 2003, and then gradually increased to an estimated 3,850 by the end of 2015 and 2016 and remained relatively flat since 2015. For 2018,2021, the Company estimated that industry-wide 7570 new tank barges were placed in service, of which one was by the Company, and 10090 tank barges were retired, 48 of which were by the Company.retired. For 2019,2022, the Company estimatedestimates that industry-wide 15022 new tank barges were placed in service and retirements, net of which nonereactivations, were byflat. For 2023, the Company and 100 tank barges were retired, 17 of which were by the Company. For 2020, the Company estimatedestimates that industry-wide approximately 15027 new tank barges were placed in service six of which were purchased by the Company from another operator, and approximately 15048 tank barges were retired, 95 of which were by the Company. The increase for 2015 reflected the improved demand for inland petrochemical, refined petroleum products and black oil barges experienced in 2014 and federal tax incentives on new equipment. The decrease in the number of tank barges at the end of 2018 was primarily due to continued industry-wide tank barge retirements and minimal new tank barge construction.retired. The Company estimates that approximately 3525 to 30 new tank barges have currently been ordered during 2020 for delivery in 20212024 and expects manya number of older tank barges including an expected 26 by the Company, will be retired, dependent on 20212024 market conditions.
The long-term risk of an oversupply of inland tank barges may be mitigated by the fact that the inland tank barge industry has approximately 350600 tank barges that are over 30 years old or older and approximately 260400 of those overare 40 years old.old or older. Given the age profile of the industry inland tank barge fleet and extensive customer vetting standards, the expectation is that these older tank barges will continue to be removed from service and replaced by new tank barges as needed, with the extent of both retirements and new builds dependent on petrochemical and refinery production levels and crude oil and natural gas condensate movements, both of which can have a direct effect on industry-wide tank barge utilization, as well as term and spot contract rates.
Beginning in 2019, and 2020, a decline in industry-wide demand for the movement of crude oil and natural gas condensate transportation volumes increased available capacity and resulted in some reluctance among certain customers to extend term contracts, which led to an increase in the number of coastal vessels operating in the spot market. In addition, the Company and the industry added new coastal tank barge capacity during 2018, 2019 and 2020. through 2021. Much of this new capacity iswas replacement capacity for older vessels anticipated to be retired.
The Company estimates there are approximately 280264 tank barges operating in the 195,000 barrels or less coastal industry fleet, the sector of the market in which the Company operates, and approximately 20 of those are over 25 years old. In June 2018, the Company purchased a 155,000 barrel coastal ATB under construction from another operator that was delivered to the Company in the 2018 fourth quarter. The Company is aware of threeone small specialized coastal ATB placed in service in 2021 and no ATBs placed in service in 2018, two in 2019, and one in 2020 by competitors. There is2022 or 2023 with no further ATBs currently one announced small specialized coastal ATB under construction by a competitor for delivery in 2021.
Higher fuel prices could increase operating expenses and fuel price volatility could reduce profitability. The cost of fuel during 20202023 was approximately 6%12% of marine transportation revenue. All of theThe Company’s marine transportation term contracts containtypically include fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 90120 day delay before contracts are adjusted depending on the specific contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to adjust to 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.
Significant increases in the construction cost of tank barges and towing vessels may limit the Company’s ability to earn an adequate return on its investment in new tank barges and towing vessels. The price of steel, economic conditions, and supply and demand dynamics can significantly impact the construction cost of new tank barges and towing vessels. Over the last 20 years, the Company’s average construction price for a new 30,000 barrel capacity inland tank barge has fluctuated up or down significantly. For example, the average construction price for a new 30,000 barrel capacity tank barge in 2009 was approximately 90% higher than in 2000, with increases primarily related to higher steel costs. During 2009, the United States and global recession negatively impacted demand levels for inland tank barges and as a result, the construction price of inland tank barges fell significantly in 2010, primarily due to a significant decrease in steel prices, as well as a decrease in the number of tank barges ordered. In 2018The cost of steel, a key material in barge construction, was relatively stable from 2010 through 2019. During 2020, at the onset of the COVID-19 pandemic, steel costs dropped, however, during 2021 and 2022, steel prices rose above 2019 levels due to supply chain disruptions before decreasing in 2023. Although steel prices decreased in 2023, they still remain near historical highs. These increases in steel costs and improvementalterations in supply and demand dynamics, as well as higher labor costs, resulted in construction prices for a new 30,000 barrel tank barge increasing compared to prices in 2017 when there was an industry-wide over-capacity of inland tank barges in the market.
The Company’s marine transportation segmentKMT could be adversely impacted by the failure of the Company’s shipyard vendors to deliver new vessels according to contractually agreed delivery schedules and terms. The Company contracts with shipyards to build new vessels and currently has many vessels under construction. Construction projects are subject to risks of delay and cost overruns, resulting from shortages of equipment, materials and skilled labor; lack of shipyard availability; unforeseen design and engineering problems; work stoppages; weather interference; unanticipated cost increases; unscheduled delays in the delivery of material and equipment; and financial and other difficulties at shipyards including labor disputes, shipyard insolvency and inability to obtain necessary certifications and approvals. A significant delay in the construction of new vessels or a shipyard’s inability to perform under the construction contract could negatively impact the
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Company’s ability to fulfill contract commitments and to realize timely revenues with respect to vessels under construction. Significant cost overruns or delays for vessels under construction could also adversely affect the Company’s financial condition, results of operations and cash flows. To date, theThe Company hasdid not experiencedexperience significant shipyard delays associated with the COVID-19 pandemic, including at its subsidiary, San Jac.
The Company is subject to competition in its marine transportation segment.KMT. The inland and coastal tank barge industry remains very fragmented and competitive. The Company’s primary competitors are noncaptive inland tank barge operators and coastal operators. The Company also competes with companies who operate refined product and petrochemical pipelines, railroad tank cars and tractor-trailer tank trucks. Increased competition from any significant expansion of or additions to facilities or equipment by the Company’s competitors could have a negative impact on the Company’s results of operations. In addition, the Company’s failure to adhere to its safety, reliability and performance standards may impact its ability to retain current customers or attract new customers.
Distribution and Services Segment Risk Factors
The Company’s distribution and services segmentKDS could be adversely impacted by future legislation, executive or other governmental orders, or additional regulation of oil and gas extraction, including hydraulic fracturing practices. The Company, through its United and S&S subsidiaries, is a distributor and service provider of engine and transmission related products for the oil and gas services, power generation and transportation industries, and a manufacturer of oilfield service equipment, including pressure pumping units. The EPA is studying hydraulic fracturing practices,Various legislative and regulatory initiatives have been proposed that, if passed, could limit or discourage future production of oil and gas. Further, legislation may be enacted by Congress that would authorize the EPA to impose additional regulations on hydraulic fracturing. In addition, a number of states have adopted or are evaluating the adoption of legislation or regulations governing hydraulic fracturing or byproducts of the fracturing process. In January 2021, the Secretary of the Interior ordered a 60-day pause on issuing new drilling permits and new leases on federal lands in response to a relatedRelated actions may also be taken via executive order issued by President Biden, and it is uncertain what further action may be taken. Such federalorder. Federal or state legislation, executive or governmental orders, and/or regulations could materially impact customers’ operations and greatly reduce or eliminate demand for the Company’s pressure pumping fracturing equipment and related products. The Company is unable to predict whether future legislation or any other regulations will ultimately be enacted and, if so, the impact on the Company’s distribution and services segment.
The Company’s distribution and services segmentKDS could be adversely impacted by the construction of pressure pumping units by its competitors. In early 2015, an estimated 21.0 million horsepower of pressure pumping units were working, or available to work, in North America. By late 2016, the working horsepower in North America had declined to an estimated 6.0 million, with an estimated 2.0 million horsepower scrapped, an estimated 2.0 million horsepower available for work and an estimated 12.5 million horsepower stacked, the large majority of which would require major service before being placed back in service. A significant drop in demand due to the low price of crude oil resulted in an oversupply in the pressure pumping market and negatively impacted the Company’s 2015 and 2016 results of operations. During 2017 and 2018, with the stabilization of crude oil prices in the $40 to $70 per barrel range, the United States land rig count improved and service intensity in the well completion business increased. As a result, the Company experienced a healthy rebound in service demand during 2018, particularly with pressure pumping unit remanufacturing and transmission overhauls, and with the acquisition of S&S in September 2017, the manufacture of oilfield service equipment, including pressure pumping units, and the sale of transmissions. At the end of 2019, an estimated 15.0 million horsepower of pressure pumping units were working in North America, with an estimated 6.0 million horsepower available to work, and 3.0 million horsepower stacked and in need of major repair. During 2020, a significant reduction in oilfield activity as a result of oil price volatility throughout 2019 and 2020 and the COVID-19 pandemic resulted in a decrease to an estimated 6.06 million horsepower of pressure pumping units working in North America, with an estimated 1.5 million horsepower available to work, and 12.012 million horsepower stacked and in need of major repair. At the end of 2021, strong commodity prices resulted in an increase in horsepower demand with an estimated 12 million horsepower of pressure pumping units working in North America, with an estimated 8 million horsepower idled and in need of major repair. Supported by stronger commodity prices, surplus horsepower capacity declined as activity levels in North America improved during 2022 resulting in an increase to an estimated 15 million horsepower of pressure pumping units working in North America at the end of 2022, with an estimated 5 million horsepower idled and in need of major repair. Horsepower demand remained flat in 2023 with an estimated 15 million horsepower of pressure pumping units working in North America at the end of 2023, with an estimated 4 million horsepower idled and in need of major repair. Increased expansion of, or additions to, facilities or equipment by the Company’s competitors could have a negative impact on the Company’s results of operations.
Prevailing natural gas and crude oil prices, as well as the volatility of their prices, could have an adverse effect on the distribution and services segmentKDS business. Lower energy prices generally result in a decrease in the number of oil and gas wells being drilled. Oilfield service companies reduce their capital spending, resulting in decreased demand for new parts and equipment, including pressure pumping units, provided by the Company’s distribution and services segment.KDS. This may also lead to order cancellations from customers or customers requesting to delay delivery of new equipment. The Company also services offshore supply vessels and offshore drillings rigs operating in the Gulf of Mexico, as well as internationally. Low energy prices may negatively impact the number of wells drilled in the Gulf of Mexico and international waters. Prolonged downturns in oil and gas prices may cause substantial declines in oilfield service and exploration expenditures and could adversely impact oil and gas manufacturing, remanufacturing, parts and distribution business. In addition, energy price volatility may also result in difficulties in the Company’s ability to ramp up and ramp downaddress variations in production on a timely basis and, therefore, could result in an adverse impact on the Company’s distribution and services segment.
The Company is subject to competition in its distribution and services segment.KDS. The distribution and services industry is very competitive. The segment’s oil and gas market’s principal competitors are independent distribution and service and oilfield manufacturing companies and other factory-authorized distributors and service centers. In addition, certain oilfield service companies that are customers of the Company also manufacture and service a portion of their own oilfield equipment. Increased competition in the distribution and services industry and continued low price of natural gas, crude oil or natural gas condensate, and resulting decline in drilling for such natural resources in North American shale formations, could result in less oilfield equipment being manufactured and remanufactured, lower rates for service and parts pricing and result in less manufacturing, remanufacturing, service and repair opportunities and parts sales for the Company. For the commercial and industrial market, the segment’s primary marine diesel competitors are independent diesel services companies and other factory-authorized distributors, authorized service centers and authorized marine dealers. Certain operators of diesel powered marine equipment also elect to maintain in-house service capabilities. For power generation, the primary competitors are other independent service companies.
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Loss of a distributorship or other significant business relationship or disruptions of supply could adversely affect the Company’s distribution and services segment.KDS. The Company’s distribution and services segmentKDS has had a relationship with EMD, the largest manufacturer of medium-speed diesel engines, for over 50 years.since the 1960s. The Company, through Kirby Engine Systems, serves as both an EMD distributor and service center for select markets and locations for both service and parts. With the acquisition of S&S in September 2017, the Company added additional EMD exclusive distributorship rights in key states, primarily through the Central South and EasternSouth areas of the United States. With the S&S acquisition, the Company became the United States distributor for EMD marine and power generation applications. Sales and service of EMD products account for approximately 4%3% of the Company’s revenues for 2020.2023. Although the Company considers its relationship with EMD to be strong, the loss of the EMD distributorship and service rights, or a disruption of the supply of EMD parts, could have a negative impact on the Company’s ability to service its customers. In 2020, with the acquisition of Convoy Servicing Company and Agility Fleet Services, LLC, the Company expanded its dealership network of Thermo King refrigeration systems for trucks, railroad cars, and other land transportation markets in Texas and Colorado. In 2020,2023, sales and service of Thermo King products comprised approximately 5% of the Company’s revenues.
United and S&S have maintained continuous exclusive distribution rights for MTU and Allison since the 1940s. United and S&S are two of MTU’s top five distributors of off-highway engines in North America, with exclusive distribution rights in multiple states. In addition, as distributors of Allison products, United and S&S have exclusive distribution rights in multiple key growth states. United and S&S are also the distributordistributors for parts, service and warranty on Daimler truck engines and related equipment in multiple states. Sales and service of MTU, Allison, and Daimler products accounted for approximately 8%13% of the Company’s revenues during 2020.2023. Although the Company considers its relationships with MTU, Allison, and Daimler to be strong, the loss of MTU, Allison, or Daimler distributorships and service rights, or a disruption of the supply of MTU or Allison parts, could have a negative impact on the Company’s ability to service its customers.
In addition to its relationships with MTU, Allison, and Daimler, the Company also has relationships with many other distributors and parts suppliers and the loss of a distributorship and service rights, or a disruption of the supply of parts from any of these other distributors or part suppliers could also have a negative impact on the Company’s ability to service its customers.
General Corporate Risk Factors
The Company is subject to adverse weather conditions in its marine transportationKMT and distribution and services segments.KDS. The Company’s marine transportation segment KMT is subject to weather condition volatility. Physical impacts of climate change could have a material adverse effect on the Company's costs and operations. There has been public discussion that climate change may be associated with rising sea levels as well as extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes, drought, and snow or ice storms. Extreme weather conditions may increase the Company’s costs or cause damage to its facilities, and any damage resulting from extreme weather may not be fully insured. Many of the Company’s facilities are located near coastal areas or waterways where rising sea levels or flooding could disrupt the Company’s operations or adversely impact its facilities. Adverse weather conditions such as high or low water on the inland waterway systems, fog and ice, tropical storms, hurricanes, and tsunamis on both the inland waterway systems and throughout the United States coastal waters can impair the operating efficiencies of the marine fleet. Such adverse weather conditions can cause a delay, diversion or postponement of shipments of products and are totally beyond the control of the Company. Tropical storms and hurricanes may also impact the Company’s customers resulting in reduced demand for the Company’s services. In addition, adverse water and weather conditions can negatively affect a towing vessel’s performance, tow size, loading drafts, fleet efficiency, limit navigation periods and dictate horsepower requirements. The Company’s distribution and services segmentKDS is also subject to tropical storms and hurricanes impacting its coastal locations and those of its customers as well as tornadoestornados impacting its Oklahoma facilities. The risk of flooding as a result of hurricanes and tropical storms as well as other weather events may impede travel via roadways, suspend service work, and impact deliveries and the Company’s ability to fulfill orders or provide services in the distribution and services segment.
The Company may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may adversely affect the Company’s business and hinder its ability to grow. The Company has made asset and business acquisitions in the past and may continue to make acquisitions of assets or businesses in the future that complement or expand the Company’s current business. The Company may not be able to identify attractive acquisition opportunities. Even if attractive acquisition opportunities are identified, the Company may not be able to complete the acquisition or do so on commercially acceptable terms. The success of any completed acquisition depends on the Company’s ability to integrate the acquired assets or business effectively into the Company’s existing operations. The process of integrating acquired assets or businesses may involve difficulties that require a disproportionate amount of the Company’s managerial and financial resources to resolve. The value of acquired assets or businesses may be negatively impacted by a variety of circumstances unknown to the Company prior to the acquisition. In addition, possible future acquisitions may be larger and for purchase prices significantly higher than those paid for earlier acquisitions. No assurance can be given that the Company will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets. The Company’s failure to achieve synergies, to successfully integrate successfully the acquired businesses and assets into the Company’s existing operations, or to minimize any unforeseen operational difficulties could have a material adverse effect on the Company’s business, financial condition, and results of operations. In addition, agreements governing the Company’s indebtedness from time to time may impose certain limitations on the Company’s ability to undertake acquisitions or make investments or may limit the Company’s ability to incur certain indebtedness and liens, which could limit the Company’s ability to make acquisitions.
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The Company’s failure to comply with the Foreign Corrupt Practices Act (“FCPA”), FCPA,or similar local applicable anti-bribery laws, could have a negative impact on its ongoing operations. The Company’s operations outside the United States require the Company to comply with both a number of United States and international regulations. For example, in addition to any similar applicable local anti-bribery laws, itsthe Company's operations in countries outside the United States are subject to the FCPA, which prohibits United States companies or their employees and third party representatives from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity, or obtain any unfair advantage. The Company has internal control policies and procedures and has implemented training and compliance programs for its employees and third party representatives with respect to the FCPA. However, the Company’s policies, procedures and programs may not always protect it from reckless or criminal acts committed by its employees or third party representatives, and severe criminal or civil sanctions could be the result of violations of the FCPA or any other applicable anti-bribery law in countries where the Company does business. The Company is also subject to the risks that its employees, joint venture partners, and third party representatives outside of the United States may fail to comply with other applicable laws.
The Company is subject to risks associated with possible climate change legislation, regulation and international accords. Greenhouse gas emissions, including carbon emissions or energy use, have increasingly become the subject of a large amount of international, national, regional, state and local attention. PursuantInternational agreements and national, regional, and state legislation and regulatory measures that aim to an April 2007 decision of the United States Supreme Court, the EPA was required to consider if carbon dioxide was a pollutant that endangers public health. On December 7, 2009, the EPA issued its “endangerment finding” regarding greenhouse gasses under the CAA. The EPA found that the emission of six greenhouse gases, including carbon dioxide (which is emitted from the combustion of fossil fuels), may reasonably be anticipated to endanger public health and welfare. Based on this finding, the EPA defined the mix of these six greenhouse gases to be “air pollution” subject to regulation under the CAA. Although the EPA has stated a preference that greenhouse gas regulation be based on new federal legislation rather than the existing CAA, many sources ofdirectly or indirectly limit or reduce greenhouse gas emissions may be regulated without the need for further legislation.
The United States Congress has considered, in the past legislationbut has not passed, various bills that would create an economy-wide “cap-and-trade” system that would establish a limit (or cap) on overall greenhouse gas emissions and create a market for the purchase and sale of emissions permits or “allowances.” Any proposed cap-and-trade legislation would likely affect the chemical industry due to anticipated increases in energy costs as fuel providers pass on the cost of the emissions allowances, which they would be required to obtain under cap-and-trade to cover the emissions from fuel production and the eventual use of fuel by the Company or its energy suppliers. In addition, cap-and-trade proposals would likely increase the cost of energy, including purchases of diesel fuel, steam and electricity, and certain raw materials used or transported by the Company. Proposed domestic and international cap-and-trade systems could materially increase raw material and operating costs of the Company’s customer base. Future environmental regulatory developments related to climate change in the United States that restrict emissions of greenhouse gases could result in financial impacts on the Company’s operations that cannot be predicted with certainty at this time.
In addition, current global trends incorporating carbon neutral policies and reduction in greenhouse gas emissions are driving decarbonization initiatives across all industries to mitigate the impact on climate change and may result in a decline in global and U.S. hydrocarbon usage. Such a decline in hydrocarbon usage (for example, as a result of an increase in electric vehicles) could result in a reduction in demand for (a) the Company’s services in its marine transportation segmentKMT to the extent there is reduced demand for crude oil and other feedstocks used and the products produced by the Company’s major refining customers and (b) for the Company’s products and services in its distribution and services segmentKDS to the extent there is reduced demand in the exploration and production of hydrocarbons by the Company’s oil and gas customers.
Loss of a large customer could adversely affect the Company. Five marine transportationKMT customers accounted for approximately 18%16% of the Company’s 2020, 19%2023 revenue, and 17% of 20192022 and 18% of 20182021 revenue. The Company has contracts with these customers expiring in 20212024 through 2026. Three distribution and servicesKDS customers accounted for approximately 3%12% of the Company’s 20202023 revenue, 12%9% of 20192022 revenue, and 13%6% of 20182021 revenue. Although the Company considers its relationships with these companies to be strong, the loss of any of these customers, or their inability to meet financial obligations, could have an adverse effect on the Company.
The Company relies on critical operating assets including information systems for the operation of its businesses, and the failure of such assets or any critical information system, including as a result of natural disasters, terrorist acts, a cyber-securitycybersecurity attack, or other extraordinary events, may adversely impact its businesses. The Company is dependent on its critical operating assets and technology infrastructure and must maintain and rely upon critical information systems and security of its assets for the effective and safe operation of its businesses. These assets include vessels, vessel equipment, property and facilities, as well as information systems, such as software applications, hardware equipment, and data networks and telecommunications.
The Company’s critical assets and information systems, including the Company’s proprietary vessel management computer system, are subject to damage or interruption from a number of potential sources, including but not limited to, natural disasters, terrorist acts, cyber-securitycybersecurity attacks, software viruses, and power failures. In addition to standard safety operating procedures, the Company has implemented measures such as business continuity plans, hurricane preparedness plans, emergency recovery processes, and security preparedness plans to protect physical assets and to recover from damage to such assets. The Company has also implemented virus protection software, intrusion detection systems and annual attack and penetration audits to protect information systems to mitigate these risks. However, the Company cannot guarantee that its critical assets or information systems cannot be damaged or compromised.
Any damage or compromise of its critical assets or data security or its inability to use or access these critical assets and information systems could adversely impact the efficient and safe operation of its businesses, or result in the failure to safely operate its equipment, and maintain the confidentiality of data of its customers or its employees and could subject the Company to increased operating expenses
26
or legal action, which could have an adverse effect on the Company.
Limitations on the Company’s ability to obtain, maintain, protect, or enforce its proprietary information and any successful intellectual property challenges or infringement proceedings, including its trade secrets could affect the Company's competitive position. The Company’s distribution and services businesses rely on a variety of intellectual property rights for its product and services. The Company’s intellectual property could be adversely affected by successful intellectual property challenges or infringement proceedings against it which could materially and adversely affect its competitive position. The Company may also be adversely affected when its patents are unenforceable, where claims allowed are not sufficient to protect its technology or its trade secrets are not adequately protected. The Company's failure to protect its proprietary information and any successful challenges to the Company's intellectual property rights could have an adverse effect on the Company.
A deterioration of the Company’s credit profile, disruptions of the credit markets or higher interest rates could restrict its ability to access the debt capital markets or increase the cost of debt. Deterioration in the Company’s credit profile may have an adverse effect on the Company’s ability to access the private or public debt markets and also may increase its borrowing costs. If the Company’s credit profile deteriorates significantly its access to the debt capital markets or its ability to renew its committed lines of credit may become restricted, its cost of debt may increase, or the Company may not be able to refinance debt at the same levels or on the same terms. Because the Company relies on its ability to draw on its Revolving Credit Facility to support its operations as needed, any volatility in the credit and financial markets that prevents the Company from accessing funds on acceptable terms could have an adverse effect on the Company’s financial condition and cash flows. Additionally, the pricing grids on Company’s Revolving Credit Facility and Term Loan contain a ratings grid that includes a possible increase in borrowing rates if the Company’s rating declines. Furthermore, the Company incurs interest under its Revolving Credit Facility based on floating rates. Floating rate debt creates higher debt service requirements if market interest rates increase, which would adversely affect the Company’s cash flow and results of operations.
Corporate responsibility, specifically related to ESG matters, may impose additional costs and expose the Company to new risks. There is an increasing focus from regulators, certain investors, and other stakeholders concerning environmental, social, and governance (“ESG”) matters, both in the United States and internationally. The Company communicates certain ESG-related initiatives, goals, and/or aspirations regarding environmental matters, diversity, responsible sourcing and social investments, and other matters in its annual Sustainability Report, on its website, in its filings with the SEC, and elsewhere. These initiatives, goals, or aspirations reflect the Company’s current plans and are not guarantees that the Company will be able to achieve them. The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Further, the statutory and regulatory requirements continue to evolve as well. In 2023, the State of California enacted climate related legislation and the SEC is expected to issue its own climate disclosure rules in 2024, both of which will or are expected to impose additional reporting requirements on the Company resulting in additional compliance cost and expense. The Company’s selection of disclosure frameworks that seek to align with various reporting standards may change from time to time and may result in a lack of comparative data from period to period. The ESG-related initiatives, goals and/or aspirations could be difficult to achieve and costly to implement, and the Company may be unable to economically develop or deploy technologies to achieve its goals or aspirations, if at all. In addition, as the floating rate on certain borrowings underCompany could be criticized for the Revolving Credit Facility is tiedtiming, scope or nature of these initiatives, goals, or aspirations, or for any revisions to LIBOR,them. As mandatory and voluntary disclosures about ESG matters increase, the uncertainty regardingCompany could be penalized or criticized for the futureaccuracy, adequacy, or completeness of LIBOR as well as the transition from LIBORsuch disclosures. The Company’s actual or perceived failure to an alternate benchmark ratereport accurately or ratesachieve its ESG-related initiatives, goals, or aspirations could adversely affectresult in government enforcement action, negatively impact its reputation, result in ESG-focused investors not purchasing and holding Company stock, or otherwise materially harm the Company’s financing costs.business.
Increased prices and inflation could negatively impact the Company’s margin performance and financial results. Increased inflation, including rising prices for items, such as raw materials, fuel, parts and components, freight, packaging, supplies, labor and energy increases the Company’s costs to provide services and manufacture and distribute the Company’s products. The Company does not currently use financial derivatives to hedge against volatility in commodity prices. The Company uses market prices for materials, fuel, parts and components. The Company may be unable to pass these rising costs on to its customers. To mitigate this exposure, the Company attempts to include cost escalation clauses in its longer-term marine transportation contracts whereby certain costs, including fuel, can largely be passed through to its customers. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which limits exposure to cost escalations. Results of operations and margin performance can be negatively affected if the Company is unable to mitigate the impact of these cost increases through contractual means and is unable to increase prices to sufficiently offset the effect of these cost increases.
The Company could be adversely impacted by materials shortages, delays, and disruptions in supply chain. Materials, components, and equipment essential to the Company’s operations, such as original equipment manufacturer engines, transmissions, generators, electrical components and steel, are normally readily available, but shortages as a result of supply chain disruptions can adversely impact the Company’s operations, particularly where the Company has a relationship with a single supplier for a particular resource. Many of
27
the items essential to the Company’s business require the use of shipping services to transport them to the Company’s facilities. Shipping delays or disruptions may result in operational slowdowns, especially where materials, components, or equipment are necessary to complete a project or order for the Company’s customers, particularly in the manufacturing business of KDS. These constraints could have a material adverse effect on the Company and contribute to increased buildup of inventories. In addition, price increases imposed by the Company’s vendors for materials and shipping services used in its business, and the inability to pass these increases through to its customers, could have a material adverse effect on the Company.
Continuing widespread health developments and economic uncertaintyimpacts resulting from the recent global COVID-19 pandemicactual or threatened health epidemics, and pandemics or other major health crisis could materially and adversely affect ourthe Company’s business, financial condition and results of operations. In December 2019, COVID-19 surfacedThe Company’s business could be impacted adversely by the effects of public health epidemics, pandemics or other major heath crises (which we refer to collectively as public health crises). Actual or threatened public health crises may have a number of adverse impacts, including volatility in Wuhan, China.the global economy, impacts to the Company’s customers’ business operations, or significant disruptions in waterborne transportation of cargoes, and supply chain activity, caused by a variety of factors such as quarantines, supplier factory and office closures, or other government-imposed restrictions, any of which could adversely impact the Company’s business, financial condition, and results of operations. In response to the resultingCOVID-19 pandemic, various countries, including the United States, either mandated or recommended business closures, travel restrictions or limitations, social distancing, and/or self-quarantine, among other actions.restrictions. Additionally, various state and local governments in locations where the Company operates took similar actions. The full impact and durationGovernments removed, eased, reinstated, or implemented new protocols or restrictions in response to reassessment of the outbreak is still unknown and the situation continues to evolve. Many governments arerisk of COVID-19, based in various stages of removing or easing these actions. In some cases, governments have reinstated actions or slowed reopenings and they may impose new actions in an effort to reduce or manage current or anticipatedpart on, changing levels of infection. The full extentinfection and duration of these impacts is unknown at this time, but therehospitalization rates. There has been and continues to be a negative impact on the global and United States economies and supply chains, including the oil and gas industry, which has created delays and reduced demand for the Company’s products and services.
The Company is unable to predict the extent to which major health crisis or other public health threats that may arise in the future may affect the global and United States economies and supply chain, which could continuehave a material impact on its business. The degree to place limitations onwhich any future disease outbreaks or public health threats may impact the Company’s ability to execute on its business planrevenues, results of operations and materially and adversely affect its business, financial condition is uncertain and results of operations. The Company continues to monitor the situation, actively implemented policies and procedures to address the situation, including its pandemic response plan and business continuity plan, and took steps to reduce costs. As the pandemic continues to further unfold, the Company may further adjust its current policies and procedures as government mandates or recommendations change or as more information and guidance become available.will depend on future developments. The impact of theepidemics or COVID-19 pandemicand other pandemics may also exacerbate other risks discussed above, any of which could have a material effect on the Company.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
The Company is committed to maintaining robust governance and oversight of cybersecurity risks and to implementing processes, controls and technologies designed to help assess, identify, and manage material risks. The Company’s Board of Directors has ultimate oversight of cybersecurity risks, which it manages as part of the Company’ enterprise risk management program. The Audit Committee assists the Board in reviewing the Company’s information security programs, including review of cybersecurity processes, procedures and safeguards. To more effectively prevent, detect and respond to information security threats, the Company maintains a cyber risk management program, which is supervised by a Company executive officer, the Vice President and Chief Information Officer, whose team is responsible for leading company-wide cybersecurity strategy, policy, standards, architecture and processes. The Vice President and Chief Information Officer has extensive experience assessing and managing cybersecurity programs and risks and has served in this position since 2019. The team includes the Senior Director of IT Operations & Security with a certification in information security, who reports directly to the Vice President and Chief Information Officer. The Audit Committee receives regular reports from the Vice President and Chief Information Officer on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the Company’s security program and the emerging threat landscape. Additionally, the Vice President and Chief Information Officer chairs the Cybersecurity Risk Oversight working group, which drives awareness, ownership and alignment across broad governance and risk stakeholder groups for effective cybersecurity risk management and reporting. Upon the occurrence of a cybersecurity incident, a documented process is followed to escalate notifications to the Company’s CEO and Board, as appropriate.
The Company annually engages third parties such as assessors, consultants and auditors (as well as its internal audit department) to audit the Company’s information security programs, whose findings are reported to the Audit Committee. The Company also actively engage with key vendors, industry participants, and the U.S. Coast Guard as part of its efforts, which are reported to the Audit Committee.
The Company’s approach to cybersecurity risk management includes the following key elements:
28
The Company continues to invest in its cybersecurity systems and to enhance its internal controls and processes. While the Company has not, as of the date of this Form 10-K, experienced a cybersecurity threat or incident that resulted in a material adverse impact to its business or operations, there can be no guarantee that the Company iswill not awareexperience such an incident in the future. For more information regarding the risks the Company faces from cybersecurity threats, please see Item 1A-Risk Factors.
29
Item 2. Properties
The principal offices of currently.
| Building(s) Size (Approximate Square Feet) | Owned or Leased | Activity | |||
KMT | ||||||
Baton Rouge, Louisiana | 19,300 | Leased | Operations and fleeting | |||
Channelview, Texas | 108,300 | Owned | Operations, fleeting, shipyard, training and cleaning | |||
Corpus Christi, Texas | 3,600 | Leased | Operations | |||
Freeport, Texas | 6,500 | Leased | Fueling and fleeting | |||
Houston, Texas | 73,000 | Owned | KMT, KDS and Corporate Headquarters | |||
Lake Charles, Louisiana | 500 | Leased | Fleeting | |||
Miami, Florida | 8,500 | Leased | Operations and dockage | |||
Port Arthur, Texas | 1,000 | Leased | Fleeting | |||
Seattle, Washington | 10,200 | Leased | Operations and inventory | |||
Staten Island, New York | 7,800 | Leased | Operations, inventory and dockage | |||
Westwego, Louisiana | 15,300 | Owned | Operations | |||
KDS | ||||||
Albany, New York | 40,000 | Leased | Service and repairs | |||
Austin, Texas | 1,500 | Leased | Service and repairs | |||
Baton Rouge, Louisiana | 23,500 | Leased | Service and repairs | |||
Belle Chasse, Louisiana | 34,700 | Owned | Service and repairs | |||
Chesapeake, Virginia | 30,000 | Leased | Service and repairs | |||
Commerce City, Colorado | 151,600 | Owned | Service and repairs | |||
Corpus Christi, Texas | 44,100 | Owned | Service and repairs | |||
Dallas, Texas | 211,100 | Owned | Service and repairs | |||
El Paso, Texas | 9,000 | Leased | Service and repairs | |||
Fort Lauderdale, Florida | 40,400 | Leased | Service and repairs | |||
Fort Myers, Florida | 9,900 | Owned | Service and repairs | |||
Fort Pierce, Florida | 10,300 | Owned | Service and repairs | |||
Fort Worth, Texas | 22,600 | Owned | Service and repairs | |||
Houma, Louisiana | 109,700 | Owned | Service and repairs | |||
Houston, Texas | 491,100 | Owned | Manufacturing, service and repairs | |||
Jacksonville, Florida | 44,800 | Leased | Service and repairs | |||
Laredo, Texas | 7,000 | Leased | Service and repairs | |||
Little Rock, Arkansas | 21,500 | Owned | Service and repairs | |||
Lodi, New Jersey | 57,300 | Leased | Service and repairs | |||
Longview, Texas | 50,000 | Owned | Service and repairs | |||
Lubbock, Texas | 27,500 | Owned | Service and repairs | |||
Marlborough, Massachusetts | 45,700 | Leased | Service and repairs | |||
Miami, Florida | 54,400 | Leased | Service and repairs | |||
Middletown, Connecticut | 38,800 | Leased | Service and repairs | |||
Mobile, Alabama | 27,000 | Owned | Service and repairs | |||
Mount Pleasant, Texas | 3,100 | Leased | Service and repairs | |||
New Iberia, Louisiana | 33,000 | Owned | Service and repairs | |||
Ocala, Florida | 15,200 | Owned | Service and repairs | |||
Odessa, Texas | 49,500 | Owned | Service and repairs | |||
Oklahoma City, Oklahoma | 446,400 | Owned/Leased | Manufacturing, service and repairs | |||
Orlando, Florida | 44,600 | Leased | Service and repairs | |||
Paducah, Kentucky | 73,700 | Owned/Leased | Service and repairs | |||
Panama City, Florida | 10,200 | Owned | Service and repairs | |||
Pharr, Texas | 59,300 | Leased | Service and repairs | |||
Piscataway, New Jersey | 39,900 | Leased | Service and repairs | |||
Rocky Mount, North Carolina | 50,000 | Leased | Service and repairs | |||
San Antonio, Texas | 42,100 | Owned | Service and repairs | |||
Seattle, Washington | 19,500 | Leased | Service and repairs | |||
Shreveport, Louisiana | 50,000 | Owned | Service and repairs | |||
Tampa, Florida | 50,900 | Owned | Service and repairs | |||
Thorofare, New Jersey | 24,200 | Leased | Service and repairs | |||
Tulsa, Oklahoma | 37,600 | Leased | Service and repairs | |||
West Palm Beach, Florida | 7,000 | Leased | Service and repairs | |||
Wichita Falls, Texas | 11,500 | Leased | Service and repairs |
30
Item 3. Legal Proceedings
See Note 14, Contingencies and Commitments to the Company’s financial statements.
Item 4. Mine Safety Disclosures
|
31
Equity Securities
|
As of February 19, 2021,16, 2024, the Company had 60,085,00058,522,000 outstanding shares held by approximately 575370 stockholders of record; however, the Company believes the number of beneficial owners of common stock exceeds this number.
The Company does not have an established dividend policy. Decisions regarding the payment of future dividends will be made by the Board of Directors based on the facts and circumstances that exist at that time. Since 1989, the Company has not paid any dividends on its common stock. The Company’s credit agreements contain covenants restricting the payment of dividends by the Company at any time when there is a default under the agreements.
The comparative selected financial datafollowing table is a summary of purchases of the Company and consolidated subsidiaries is presented forCompany's common stock during the five years ended December 31, 2020. The information should be read2023 fourth quarter.
Period |
| Total Number of Shares Purchased |
| Average Price Paid Per Share |
| Total Number of Shares Purchased as Part of Publicly Announced Plans |
| Maximum Number of Shares that May Yet be Purchased Under the Plans |
October 1 — October 31, 2023 |
| 131,603 |
| $ 81.16 |
| — |
| — |
November 1 — November 30, 2023 |
| 294,843 |
| $ 76.46 |
| — |
| — |
December 1 — December 31, 2023 |
| 246,833 |
| $ 75.63 |
| — |
| — |
Total |
| 673,279 |
| $ 77.08 |
| — |
| — |
Purchases of the Company's common stock during the 2023 fourth quarter were made in conjunction with the open market pursuant to a discretionary authorization by the Board of Directors.
Item 6. Reserved
32
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company in Item 7 and the Financial Statements included under Item 8 (selected financial data in thousands, except per share amounts).
Year Ended December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Marine transportation | $ | 1,404,265 | $ | 1,587,082 | $ | 1,483,143 | $ | 1,324,106 | $ | 1,471,893 | ||||||||||
Distribution and services | 767,143 | 1,251,317 | 1,487,554 | 890,312 | 298,780 | |||||||||||||||
$ | 2,171,408 | $ | 2,838,399 | $ | 2,970,697 | $ | 2,214,418 | $ | 1,770,673 | |||||||||||
Net earnings (loss) attributable to Kirby | $ | (272,546 | ) | $ | 142,347 | $ | 78,452 | $ | 313,187 | $ | 141,406 | |||||||||
Net earnings (loss) per share attributable to Kirby common stockholders: | ||||||||||||||||||||
Basic | $ | (4.55 | ) | $ | 2.38 | $ | 1.31 | $ | 5.62 | $ | 2.63 | |||||||||
Diluted | $ | (4.55 | ) | $ | 2.37 | $ | 1.31 | $ | 5.62 | $ | 2.62 | |||||||||
Common stock outstanding: | ||||||||||||||||||||
Basic | 59,912 | 59,750 | 59,557 | 55,308 | 53,454 | |||||||||||||||
Diluted | 59,912 | 59,909 | 59,689 | 55,361 | 53,512 |
December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Property and equipment, net | $ | 3,917,070 | $ | 3,777,110 | $ | 3,539,802 | $ | 2,959,265 | $ | 2,921,374 | ||||||||||
Total assets | $ | 5,924,174 | $ | 6,079,097 | $ | 5,871,594 | $ | 5,127,427 | $ | 4,289,895 | ||||||||||
Long-term debt, including current portion | $ | 1,468,586 | $ | 1,369,767 | $ | 1,410,188 | $ | 992,406 | $ | 722,802 | ||||||||||
Total equity | $ | 3,087,553 | $ | 3,371,592 | $ | 3,216,301 | $ | 3,114,223 | $ | 2,412,867 |
|
For purposes of Management’s Discussion, all net earnings per share attributable to Kirby common stockholders are “diluted earnings (loss) per share.” The weighted average number of common shares outstanding applicable to diluted earnings (loss) per share for 2020, 20192023, 2022, and 20182021 were 59,912,000, 59,909,00059,857,000, 60,329,000, and 59,689,000,60,053,000, respectively.
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, and in Alaska and Hawaii.coasts. The Company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. As of December 31, 2020, the Company operated a fleet of 1,066 inland tank barges with 24.1 million barrels of capacity, and operated an average of 248 inland towboats during the 2020 fourth quarter. The Company’s coastal fleet consisted of 44 tank barges with 4.2 million barrels of capacity and 44 coastal tugboats. The Company also owns and operates four offshore dry-bulk cargo barges, four offshore tugboats and one docking tugboat transporting dry-bulk commodities in United States coastal trade. Through its distribution and services segment,KDS, the Company provides after-market service and parts for engines, transmissions, reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for land-based oilfield service and railroad customers.
The following table summarizes key operating results of the Company (in thousands, except per share on revenues of $2,171,408,000, compared to 2019 net earnings attributable to Kirby of $142,347,000, or $2.37 per share, on revenues of $2,838,399,000. amounts):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Total revenues |
| $ | 3,091,640 |
|
| $ | 2,784,754 |
|
| $ | 2,246,660 |
|
Net earnings (loss) attributable to Kirby |
| $ | 222,935 |
|
| $ | 122,291 |
|
| $ | (246,954 | ) |
Net earnings (loss) per share attributable to Kirby common stockholders – diluted |
| $ | 3.72 |
|
| $ | 2.03 |
|
| $ | (4.11 | ) |
Net cash provided by operating activities |
| $ | 540,228 |
|
| $ | 294,128 |
|
| $ | 321,576 |
|
Capital expenditures |
| $ | 401,730 |
|
| $ | 172,606 |
|
| $ | 98,015 |
|
The 20202023 first quarter included $561,274,000$3.0 million before taxes, $433,341,000$2.4 million after taxes, or $7.24$0.04 per share of costs related to the strategic review and shareholder engagement and $2.7 million before taxes, $2.2 million after taxes, or $0.04 per share of other income associated with the interest on a refund from the Internal Revenue Service (“IRS”).
The 2022 fourth quarter included $3.3 million before taxes, $2.4 million after taxes, or $0.04 per share of severance expense. The 2022 fourth quarter also included $0.9 million before taxes, $0.6 million after taxes, or $0.01 per share of professional fees related to the Company’s strategic alternatives review. The 2022 second quarter included $1.5 million before taxes, $1.3 million after taxes, or $0.02 per share of severance expense.
The 2021 third quarter included $340.7 million before taxes, $275.1 million after taxes, or $4.58 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets including intangible assets and property andrelated to coastal marine transportation equipment and impairment of goodwill in the distribution and services segment.KMT. See Note 7, Impairments and Other Charges in the financial statements for additional information. In addition, the 2020 firstThe 2021 fourth quarter was favorablyalso impacted by an incomea one-time deferred tax benefitprovision of $50,824,000,$5.7 million or $0.85$0.09 per share related to net operating losses generateda change in 2018 and 2019 used to offset taxable income generated between 2013 and 2017.Louisiana tax law. See Note 9, Taxes on Income for additional information.
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Cash provided by operating activities in 2023 increased compared to 2022 primarily due to higher business activity levels and the receipt of an IRS refund of $70.4 million plus accrued interest. During 2023, capital expenditures of $401.7 million included $255.4 million in KMT and $146.3 million in KDS and corporate, more fully described under cash flow and capital expenditures below.
The 2019 fourth quarter included $35,525,000 before taxes, $27,978,000 after taxes, or $0.47 per share, non-cash inventory write-downsCompany projects net cash flow from operations in 2024 of between $600 million and $4,757,000 before taxes, $3,747,000 after taxes, or $0.06 per share, severance$700 million and early retirement expense.
The Company’s debt-to-capitalization ratio decreased to 24.2% at December 31, 2023 from 26.2% at December 31, 2022, primarily due an increase in total equity, primarily from net earnings attributable to Kirby of $222.9 million during 2023 and a reduction of debt outstanding of $63.0 million, partially offset by treasury stock purchases of $112.8 million. The Company’s debt outstanding as of December 31, 2023 and December 31, 2022 is detailed in Long-Term Financing below.
Marine Transportation
The following table summarizes the Company’s marine transportation fleet:
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Inland tank barges: |
|
|
|
|
|
| ||
Owned |
|
| 1,043 |
|
|
| 999 |
|
Leased |
|
| 33 |
|
|
| 38 |
|
Total |
|
| 1,076 |
|
|
| 1,037 |
|
Barrel capacity (in millions) |
|
| 23.7 |
|
|
| 23.1 |
|
|
|
|
|
|
|
| ||
Active inland towboats (quarter average): |
|
|
|
|
|
| ||
Owned |
|
| 214 |
|
|
| 216 |
|
Chartered |
|
| 67 |
|
|
| 61 |
|
Total |
|
| 281 |
|
|
| 277 |
|
|
|
|
|
|
|
| ||
Coastal tank barges: |
|
|
|
|
|
| ||
Owned |
|
| 28 |
|
|
| 28 |
|
Leased |
|
| — |
|
|
| 1 |
|
Total |
|
| 28 |
|
|
| 29 |
|
Barrel capacity (in millions) |
|
| 2.9 |
|
|
| 3.0 |
|
|
|
|
|
|
|
| ||
Coastal tugboats: |
|
|
|
|
|
| ||
Owned |
|
| 24 |
|
|
| 24 |
|
Chartered |
|
| 1 |
|
|
| 3 |
|
Total |
|
| 25 |
|
|
| 27 |
|
|
|
|
|
|
|
| ||
Offshore dry-bulk cargo barges (owned) |
|
| 4 |
|
|
| 4 |
|
Offshore tugboats and docking tugboat (owned and chartered) |
|
| 5 |
|
|
| 5 |
|
The Company also owns shifting operations and fleeting facilities for dry cargo barges and tank barges on the Houston Ship Channel and in Freeport and Port Arthur, Texas, and Lake Charles, Louisiana, and its San Jac shipyard for building towboats and performing routine maintenance near the Houston Ship Channel, as well as a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.
For 2020, 65%2023, 56% of the Company’s revenues were generated by its marine transportation segment.KMT. 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, fibers, 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, the Company’s marine transportation business is directly affected by the volumes produced by the Company’s petroleum, petrochemical and refining customer base.
KMT’s revenues for 2020 decreased 12%2023 increased 6% compared to 20192022 and operating income decreased 24%increased 75%, compared to 2019.2022. The decreasesincreases for 2023 were primarily due to reduced bargeimproved term and spot pricing and utilization in the inland and coastal markets and decreased term and spot contract pricing in the inland market each as a result of a reduction in demand duewhen compared to the COVID-19 pandemic, lower fuel rebills, retirements of three large coastal barges, and planned shipyard activity in the coastal market. These reductions were2022. This was partially offset by various lock closures along the acquisition ofGulf Intracoastal Waterway and Illinois River, resulting in higher delay days. In
34
addition, several refinery outages also impacted utilization. Revenues and operating income in 2022 were impacted by record low water levels on the Savage Inland Marine, LLC (“Savage”) fleet acquired on April 1, 2020 andMississippi River during the Cenac Marine Services, LLC (“Cenac”) fleet acquired on March 14, 2019. The 2020 third2022 fourth quarter. Also, the 2022 first quarter was impacted by hurricanes and tropical storms along the East and Gulf Coasts and the closureCOVID-19 Omicron variant as increased cases of the Illinois river. The 2020 first quartervirus among the Company’s mariners led to crewing challenges, lost revenue and 2019 first six months were each impacted by poorincreased operating conditionscosts. For 2023 and high delay days due to heavy fog and wind along the Gulf Coast, high water on the Mississippi River System, and closures of key waterways as a result of lock maintenance projects, as well as increased shipyard days on large capacity coastal vessels. The 2019 first six months was also impacted by prolonged periods of ice on the Illinois River and a fire at a chemical storage facility on the Houston Ship Channel. For 2020 and 2019,2022, the inland tank barge fleet contributed 78%82% and 77%79%, respectively, and the coastal fleet contributed 22%18% and 23%21%, respectively, of marine transportation revenues.
During 2020, reduced demandOverall inland tank barge utilization levels improved in 2023 as a result ofcompared to 2022, ranging from the COVID-19 pandemiclow to mid-90% range during the 2023 first quarter, the low 90% range during the 2023 second quarter, the high 80% range during the 2023 third quarter, and the resulting economic slowdown contributedlow 90% range in the 2023 fourth quarter. During 2022, inland tank barge utilization levels ranged from the mid-80% range during the 2022 first quarter, the low 90% range during both the 2022 second and third quarters, and the low 90% range in the 2022 fourth quarter. Utilization in the 2023 fourth quarter improved from the 2023 third quarter, which was negatively impacted by Illinois River lock closures and several refinery outages.
Coastal tank barge utilization levels during 2023 averaged in the mid to lower barge utilization. Inlandhigh 90% range during both the 2023 first and second quarters, the mid-90% range during the 2023 third quarter and the low to mid-90% range during the 2023 fourth quarter. For 2022, coastal tank barge utilization levels averaged in the low to mid-90%90% range during both the 20202022 first quarter, the mid-80% range during the 2020and second quarter, thequarters and low 70% range during the 2020 third quarter, and the high 60% range during the 2020 fourth quarter. For 2019, barge utilization averaged in theto mid-90% range during both the first and second quarters and the low 90% range during both the2022 third and fourth quarters. The 2020 first quarter and full year 2019 each experienced strong demand from petrochemicals, black oil, and refined petroleum products customers. Extensive delay days due to poor operating conditions and lock maintenance projects in the 2020 first quarter and 2019 first six months slowed the transport of customer cargoes and contributed to strong barge utilization during those periods.
Coastal tank barge utilization levels averaged in the low to mid-80% range during the 2020 first quarter and the mid-70% range during each of the 2020 second, third, and fourth quarters. In 2019, barge utilization averaged in the low 80% range during the first quarter and the mid-80% range during each of the second, third, and fourth quarters. Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of smaller tank barges in the coastal industry during 2020 and 2019.
The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2023 compared to 85%contracts renewed during 2019. the corresponding quarter of 2022:
Three Months Ended | ||||||||
March 31, 2023 | June 30, 2023 | September 30, 2023 | December 31, 2023 | |||||
Inland market: | ||||||||
Term increase | 10% – 12% | 10% – 12% | 7% – 9% | 7% – 9% | ||||
Spot increase | 23% – 26% | 26% – 29% | 14% – 16% | 15% – 18% | ||||
Coastal market (a): | ||||||||
Term increase | 10% – 12% | 16% – 18% | 10% – 12% | 20% – 22% | ||||
Spot increase | 20% – 23% | 25% – 28% | 31% – 33% | 34% – 36% |
RatesEffective January 1, 2023, annual escalators for labor and the producer price index on coastal terma number of inland multi-year contracts renewedresulted in the 2020 first quarter increased in the 10% to 15% average range compared to termrate increases on those contracts renewed in the 2019 first quarter. Rates on coastal term contracts renewed in the 2020 second quarter were flat compared to term contracts renewed in the 2019 second quarter. Rates on coastal term contracts renewed in both the 2020 third and fourth quarters decreased in the 4% to 6% average range compared to term contracts renewed in the 2019 third and fourth quarters. Spot market rates in the 2020 first quarter increased in the 10% to 15% average range compared to the 2019 first quarter. Spot market rates in each of the 2020 second, third, and fourth quarters were flat compared to the 2019 second, third, and fourth quarters.approximately 9%, excluding fuel.
The 20202023 marine transportation operating margin was 11.7%13.9% compared to 13.6%8.4% for 2019.
Distribution and Services
The Company, through KDS, sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electrical distribution and services segmentcontrol equipment, and high capacity energy storage/battery systems for oilfield service and railroad customers. The Company sells and manufactures various products used in oil and gas and industrial applications, including those used in hydraulic fracturing and refrigeration systems that, as compared to conventional offerings, reduce emissions. These products made up approximately 24% of KDS’s revenues in 2023.
35
During 2023, KDS generated 35%44% of the Company’s revenues, of which 93%78% was generated from service and parts and 7%22% from manufacturing. The results of the distribution and services segmentKDS are largely influenced by cycles of the land-based oilfield service industry and oil and gas operator and producer markets, marine, power generation, on-highway and other industrial markets.
Distribution and services revenues for 2020 decreased 39%2023 increased 17% compared to 20192022 and operating income decreased 118%increased 71% compared to 2019. The decreases2022. In the commercial and industrial market, the increases in 2023 compared to 2022 were primarily attributable to reducedstrong economic activity across the U.S. which resulted in higher business levels in the oilfield as a result of oil price volatility throughout 2019marine and 2020, the extensive downturnon-highway businesses. Increased product sales in oil and gas exploration dueThermo King also contributed favorably to low oil prices, caused in part by the COVID-19 pandemic, an oversupply of pressure pumping equipment in North America, and reduced spending and enhanced cash flow discipline for the Company’s major oilfield customers. As a result, customer demand and incremental orders for new and remanufactured pressure pumping equipment and sales of new and overhauled transmissions and related parts and service declined during 2020. For 2020, the oil and gas market represented approximately 26% of distribution and services revenues.
In the oil and gas market, revenues improved compared to 2022 due to higher oilfield activity which resulted in increased demand for new transmissions and parts in the distribution business. Although the manufacturing business was heavily impacted by supply chain delays, the business continues to experience increased orders and deliveries of new environmentally friendly pressure pumping equipment and power generation equipment for electric fracturing. For 2023 and 2022, the oil and gas market contributed 41% and 44%, respectively, of the distribution and services revenues.
The distribution and services operating margin for 20202023 was (1.6)%8.4% compared to 5.4%5.7% for 2019.
The decline was driven by decreased revenues and operating income in both the marine transportation and distribution and services segments. The decrease in the marine transportation segment was driven by decreased barge utilization in the inland and coastal markets and decreased term and spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, partially offset by the Savage acquisition in April 2020 and the Cenac acquisition in March 2019 and reduced costs. TOutlookhe decrease in the distribution and services segment was primarily attributable to reduced activity in the oilfield as a result of oil price volatility throughout 2019 and 2020, the extensive downturn in oil and gas exploration due to low oil prices, caused in part by the COVID-19 pandemic, an oversupply of pressure pumping equipment in North America, and reduced spending and enhanced cash flow discipline for the Company’s major oilfield customers.
The decline was also partially offset by changes in certain operating assets and liabilities primarily related to reduced incentive compensation payouts in the 2020 first quarter and a larger decrease in trade accounts receivable compared to an increase during 2019, driven by reduced business activity levels in both the marine transportation and distribution and services segments. In addition, during 2020, the Company received a tax refund of $30,606,000 for its 2018 tax return related to net operating losses being carried back to offset taxable income generated during 2013. During 2020 and 2019, the Company generated cash of $17,310,000 and $57,657,000, respectively, from proceeds from the disposition of assets, and $353,000 and $5,743,000, respectively, from proceeds from the exercise of stock options.
In the inland marine transportation market, the Company anticipates favorable market conditions are expected to remain challenging indriven by steady refinery and petrochemical plant utilization, minimal new barge construction across the coming months, with gradual improvement in the second quarterindustry, and a more meaningful recovery inheavy year for industry maintenance. As a result, the second half of 2021. Barge utilization is projected to start the year in the low to mid-70% range and improve into the high 80% to low 90% range by the end of the year. Pricing, which typically improves with barge utilization, is expected to remain under pressure in the near-term. First quarter revenues and operating margin are expected to be the lowest of the year, sequentially down from the 2020 fourth quarter due to the impact of lowerCompany expects further pricing on term contract renewals and increased delays from seasonal winter weather. Anticipated improvements in the spot market, later in 2021 should contribute to increased barge utilization and better operating margins as the year progresses. However, the full year impactwhich currently represents 40% of lower term contract pricing isinland revenues. Term contracts are also expected to continue to reset higher as a result in full year operating margins lower than the mid-teens margins realized in 2020.
KDS results of the distribution and services segment are largely influenced by the cycles of the land-based oilfield service and oil and gas, operator and producer markets, marine, power generation, on-highway and other related industrial markets. Improving economic activityDespite the uncertainty from volatile commodity prices, the Company expects to yield incremental demand for OEM products, parts, and growthservices in the oilfield are expected to boost activity levels and contribute to meaningful year-over-year improvement in revenue and operating income.segment. In commercial and industrial, revenues arestrong demand for power generation and stable on-highway and marine repair markets is expected to benefit from improving economic conditions as well as from growth in the on-highway market, due in part tohelp drive improved revenues. In oil and gas, the Company’s new online parts sales platform which was launched in 2020. However, these gains aremanufacturing backlog is expected to provide stable levels of activity through most of 2024 which will be partially offset by lower sales of new marine engines which remained strong throughout 2020.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis based on a combination of historical information and various other assumptions that are believed to be reasonable under the particular circumstances. Actual results may differ from these estimates based on different assumptions or conditions. The Company believes the critical accounting policies that most impact the consolidated financial statements are described below. It is also suggested that the Company’s significant accounting policies, as described in the Company’s financial statements in Note 1, Summary of Significant Accounting Policies, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Property, Maintenance and Repairs. Property is recorded at cost; improvements and betterments are capitalized as incurred. Depreciation is recorded using the straight-line method over the estimated useful lives of the individual assets. When property items are retired, sold, or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts with any gain or loss on the disposition included in the statement of earnings. Maintenance and repairs on vessels built for use on the inland waterways are charged to operating expense as incurred and includes the costs incurred in USCG inspections unless the shipyard extends the life, or improves the operating capacity of the vessel, or replaces significant components of the vessel which results in the costs being capitalized. The Company’s ocean-going vessels are subject to regulatory drydocking requirements after certain periods of time to be inspected, have planned major maintenance performed and be recertified by the ABS. These recertifications generally occur twice in a five-year period. The Company defers the drydocking expenditures incurred on its ocean-going vessels due to regulatory marine
36
inspections by the ABS and amortizes the costs of the shipyard over the period between drydockings, generally 30 or 60 months, depending on the type of major maintenance performed. Drydocking expenditures that extend the life, or improve the operating capability of the vessel, or replace significant components of the vessel result in the costs being capitalized. Routine repairs and maintenance on ocean-going vessels are expensed as incurred. Interest is capitalized on the construction of new ocean-going vessels.
The Company performs an impairment assessment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. If a triggering event is identified, the Company compares the carrying amount of the asset group to the estimated undiscounted future cash flows expected to result from the use of the asset group. If the carrying amount of the asset group exceeds the estimated undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset group to its estimated fair value.value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There are many assumptions and estimates underlying the determination of an impairment event or loss, if any. The assumptions and estimates include, but are not limited to, estimated fair market value of the assets and estimated future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used, and estimated salvage values. Although the Company believes its assumptions and estimates are reasonable, deviations from the assumptions and estimates could produce a materially different result.
Goodwill. The excess of the purchase price over the fair value of identifiable net assets acquired in transactions accounted for as a purchase is included in goodwill. Management monitors the recoverability of goodwill on an annual basis, or whenever events or circumstances indicate that interim impairment testing is necessary. The amount of goodwill impairment, if any, is typically measured based on projected discounted future operating cash flows using an appropriate discount rate and valued based on the excess of a reporting unit’s carrying amount over its fair value, incorporating all tax impacts caused by the recognition of the impairment loss. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. There are many assumptions and estimates underlying the determination of an impairment event or loss, if any. Although the Company believes its assumptions and estimates are reasonable, deviations from the assumptions and estimates could produce a materially different result.
Accrued Insurance.Acquisitions The Company is subject to property damage and casualty risks associated with operating vessels carrying large volumes of bulk liquid and dry cargo in a marine environment. The Company maintains insurance coverage against these risks subject to a deductible, below which the Company is liable. In addition to expensing claims below the deductible amount as incurred, the Company also maintains a reserve for losses that may have occurred but have not been reported to the Company, or are not yet fully developed. The Company uses historic experience and actuarial analysis by outside consultants to estimate an appropriate level of accrued liabilities. If the actual number of claims and magnitude were substantially greater than assumed, the required level of accrued liabilities for claims incurred but not reported or fully developed could be materially understated. The Company records receivables from its insurers for incurred claims above the Company’s deductible. If the solvency of the insurers became impaired, there could be an adverse impact on the accrued receivables and the availability of insurance.
During 2020,On July 14, 2023, the Company purchased six newly constructed inland pressure barges for $39,350,000 in cash. Financing of these equipment purchases was through borrowings under the Company’s Revolving Credit Facility.
The Company purchased four inland tank barges from a leasing company for $0.5 million in cash during the 2023 third quarter. The Company had been leasing the barges prior to the purchase.
On March 31, 2022, the Company paid $3.9 million in cash to purchase assets of a gearbox repair company in KDS.
During 2021, the Company purchased four inland tank barges from a leasing company for $7.5 million in cash. The Company had been leasing the barges prior to the purchase.
On October 4, 2021, the Company paid $1.6 million in cash to purchase assets of an energy storage systems manufacturer based in Texas which have been key to the development of new power generation solutions for electric fracturing equipment.
Financing of the equipment acquisitionthese purchases and acquisitions was through borrowings under the Company’s Revolving Credit Facility.
(as defined in Note 5, Long-Term Debt to the Company’s financial statements). The 2028 Notes were issued on February 12, 2018 in preparation for closing of the acquisition.
The following tables settable sets forth the Company’s net earnings (loss) attributable to Kirby, along with per share amounts, and marine transportation and distribution and services revenues and the percentage of each to total revenues for the comparable periods (dollars in thousands):
|
| Year Ended December 31, |
| |||||||||||||||||||||
|
| 2023 |
|
| % |
|
| 2022 |
|
| % |
|
| 2021 |
|
| % |
| ||||||
Marine transportation |
| $ | 1,721,937 |
|
|
| 56 | % |
| $ | 1,616,967 |
|
|
| 58 | % |
| $ | 1,322,918 |
|
|
| 59 | % |
Distribution and services |
|
| 1,369,703 |
|
|
| 44 |
|
|
| 1,167,787 |
|
|
| 42 |
|
|
| 923,742 |
|
|
| 41 |
|
| $ | 3,091,640 |
|
|
| 100 | % |
| $ | 2,784,754 |
|
|
| 100 | % |
| $ | 2,246,660 |
|
|
| 100 | % |
37
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Net earnings (loss) attributable to Kirby | $ | (272,546 | ) | $ | 142,347 | $ | 78,452 | |||||
Net earnings (loss) attributable to Kirby per share - diluted | $ | (4.55 | ) | $ | 2.37 | $ | 1.31 |
Year Ended December 31, | ||||||||||||||||||||||||
2020 | % | 2019 | % | 2018 | % | |||||||||||||||||||
Marine transportation | $ | 1,404,265 | 65 | % | $ | 1,587,082 | 56 | % | $ | 1,483,143 | 50 | % | ||||||||||||
Distribution and services | 767,143 | 35 | 1,251,317 | 44 | 1,487,554 | 50 | ||||||||||||||||||
$ | 2,171,408 | 100 | % | $ | 2,838,399 | 100 | % | $ | 2,970,697 | 100 | % |
The 2020 first quarter included $561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment. See Note 7, Impairments and Other Charges to the Company’s financial statements for additional information. In addition, the 2020 first quarter was favorably impacted by an income tax benefit of $50,824,000, or $0.85 per share related to net operating losses generated in 2018 and 2019 used to offset taxable income generated between 2013 and 2017. See Note 9, Taxes on Income to the Company’s financial statements for additional information.
The following table sets forth the Company’s marine transportation segment’sa year over year comparison of KMT’s revenues, costs and expenses, operating income and operating margins (dollars in thousands):
Year Ended December 31, | ||||||||||||||||||||
2020 | 2019 | % Change | 2018 | % Change | ||||||||||||||||
Marine transportation revenues | $ | 1,404,265 | $ | 1,587,082 | (12 | )% | $ | 1,483,143 | 7 | % | ||||||||||
Costs and expenses: | ||||||||||||||||||||
Costs of sales and operating expenses | 907,119 | 1,034,758 | (12 | ) | 997,979 | 4 | ||||||||||||||
Selling, general and administrative | 111,182 | 122,202 | (9 | ) | 122,421 | — | ||||||||||||||
Taxes, other than on income | 35,528 | 34,538 | 3 | 33,020 | 5 | |||||||||||||||
Depreciation and amortization | 186,798 | 179,742 | 4 | 182,307 | (1 | ) | ||||||||||||||
1,240,627 | 1,371,240 | (10 | ) | 1,335,727 | 3 | |||||||||||||||
Operating income | $ | 163,638 | $ | 215,842 | (24 | )% | $ | 147,416 | 46 | % | ||||||||||
Operating margins | 11.7 | % | 13.6 | % | 9.9 | % |
|
| Year Ended December 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| % Change |
|
| 2021 |
|
| % Change |
| |||||
Marine transportation revenues |
| $ | 1,721,937 |
|
| $ | 1,616,967 |
|
|
| 6 | % |
| $ | 1,322,918 |
|
|
| 22 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs of sales and operating expenses |
|
| 1,136,526 |
|
|
| 1,146,657 |
|
|
| (1 | ) |
|
| 924,380 |
|
|
| 24 |
|
Selling, general and administrative |
|
| 134,641 |
|
|
| 128,340 |
|
|
| 5 |
|
|
| 119,017 |
|
|
| 8 |
|
Taxes, other than on income |
|
| 27,602 |
|
|
| 28,235 |
|
|
| (2 | ) |
|
| 30,527 |
|
|
| (8 | ) |
Depreciation and amortization |
|
| 184,225 |
|
|
| 177,551 |
|
|
| 4 |
|
|
| 185,979 |
|
|
| (5 | ) |
|
| 1,482,994 |
|
|
| 1,480,783 |
|
|
| — |
|
|
| 1,259,903 |
|
|
| 18 |
| |
Operating income |
| $ | 238,943 |
|
| $ | 136,184 |
|
|
| 75 | % |
| $ | 63,015 |
|
|
| 116 | % |
Operating margins |
|
| 13.9 | % |
|
| 8.4 | % |
|
|
|
|
| 4.8 | % |
|
|
|
The following table shows the marine transportation markets serviced by the Company, the marine transportation revenue distribution, products moved and the drivers of the demand for the products the Company transports:
Markets Serviced | 2023 Revenue Distribution | Products Moved | Drivers | |||
Petrochemicals | 51% | Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene | Consumer non-durables — 70% Consumer durables — 30% | |||
Black Oil | 26% | Residual Fuel Oil, Coker Feedstock, Vacuum Gas Oil, Asphalt, Carbon Black Feedstock, Crude Oil, Natural Gas Condensate, Ship Bunkers | Fuel for Power Plants and Ships, Feedstock for Refineries, Road Construction | |||
Refined Petroleum Products | 20% | Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol | Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization | |||
Agricultural Chemicals | 3% | Anhydrous Ammonia, Nitrogen-Based Liquid Fertilizer, Industrial Ammonia | Corn, Cotton and Wheat Production, Chemical Feedstock Usage |
2023 Compared to 2019
Marine Transportation Revenues
KMT’s revenues for 2020 decreased 12%2023 increased 6% compared to 2019.2022 and operating income increased 75%, compared to 2022. The decrease wasincreases for 2023 were primarily due to reduced bargeimproved term and spot pricing and utilization in the inland and coastal markets and decreased term and spot contract pricing in the inland market each as a result of a reduction in demand duewhen compared to the COVID-19 pandemic, lower fuel rebills, retirements of three large coastal barges, and planned shipyard activity in the coastal market. These reductions were2022. This was partially offset by various lock closures along the acquisition ofGulf Intracoastal Waterway and Illinois River, resulting in higher delay days. In addition, several refinery outages also impacted utilization. Revenues and operating income in 2022 were impacted by record low water levels on the Savage fleet acquired on April 1, 2020 andMississippi River during the Cenac fleet acquired on March 14, 2019. The 2020 third2022 fourth quarter. Also, the 2022 first quarter was impacted by hurricanes and tropical storms along the East and Gulf Coasts and the closureCOVID-19 Omicron variant as increased cases of the Illinois River. The 2020 first quartervirus among the Company’s mariners led to crewing challenges, lost revenue and 2019 first six months were each impacted by poorincreased operating conditionscosts. For 2023 and high delay days due to heavy fog and wind along the Gulf Coast, high water on the Mississippi River System, and closures of key waterways as a result of lock maintenance projects, as well as increased shipyard days on large capacity coastal vessels. The 2019 first six months was also impacted by prolonged periods of ice on the Illinois River and a fire at a chemical storage facility on the Houston Ship Channel. For 2020 and 2019,2022, the inland tank barge fleet contributed 78%82% and 77%79%, respectively, and the coastal fleet contributed 22%18% and 23%21%, respectively, of marine transportation revenues. The Savage fleet was quickly integrated into the Company’s own fleet and the former Savage equipment began operating under Company contracts soon after the acquisition closed, with former Savage barges working with the Company’s existing towboats and vice versa resulting in differences in vessel utilization and pricing among individual assets and the consolidated fleet. Due to this quick integration, it is not practical to provide a specific amount of revenues for the Savage fleet but the acquisition in April 2020 was one of the factors that offset decreases in marine transportation revenues in 2020 as compared to 2019.
Overall inland tank barge utilization levels averagedimproved in 2023 as compared to 2022, ranging from the low to mid-90% range during the 20202023 first quarter, the low 90% range during the 2023 second quarter, the high 80% range during the 2023 third quarter, and the low 90% range in the 2023 fourth quarter. During 2022, inland tank barge utilization levels ranged from the mid-80% range during the 2020 second2022 first quarter, the low 70% range during the 2020 third quarter, and the high 60% range during the 2020 fourth quarter. In 2019, inland tank barge utilization levels averaged in the mid-90% range during both the 2019 first and second quarters and the low 90% range during both the 20192022 second and third quarters, and fourth quarters. The 2020 first quarter and full year 2019 each experienced strong demand from petrochemicals, black oil, and refined petroleum products customers. Extensive delay days due to poor operating conditions and lock maintenance projectsthe low 90% range in the 2020 first2022 fourth quarter. Utilization in the 2023 fourth quarter improved from the 2023 third quarter, which was negatively impacted by Illinois River lock closures and 2019 first six months slowed the transport of customer cargoes and contributed to strong barge utilization during those periods.
Coastal tank barge utilization levels during 2023 averaged in the lowmid to mid-80%high 90% range during both the 2023 first and second quarters, the mid-90% range during the 2020 first2023 third quarter, and the mid-70%low to mid-90% range during each of the 2020 second, third, and2023 fourth quarters. In 2019,quarter. For 2022, coastal tank barge utilization levels averaged in the low 80%90% range during both the 20192022 first quarter and the mid-80%second quarters and low to mid-90% range during each ofboth the 2019 second,2022 third and fourth quarters. Barge utilization in the coastal marine fleet continued to be impacted by the oversupply of smaller tank barges in the coastal industry during 2020 and 2019.
38
The petrochemical market, the Company’s largest market, contributed 52%51% of marine transportation revenues for 2020,2023, reflecting reducedincreased rates, volumes and utilization from Gulf Coast petrochemical plants for both domestic consumption and to terminals for export destinations as a result of improved economic conditions and a reduced supply of barges across the COVID-19 pandemic. Also, during the 2020 third quarter, the petrochemical complex along the Gulf Coast was impacted by hurricanes and tropical storms, reducing barge volumes and closing critical waterways for extended periods of time. During 2020, U.S. chemical plant capacity utilization declinedindustry due to an average in the lowa heavier than normal maintenance cycle as compared to mid-70% range.
The black oil market, which contributed 26% of marine transportation revenues for 2020, reflected reduced2023, reflecting improved demand as refinery utilization and production levels and the export of refined petroleum products and fuel oils declined as a result of the COVID-19 pandemic and the impact from hurricanes and tropical storms along the Gulf Coast during the third and fourth quarters.increased. During 2020, U.S. refinery utilization peaked in the low to mid-90% range early in the first quarter and troughed in the high 60% range during the second quarter. During the third and fourth quarters, refinery utilization stabilized in the low 70% to low 80% range with the low end resulting from significant hurricane and tropical storm activity along the Gulf Coast during September and October and increased to the low 80% range late in the fourth quarter. During 2020,2023, the Company continued to transporttransported crude oil and natural gas condensate produced from the Permian Basin as well as reduced volumes fromand the Eagle Ford shale formation in Texas, both along the Gulf Intracoastal Waterway with inland vessels and in the Gulf of Mexico with coastal equipment. Additionally, the Company transported volumes of Utica natural gas condensate downriver from the Mid-Atlantic to the Gulf Coast and Canadian and Bakken crude downriver from the Midwest to the Gulf Coast.
The refined petroleum products market, which contributed 19%20% of marine transportation revenues for 2020, reflected lower2023, saw increased volumes in both the inland and coastal markets as a result of reduced demand related to the COVID-19 pandemic and the impact from hurricanes and tropical storms along the Gulf Coast during the third and fourth quarters. During 2020, U.S.market with improved refinery utilization peaked in the low to mid-90% range early in the first quarter and troughed in the high 60% range during the second quarter. During the third and fourth quarters, refinery utilization stabilized in the low 70% to low 80% range with the low end resulting from significant hurricane and tropical storm activity along the Gulf Coast during September and October and increased to the low 80% range late in the fourth quarter.
The agricultural chemical market, which contributed 3% of marine transportation revenues for 2020, saw modest reductions in2023, also experienced improved demand for transportation of both domestically produced and imported products during the quarter, primarily due to reduced demand associated with the COVID-19 pandemic.
Inland operations incurred 10,40810,863 delay days 22% fewerin 2023, 6% more than the 13,25910,244 delay days that occurred during 2019.2022. 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. Reduced delay days during 2020 is primarily due to lower barge utilization, despite significant delays associated with hurricane activity along the Gulf Coast during the third quarter. In addition, delayDelay days for the 2020 first quarter2023 and 2019 first six months reflected2022 were impacted by hurricanes and tropical storms, poor operating conditions due to heavy fogwind and windfog along the Gulf Coast, low and high water conditions on the Mississippi River System, and various lock closures of key waterways as a result ofalong the Gulf Intracoastal Waterway, due in part to lock maintenance projects. The 2019 first six months2023 third quarter was also impacted by prolonged periods of icelock closures on the Illinois River and a fire at a chemical storage facility on the Houston Ship Channel.
Approximately 60% of the inland marine transportation revenues were under term contracts and 35%40% were under spot contract revenues. These allocationscontracts in 2023 and 2022. Term contracts provide the operations with a reasonably predictable revenue stream. Inland time charters, which insulate the Company from revenue fluctuations caused by weather and navigational delays and temporary market declines, represented 66%63% of the inland revenues under term contracts during 2020 compared to 62%2023 and 58% during 2019. Rates on inland term contracts renewed in the 2020 first quarter increased in the 1% to 3% average range compared to term contracts renewed in the 2019 first quarter. Rates on inland term contracts renewed in the 2020 second quarter were flat compared to term contracts renewed in the 2019 second quarter. Rates on inland term contracts renewed in the 2020 third quarter decreased in the 1% to 3% average range compared to term contracts renewed in the 2019 third quarter. Rates on inland term contracts renewed in the 2020 fourth quarter decreased in the 10% to 12% average range compared to term contracts renewed in the 2019 fourth quarter. Spot contract rates in the 2020 first quarter increased in the 4% to 6% average range compared to the 2019 first quarter. Spot contract rates in the 2020 second quarter decreased in the 5% to 10% average range compared to the 2019 second quarter. Spot contract rates in the 2020 third quarter decreased approximately 10% compared to the 2019 third quarter. Spot contract rates in the 2020 fourth quarter decreased approximately 25% compared to the 2019 fourth quarter. There was no material rate increase on January 1, 2020, related to annual escalators for labor2022. During 2023 and the producer price index on a number of inland multi-year contracts.
The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2023 compared to 85%contracts renewed during 2019. the corresponding quarter of 2022:
Three Months Ended | ||||||||
March 31, 2023 | June 30, 2023 | September 30, 2023 | December 31, 2023 | |||||
Inland market: | ||||||||
Term increase | 10% – 12% | 10% – 12% | 7% – 9% | 7% – 9% | ||||
Spot increase | 23% – 26% | 26% – 29% | 14% – 16% | 15% – 18% | ||||
Coastal market (a): | ||||||||
Term increase | 10% – 12% | 16% – 18% | 10% – 12% | 20% – 22% | ||||
Spot increase | 20% – 23% | 25% – 28% | 31% – 33% | 34% – 36% |
RatesEffective January 1, 2023, annual escalators for labor and the producer price index on coastal terma number of inland multi-year contracts renewedresulted in the 2020 first quarter increased in the 10% to 15% average range compared to termrate increases on those contracts renewed in the 2019 first quarter. Rates on coastal term contracts renewed in the 2020 second quarterof approximately 9%, excluding fuel.
Marine Transportation Costs and Expenses
Total costs and expenses for 2023 were flat compared to term contracts renewed in the 2019 second quarter. Rates on coastal term contracts renewed in both the 2020 third and fourth quarters decreased in the 4% to 6% average range compared to term contracts renewed in the 2019 third and fourth quarters. Spot market rates in the 2020 first quarter increased in the 10% to 15% average range compared to the 2019 first quarter. Spot market rates in each of the 2020 second, third, and fourth quarters were flat compared to the 2019 second, third, and fourth quarters.
The inland marine transportation fleet operated an average of 287280 towboats during 2020,2023, of which an average of 5264 were chartered, compared to 299271 during 2019,2022, of which an average of 7559 were chartered. The decreaseincrease was primarily due to the chartered towboats released during the 2020 second and third quarters, partially offset by the addition of inland towboats with the Savage acquisitionhigher business activity levels. Generally, variability in April 2020. Generally, as demand or anticipated demand, increases or decreases, as tank barges are added to or removed from the fleet, as chartered towboat availability changes, or as weather or water conditions dictate, the Company charters in or releases chartered towboats in an
39
effort to balance horsepower needs with current requirements. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements.
Inland operations consumed 47.548.1 million gallons of diesel fuel in 2023 compared to 50.048.4 million gallons consumed during 2019.2022. The average price per gallon of diesel fuel consumed during 20202023 was $1.41$3.08 per gallon compared to $2.06$3.70 per gallon for 2019.2022. Fuel escalation and de-escalation clauses onare 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 90120 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel.
Selling, general and administrative expenses for 2020 decreased 9%2023 increased 5% compared to 2019. The decrease is primarily2022 due to cost reduction initiatives throughout the organization as a result of reducedhigher business activity levels due to the COVID-19 pandemic.
Depreciation and amortization for 20202023 increased 4%slightly compared to 2019.2022. The increase iswas primarily due to the acquisition of the including the Savage fleet in 2020capital additions during 2023 and Cenac fleet in 2019.
Marine Transportation Operating Income and Operating Margins
KMT operating income for 2020 decreased 24%2023 increased 75% compared to 2019.2022. The operating margin was 11.7%13.9% for 20202023 compared to 13.6%8.4% for 2019.2022. The decreasesincrease in operating income and operating margin were primarily due to reducedincreased barge utilization in the inland and coastal markets and reducedhigher term and spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, partially offsetand coastal markets. The 2022 results were impacted by cost reductions throughout the organization, including chartered towboats released during the 2020 second and third quarters.
Distribution and Services
The following table sets forth the Company’s distribution and services segment’sa year over year comparison of KDS’s revenues, costs and expenses, operating income and operating margins (dollars in thousands):
Year Ended December 31, | ||||||||||||||||||||
2020 | 2019 | % Change | 2018 | % Change | ||||||||||||||||
Distribution and services revenues | $ | 767,143 | $ | 1,251,317 | (39 | )% | $ | 1,487,554 | (16 | )% | ||||||||||
Costs and expenses: | ||||||||||||||||||||
Costs of sales and operating expenses | 604,238 | 995,288 | (39 | ) | 1,162,967 | (14 | ) | |||||||||||||
Selling, general and administrative | 140,449 | 145,473 | (3 | ) | 149,756 | (3 | ) | |||||||||||||
Taxes, other than on income | 6,392 | 7,357 | (13 | ) | 6,177 | 19 | ||||||||||||||
Depreciation and amortization | 28,255 | 35,998 | (22 | ) | 39,349 | (9 | ) | |||||||||||||
779,334 | 1,184,116 | (34 | ) | 1,358,249 | (13 | ) | ||||||||||||||
Operating income | $ | (12,191 | ) | $ | 67,201 | (118 | )% | $ | 129,305 | (48 | )% | |||||||||
Operating margins | (1.6 | )% | 5.4 | % | 8.7 | % |
|
| Year Ended December 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| % Change |
|
| 2021 |
|
| % Change |
| |||||
Distribution and services revenues |
| $ | 1,369,703 |
|
| $ | 1,167,787 |
|
|
| 17 | % |
| $ | 923,742 |
|
|
| 26 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs of sales and operating expenses |
|
| 1,040,905 |
|
|
| 913,624 |
|
|
| 14 |
|
|
| 728,855 |
|
|
| 25 |
|
Selling, general and administrative |
|
| 187,424 |
|
|
| 163,642 |
|
|
| 15 |
|
|
| 141,100 |
|
|
| 16 |
|
Taxes, other than on income |
|
| 7,051 |
|
|
| 6,708 |
|
|
| 5 |
|
|
| 5,607 |
|
|
| 20 |
|
Depreciation and amortization |
|
| 19,842 |
|
|
| 16,776 |
|
|
| 18 |
|
|
| 20,573 |
|
|
| (18 | ) |
|
| 1,255,222 |
|
|
| 1,100,750 |
|
|
| 14 |
|
|
| 896,135 |
|
|
| 23 |
| |
Operating income |
| $ | 114,481 |
|
| $ | 67,037 |
|
|
| 71 | % |
| $ | 27,607 |
|
|
| 143 | % |
Operating margins |
|
| 8.4 | % |
|
| 5.7 | % |
|
|
|
|
| 3.0 | % |
|
|
|
The following table shows the markets serviced by the Company, the revenue distribution, and the customers for each market:
Markets Serviced | 2023 Revenue Distribution | Customers | ||
Commercial and Industrial | 59% | 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, Power Generation, Standby Power Generation, Pumping Stations, Mining | ||
Oil and Gas | 41% | Oilfield Services, Oil and Gas Operators and Producers |
40
2023 Compared to 2019
Distribution and Services Revenues
KDS revenues for 2020 decreased 39%2023 increased 17% compared to 2019. The decrease2022. In the commercial and industrial market, the increase was primarily attributable to reducedstrong economic activity across the U.S. which resulted in higher business levels in the oilfield as a resultmarine and on-highway businesses. For 2023 and 2022, the commercial and industrial market contributed 59% and 56%, respectively, of oil price volatility throughout 2019 and 2020, the extensive downturn inKDS revenues.
The oil and gas explorationmarket revenues increase compared to 2022 primarily due to low oil prices, causedhigher oilfield activity which resulted in part by the COVID-19 pandemic, an oversupply of pressure pumping equipment in North America, and reduced spending and enhanced cash flow discipline for the Company’s major oilfield customers. As a result, customerincreased demand and incremental orders for new transmissions and remanufacturedparts in the distribution business. Although the manufacturing business was heavily impacted by supply chain delays, the business continued to experience increased orders and deliveries of new environmentally friendly pressure pumping equipment and sales of newpower generation equipment for electric fracturing. For 2023 and overhauled transmissions and related parts and service declined during 2020. For 2020 and 2019,2022, the oil and gas market contributed 26%41% and 53%44%, respectively, of the distribution and servicesKDS revenues.
Distribution and Services Costs and Expenses
Total costs and expenses for 2020 decreased 34%2023 increased 14% compared to 2019. Costs2022 reflecting higher costs of sales and operating expenses for 2020 decreased 39% compared to 2019, reflecting loweras a result of inflationary cost pressures and higher demand for newin the marine and overhauled transmissionson-highway businesses in commercial and related parts and service and reducedindustrial markets, as well as increased demand for new pressure pumping equipment in the oil and gas market.
Selling, general and administrative expenses for 2020 decreased 3%2023 increased 15% compared to 2019.2022. The decreaseincrease was primarily due to continued inflationary cost reduction initiatives throughout the organization as a result of reducedpressures, higher business activity levels due to the COVID-19 pandemic, partially offset by the Convoy acquisition, a bad debt expense charge of $3,339,000 as a result of the bankruptcy of a large oil and gas customer, and $1,354,000 of severance expense as a result of continued workforce reductions, each recorded during the 2020 second quarter.
Depreciation and amortization for 2020 decreased 22%2023 increased 18% compared to 2019.2022. The decreaseincrease was primarily due to lower amortization of intangible assets other than goodwill, which were impairedincreased capital spending during the 2020 first quarter.
Distribution and Services Operating Income and Operating Margins
Operating income for the distribution and services segmentKDS for 2019 decreased 48%2023 increased 71% compared to 2018.2022. The operating margin was 8.4% for 2019 was 5.4%2023 compared to 8.7%5.7% for 2018.2022. The results primarily reflected decreased salesreflect increased business levels in higher marginboth the commercial and industrial and oil and gas related revenuemarkets and increased sales of lower margin power generation equipment.
General Corporate Expenses
General corporate expenses for 2020, 20192023, 2022, and 20182021 were $11,050,000, $13,643,000$23.3 million, $18.6 million and $35,590,000,$13.8 million, respectively. The generalGeneral corporate expenses for 2018 arewere higher in 2023 compared to both 2020 and 20192022 primarily due to a one-time non-deductible expense of $18,057,000 in the 2018 secondhigher legal and insurance costs. The 2023 first quarter also included costs related to the retirement of the Company’s executive Chairman, effective April 30, 2018,strategic review and higher incentive compensation accruals.
Gain on Disposition of Assets
The Company reported net gains on disposition of assets of $118,000, $8,152,000,$5.0 million, $8.3 million, and $1,968,000$5.8 million in 2020, 2019,2023, 2022, and 2018,2021, respectively. The net gains were predominantly from the sales or retirements of marine equipment and distribution and services facilities.
Other Income and Expenses
The following table sets forth a year over year comparison of impairments and other charges, lease cancellation costs, other income, noncontrolling interests, and interest expense (dollars in thousands):
Year Ended December 31, | ||||||||||||||||||||
2020 | 2019 | % Change | 2018 | % Change | ||||||||||||||||
Impairments and other charges | $ | (561,274 | ) | $ | (35,525 | ) | (1,480 | )% | $ | (85,407 | ) | (58 | )% | |||||||
Lease cancellation costs | — | — | — | % | (2,403 | ) | (100 | )% | ||||||||||||
Other income | 8,147 | 3,787 | 115 | % | 5,726 | (34 | )% | |||||||||||||
Noncontrolling interests | (954 | ) | (672 | ) | 42 | % | (626 | ) | 7 | % | ||||||||||
Interest expense | (48,739 | ) | (55,994 | ) | (13 | )% | (46,856 | ) | 20 | % |
impairment and other charges includes $561,274,000 before taxes, $433,341,000 after taxes, or $7.24 per share, non-cash charges related to inventory write-downs, impairment of long-lived assets, including intangible assets and property and equipment, and impairment of goodwill in the distribution and services segment.
|
| Year Ended December 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| % Change |
|
| 2021 |
|
| % Change |
| |||||
Impairments and other charges |
| $ | — |
|
| $ | — |
|
|
| 0 | % |
| $ | (340,713 | ) |
|
| (100 | )% |
Other income |
| $ | 11,041 |
|
| $ | 16,677 |
|
|
| (34 | )% |
| $ | 10,001 |
|
|
| 67 | % |
Noncontrolling interests |
| $ | 30 |
|
| $ | (470 | ) |
|
| (106 | )% |
| $ | (183 | ) |
|
| 157 | % |
Interest expense |
| $ | (52,008 | ) |
| $ | (44,588 | ) |
|
| 17 | % |
| $ | (42,469 | ) |
|
| 5 | % |
For 2019 impairment and other charges includes a $35,525,000 non-cash pre-tax write-down of oilfield and pressure pumping related inventory in the distribution and services segment. The after-tax effect of the charge was $27,978,000 or $0.47 per share.
Other income for 2020, 20192023, 2022, and 20182021 includes income of $6,186,000, $3,454,000$4.8 million, $13.9 million and $4,517,000,$8.2 million, respectively, for all components of net benefit costs except the service cost component related to the Company’s defined benefit plans.
41
Interest Expense
The following table sets forth average debt and average interest rate and capitalized interest excluded from interest expense (dollars in thousands):
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Average debt | $ | 1,567,523 | $ | 1,502,044 | $ | 1,370,905 | ||||||
Average interest rate | 3.1 | % | 3.7 | % | 3.5 | % | ||||||
Capitalized Interest | $ | — | $ | 1,003 | $ | 2,206 |
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Average debt |
| $ | 1,088,851 |
|
| $ | 1,171,317 |
|
| $ | 1,293,446 |
|
Average interest rate |
|
| 4.7 | % |
|
| 3.8 | % |
|
| 3.2 | % |
Interest expense for 2020 decreased 13%2023 increased 17% compared to 2019,2022, primarily due to a lowerhigher average interest rate, partially offset by highera lower average debt outstanding as a result of borrowings to finance the Convoy acquisition in January 2020 and the Savage acquisition in April 2020. Interest expense for 2019 increased 20% compared to 2018 primarily due to borrowings to finance the Higman acquisition in February 2018, the acquisition of Targa’s pressure barge fleet in May 2018, the purchase of the 155,000 barrel coastal ATB under construction in June 2018, the acquisition of CGBM’s tank barges in December 2018, and the acquisition of Cenac’s fleet in March 2019.
(Provision) Benefit for Taxes on Income
Provision for taxes on income generated between 2013 through 2017. Net operating losses carried back to tax years 2013 through 2017 were applied at the higher federal statutory tax rate of 35%for 2023 increased 69% compared to the statutory rate of 21% currently in effect at December 31, 2020. The Company generated an effective tax rate benefit in 20202022, primarily due to improved earnings before taxes on income as a result of such carrybacks.
Financial Condition, Capital Resources and Liquidity
Balance Sheet
The following table sets forth a year over year comparison of the significant components of the balance sheets (dollars in thousands):
December 31, | ||||||||||||||||||||
2020 | 2019 | % Change | 2018 | % Change | ||||||||||||||||
Assets: | ||||||||||||||||||||
Current assets | $ | 1,047,971 | $ | 917,579 | 14 | % | $ | 1,096,489 | (16 | )% | ||||||||||
Property and equipment, net | 3,917,070 | 3,777,110 | 4 | 3,539,802 | 7 | |||||||||||||||
Operating lease right-of-use assets | 174,317 | 159,641 | 9 | — | N/A | |||||||||||||||
Investment in affiliates | 2,689 | 2,025 | 33 | 2,495 | (19 | ) | ||||||||||||||
Goodwill | 657,800 | 953,826 | (31 | ) | 953,826 | — | ||||||||||||||
Other intangibles, net | 68,979 | 210,682 | (67 | ) | 224,197 | (6 | ) | |||||||||||||
Other assets | 55,348 | 58,234 | (5 | ) | 54,785 | 6 | ||||||||||||||
$ | 5,924,174 | $ | 6,079,097 | (3 | )% | $ | 5,871,594 | 4 | % | |||||||||||
Liabilities and stockholders’ equity: | ||||||||||||||||||||
Current liabilities | $ | 466,032 | $ | 514,115 | (9 | )% | $ | 607,782 | (15 | )% | ||||||||||
Long-term debt, net — less current portion | 1,468,546 | 1,369,751 | 7 | 1,410,169 | (3 | ) | ||||||||||||||
Deferred income taxes | 606,844 | 588,204 | 3 | 542,785 | 8 | |||||||||||||||
Operating lease liabilities — less current portion | 163,496 | 139,457 | 17 | — | N/A | |||||||||||||||
Other long-term liabilities | 131,703 | 95,978 | 37 | 94,557 | 2 | |||||||||||||||
Total equity | 3,087,553 | 3,371,592 | (8 | ) | 3,216,301 | 5 | ||||||||||||||
$ | 5,924,174 | $ | 6,079,097 | (3 | )% | $ | 5,871,594 | 4 | % |
|
| December 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| % Change |
|
| 2021 |
|
| % Change |
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets |
| $ | 1,135,161 |
|
| $ | 1,211,759 |
|
|
| (6 | )% |
| $ | 1,003,865 |
|
|
| 21 | % |
Property and equipment, net |
|
| 3,861,105 |
|
|
| 3,633,462 |
|
|
| 6 |
|
|
| 3,678,515 |
|
|
| (1 | ) |
Operating lease right-of-use assets |
|
| 152,216 |
|
|
| 154,507 |
|
|
| (1 | ) |
|
| 167,730 |
|
|
| (8 | ) |
Investment in affiliates |
|
| 2,576 |
|
|
| 2,171 |
|
|
| 19 |
|
|
| 2,134 |
|
|
| 2 |
|
Goodwill |
|
| 438,748 |
|
|
| 438,748 |
|
|
| — |
|
|
| 438,748 |
|
|
| — |
|
Other intangibles, net |
|
| 42,927 |
|
|
| 51,463 |
|
|
| (17 | ) |
|
| 60,070 |
|
|
| (14 | ) |
Other assets |
|
| 89,464 |
|
|
| 62,814 |
|
|
| 42 |
|
|
| 48,001 |
|
|
| 31 |
|
| $ | 5,722,197 |
|
| $ | 5,554,924 |
|
|
| 3 | % |
| $ | 5,399,063 |
|
|
| 3 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities |
| $ | 675,795 |
|
| $ | 642,197 |
|
|
| 5 | % |
| $ | 543,772 |
|
|
| 18 | % |
Long-term debt, net — less current portion |
|
| 1,008,527 |
|
|
| 1,076,326 |
|
|
| (6 | ) |
|
| 1,161,433 |
|
|
| (7 | ) |
Deferred income taxes |
|
| 696,557 |
|
|
| 625,884 |
|
|
| 11 |
|
|
| 574,152 |
|
|
| 9 |
|
Operating lease liabilities — less current portion |
|
| 138,811 |
|
|
| 142,140 |
|
|
| (2 | ) |
|
| 159,672 |
|
|
| (11 | ) |
Other long-term liabilities |
|
| 15,830 |
|
|
| 23,209 |
|
|
| (32 | ) |
|
| 71,252 |
|
|
| (67 | ) |
Total equity |
|
| 3,186,677 |
|
|
| 3,045,168 |
|
|
| 5 |
|
|
| 2,888,782 |
|
|
| 5 |
|
| $ | 5,722,197 |
|
| $ | 5,554,924 |
|
|
| 3 | % |
| $ | 5,399,063 |
|
|
| 3 | % |
2023 Compared to 2019
Current assets as of December 31, 2020 increased 14%2023 decreased 6% compared to December 31, 2019.2022. Trade accounts receivable decreased 17% driven by decreasedincreased 9% primarily due to increased business activity in the distributionboth KMT and services segment, primarily related to the oil and gas market and reduced barge utilization in the marine transportation segment, partially offset by trade accounts receivable acquired from Convoy.KDS. Other accounts receivable increased 173%, primarily due to federal income taxes receivabledecreased 55% as the Company received its tax refund of $188,177,000 recorded for net operating losses generated during tax years 2019 and 2020 offset against taxable income during tax years 2014 through 2017 under provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Inventories, net decreased by 12% primarily due to reduced business activity levels$70.4 million plus accrued interest in the oil and gas market and write downs of oilfield and pressure pumping related inventory, partially offset by inventory acquired from Convoy.
Property and equipment, net of accumulated depreciation, at December 31, 20202023 increased 4%6% compared to December 31, 2019.2022. The increase reflected $134,905,000$411.3 million of capital expenditures (net of a decrease inadditions (including accrued capital expenditures) for 2020,and $37.5 million of acquisitions of barge equipment, partially offset by $203.1 million of depreciation expense and $18.1 million of property disposals, more fully described under Cash Flows and Capital Expenditures above, and $250,544,000 of acquisitions, primarily including the six newly constructed inland pressure barges purchased in 2020 and the aggregate fair value of the property and equipment acquired in the Savage and Convoy acquisitions, partially offset by $210,686,000 of depreciation expense, $16,395,000 of impairment charges, and $18,408,000 of property disposals during 2020.
Operating lease right-of-use assets as of December 31, 2020 increased 9%2023 decreased 1% compared to December 31, 2019,2022, primarily due to leases acquired as part of the Savage and Convoy acquisitions.
Other intangibles, net, as of December 31, 20202023 decreased 67%17% compared to December 31, 2019,2022, primarily due to impairmentsamortization.
42
Other assets as of customer relationship, tradename, and distributorshipDecember 31, 2023 increased 42% compared to December 31, 2022, primarily due to an increase in pension assets in the distribution and services segment as well as amortizationa result of intangibles, partially offset by intangible assets recorded as part of the Convoy and Savage acquisitions.
Current liabilities as of December 31, 2020 decreased 9%2023 increased 5% compared to December 31, 2019.2022. Accounts payable decreased 21%3%, primarily due to decreased shipyard maintenance accruals on coastal equipment and reduced activity levels in both the marine transportation and distribution and services segments, partially offset by accounts payable assumed in the Convoy acquisition.timing of payments. Accrued liabilities decreased 5%increased 12%, primarily due to lower accruedincreased insurance claims and higher employee incentive compensation during 2020, partially offset by accrued payroll taxes deferred under provisions of the CARES Act.accruals. Deferred revenues increased 6%13%, primarily reflecting progress billings for new projectsdue to deposits on equipment expected to be shipped in the distribution and services oil and gas market, partially offset by reduced business activity2024 in the marine transportation segment.
Long-term debt, net – less current portion, as of December 31, 2020 increased 7%2023, decreased 6% compared to December 31, 2019,2022, primarily reflecting additional borrowingsthe maturity of $250,000,000 under the Revolving Credit Facility,3.29% senior notes due February 27, 2023, partially offset by borrowings under the repayment of $150,000,000 of 2.72% unsecured3.46% and 3.51% senior notes upon maturity. Net debt discountsdue January 19, 2033 and deferred issuance costs were $6,454,000 at December 31, 2020 and $5,249,000 (excluding $2,650,000 attributable to the 2027 Revolving Credit Facility included in other assets on the balance sheet) at December 31, 2019.
Deferred income taxes as of December 31, 20202023 increased 3%11% compared to December 31, 2019,2022, primarily reflecting the 2020 2023deferred tax provision of $25,163,000.
Operating lease liabilities – less current portion, as of December 31, 2020 increased 17%2023 decreased 2% compared to December 31, 2019,2022, primarily due to lease payments made, partially offset by new leases acquired as part of the Savage and Convoy acquisitions.
Other long-term liabilities as of December 31, 2020 increased 37%2023 decreased 32% compared to December 31, 2019,2022, primarily due to an increasea decrease in pension liabilities due to pension contributions and accrued payroll taxes deferred under provisions of the CARES Act, partially offset by amortization of intangible liabilities.
Total equity as of December 31, 2020 decreased 8% compared to December 31, 2019. The decrease was primarily the result of a net loss attributable to Kirby of $272,546,000 for 2020 and tax withholdings of $3,193,000 on restricted stock and RSU vestings, partially offset by an increase in additional paid-in capital due to amortization of unearned share-based compensation of $14,722,000.
Retirement Plans
The Company sponsors a defined benefit plan for its inland vessel personnel and shore based tankermen. The plan benefits are based on an employee’s years of service and compensation. The plan assets consist primarily of equity and fixed income securities. The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. No pension contributions to that plan were made in 2020, 20192023, 2022 or 2018. The fair value of plan assets was $357,801,000 and $319,176,000 at December 31, 2020 and December 31, 2019, respectively.
On April 12, 2017, the Company amended its pension plan to cease all benefit accruals for periods after May 31, 2017 for certain participants. Participants grandfathered and not impacted were those, as of the close of business on May 31, 2017, who either (a) had completed 15 years of pension service or (b) had attained age 50 and completed 10 years of pension service. Participants non-grandfathered are eligible to receive discretionary 401(k) plan contributions.
On February 14, 2018, with the acquisition of Higman Marine, Inc. (“Higman”), the Company assumed Higman’s pension plan (the “Higman Pension Plan”) for its inland vessel personnel and office staff. On March 27, 2018, the Company amended the Higman pension planPension Plan to close it to all new entrants and cease all benefit accruals for periods after May 15, 2018 for all participants. The Company did not incur any one-time charges related to this amendment but the Higman pension plan’s projected benefit obligation decreased by $3,081,000. The Company made contributions to the Higman pension planPension Plan of $797,000 in 2020$8.2 million, $0.9 million and $0.5 million for the 2019 plan year, $1,438,000 in 2020 for the 2020 plan year, $1,615,000 in 2019 for the 2018 plan year, $1,449,000 in 2019 for the 2019 plan year, $6,717,000 in 2018 for the 2016years ended December 31, 2023, 2022 and 2017 plan years and $1,385,000 in 2018 for the 2018 year. 2021, respectively.
The aggregate fair value of plan assets of the Company’s pension plans was $37,336,000$375.9 million and $39,021,000$341.1 million at December 31, 20202023, and December 31, 2019,2022, respectively.
The Company’s investment strategy focuses on total return on invested assets (capital appreciation plus dividend and interest income). The primary objective in the investment management of assets is to achieve long-term growth of principal while avoiding excessive risk. Risk is managed through diversification of investments within and among asset classes, as well as by choosing securities that have an establishedinvesting in asset classes offering sufficient liquidity and trading and underlying operating history.
The Company makes various assumptions when determining defined benefit plan costs including, but not limited to, the current discount rate and the expected long-term return on plan assets. Discount rates are determined annually and are based on a yield curve that consists of a hypothetical portfolio of high quality corporate bonds with maturities matching the projected benefit cash flows. The Company used discount rates of 2.8%5.1% for the Kirby pension plan and 2.9%5.2% for the Higman pension plan in 20202023 and 3.5%5.5% for eachboth the Kirby pension plan and the Higman pension plan in 2019, in determining its benefit obligations.2022. The Company estimates that every 0.1% decrease in the discount rate results in an increase in the accumulated benefit obligation (“ABO”) of approximately $8,631,000.$4.3 million. The Company assumed that plan assets would generate a long-term rate of return of 6.75% in both 2023 and 7.0% in 2020 and 2019, respectively.2022. The Company developed its expected long-term rate of return assumption by evaluating input from investment consultants and comparing historical returns for various asset classes with its actual and targeted plan investments. The Company believes that long-term asset allocation, on average, will approximate the targeted allocation.
43
Long-Term Financing
The following table summarizes the Company’s outstanding debt (in thousands):
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Long-term debt, including current portion: |
|
|
|
|
|
| ||
Revolving Credit Facility due July 29, 2027 (a) |
| $ | 44,000 |
|
| $ | — |
|
Term Loan due July 29, 2027 (a) |
|
| 170,000 |
|
|
| 170,000 |
|
3.29% senior notes due February 27, 2023 |
|
| — |
|
|
| 350,000 |
|
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 |
|
|
| — |
|
Credit line due June 30, 2024 |
|
| — |
|
|
| — |
|
Bank notes payable |
|
| 8,068 |
|
|
| 3,292 |
|
|
| 1,022,068 |
|
|
| 1,083,292 |
| |
Unamortized debt discount and issuance costs (b) |
|
| (5,473 | ) |
|
| (3,674 | ) |
| $ | 1,016,595 |
|
| $ | 1,079,618 |
|
December 31, | ||||||||
2020 | 2019 | |||||||
Long-term debt, including current portion: | ||||||||
Revolving Credit Facility due March 27, 2024 (a) | $ | 250,000 | $ | — | ||||
Term Loan due March 27, 2024 (a) | 375,000 | 375,000 | ||||||
2.72% senior notes due February 27, 2020 | — | 150,000 | ||||||
3.29% senior notes due February 27, 2023 | 350,000 | 350,000 | ||||||
4.2% senior notes due March 1, 2028 | 500,000 | 500,000 | ||||||
Credit line due June 30, 2021 | — | — | ||||||
Bank notes payable | 40 | 16 | ||||||
1,475,040 | 1,375,016 | |||||||
Unamortized debt discount and issuance costs (b) | (6,454 | ) | (5,249 | ) | ||||
$ | 1,468,586 | $ | 1,369,767 |
At the beginning of 2022, the |
On July 29, 2022, the Company entered into a new credit agreement (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 unsecured revolving credit facility (the “2027 Revolving Credit Facility”) and a $250 million unsecured term loan (the “2027 Term Loan”) with a maturity date of July 29, 2027. The 2027 Credit Agreement replaced the 2024 Credit Agreement. In conjunction with entering into the 2027 Credit Agreement, on July 29, 2022, the Company borrowed $35 million under the 2027 Revolving Credit Facility and $250 million under the 2027 Term Loan to repay borrowings under the 2024 Term Loan. In the fourth quarter of 2022, the Company repaid $80.0 million under the 2027 Term Loan prior to scheduled maturities. As a result, no repayments are required until June 30, 2025. Outstanding letters of credit under the 2027 Revolving Credit Facility were $6,000 and available borrowing capacity was $456.0 million as of December 31, 2023.
The 2027 Term Loan is repayable in quarterly installments, currently scheduled to commence Septemberwith no repayments until June 30, 2023,2025, in increasing percentages of the original principal amount of the loan, with $343,750,000 due on March 27, 2024.the remaining unpaid balance of approximately $43.8 million payable upon maturity, assuming no prepayment. The 2027 Term Loan is prepayable, in whole or in part, without penalty. During 2019,The 2027 Credit Agreement provides for a variable interest rate based on the Company repaid $125,000,000Secured Overnight Financing Rate (“SOFR”) or a base rate calculated with reference to the prime rate quoted by The Wall Street Journal, the Federal Reserve Bank of New York Rate plus 0.5%, or the adjusted SOFR rate for a one month interest period plus 1.0%, among other factors (the “Alternate Base Rate”). The interest rate varies with the Company’s credit rating and is currently 137.5 basis points over SOFR or 37.5 basis points over the Alternate Base Rate. The 2027 Credit Agreement contains certain financial covenants including an interest coverage ratio and debt-to-capitalization ratio. In addition to financial covenants, the 2027 Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates, and changes in lines of business. The 2027 Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness, among other events. Borrowings under the Term Loan prior to the originally scheduled installments. 2027 Credit Agreement may be used for general corporate purposes including acquisitions. The 2027 Revolving Credit Facility includes a $25,000,000$25 million commitment which may be used for standby letters of credit.
The Company has $500 million of 4.2% senior unsecured notes due March 1, 2028 (the “2028 Notes”) with U.S. Bank National Association, as trustee. No principal payments are required until maturity. Interest payments of $10.5 million are due semi-annually on March 1 and September 1 of each year. The 2028 Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The 2028 Notes contain certain covenants on the part of the Company, including covenants relating to liens, sale-leasebacks, asset sales and mergers, among others. The 2028 Notes also specify certain events of default, upon the occurrence of which the maturity of the notes may be accelerated, including failure to pay principal and interest, violation of covenants or default on other indebtedness, among others.
44
On February 3, 2022, the Company entered into a note purchase agreement for the issuance of $300 million of unsecured senior notes with a group of institutional investors, consisting of $60 million of 3.46% series A notes (“Series A Notes”) and $240 million of 3.51% series B notes (“Series B Notes”), each due January 19, 2033 (collectively, the “2033 Notes”). 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. Beginning in 2023, interest payments of $5.3 million will be due semi-annually on January 19 and July 19 of each year, with the exception of the first payment on January 19, 2023, which was $0.5 million. The 2033 Notes are unsecured and rank equally in right of payment with the Company's other unsecured senior indebtedness. The 2033 Notes contain certain covenants on the part of the Company, including an interest coverage covenant, a debt-to-capitalization covenant, and covenants relating to liens, asset sales and mergers, among others. The 2033 Notes also specify certain events of default, upon the occurrence of which the maturity of the notes may be accelerated, including failure to pay principal and interest, violation of covenants or default on other indebtedness, among others. The 3.29% unsecured senior notes due February 27, 2023 (the “2023 Notes”) were repaid using a combination of the proceeds from the issuance of the 2033 Notes and availability under the 2027 Revolving Credit Facility.
The Company has a $10.0 million line of credit (“Credit Line”) with Bank of America, N.A. (“Bank of America”) for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2024. Outstanding letters of credit under the Revolving Credit Facility$10.0 million credit line were $5,063,000$7.3 million and available borrowing capacity was $594,937,000$2.7 million as of December 31, 2020.
The Company repaid in full $150,000,000also had $8.1 million and $3.3 million of 2.72%short-term unsecured senior notes.
As of December 31, 2020,2023, 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.
Cash Flow and Capital Expenditures
The Company generated net cash provided by operating activities of $540.2 million, $294.1 million, and $321.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. The 84% increase in 2023 as compared to 2022 was primarily due to higher revenues and operating income in KMT and KDS and the receipt of the IRS refund of $70.4 million plus accrued interest in April 2023, which more than offset an increase in trade accounts receivable, primarily due to higher revenues and timing of collections. Increases in KMT revenues and operating income were driven by increased barge utilization and higher term and spot contract pricing in the inland and coastal markets during 2023.
During 2023, 2022, and 2021, the Company generated cash of $26.1 million, $36.9 million, and $51.3 million, respectively, from proceeds from the disposition of assets, and $4.2 million, $3.9 million, and $0.6 million, respectively, from proceeds from the exercise of stock options.
For 2023, cash generated was used for capital expenditures of $401.7 million (net of an increase in accrued capital expenditures of $9.6 million), including $46.7 million for specialized inland equipment construction and $355.0 million primarily for upgrading existing marine equipment, new electric fracturing equipment, and KMT and KDS facilities. The Company also used $37.5 million for acquisitions of businesses and marine equipment, more fully described under Acquisitions above.
For 2022, cash generated was used for capital expenditures of $172.6 million (net of an increase in accrued capital expenditures of $3.0 million), including $8.3 million for inland towboat construction and $164.3 million primarily for upgrading existing marine equipment and marine transportation and distribution and services facilities. The Company also used $3.9 million for acquisitions of businesses and marine equipment, more fully described under Acquisitions above.
Treasury Stock Purchases
During 2023, the Company purchased 1.5 million shares of its common stock for $112.8 million, at an average price of $75.95 per share. Subsequent to December 31, 2023 and through February 16, 2024, the Company purchased an additional 235,247 shares of its common stock for $18.7 million, at an average price of $79.34 per share. During 2022, the Company purchased 0.4 million shares of its common stock for $22.9 million, at an average price of $59.32 per share. The Company did not purchase any treasury stock during 2020 or 2019. During 2018,2021. On January 30, 2023, the Company purchased 11,000 shares of its common stock for $776,000, for an average price of $69.61 perBoard approved a five million share pursuant to a stock trading plan entered into with a brokerage firm pursuant to Rule 10b5-1 underincrease in the Securities Exchange Act of 1934.Company’s purchase authorization. As of February 19, 2021,16, 2024, the Company had approximately 1,400,0004.3 million shares available under its existing repurchasepurchase 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.
Liquidity and Capital Resources
The decline in 2020 was driven by decreased revenues and operating income in both the marine transportation and distribution and services segments. The decrease in the marine transportation segment was driven by decreased barge utilization in the inland and coastal markets and decreased term and spot contract pricing in the inland market, each as a result of a reduction in demand due to the COVID-19 pandemic, partially offset by the Savage acquisition in April 2020 and the Cenac acquisition in March 2019. The decline was also partially offset by changes in certain operating assets and liabilities primarily related to reduced incentive compensation payouts in the 2020 first quarter and a larger decrease in trade accounts receivable compared to 2019, driven by reduced business activity levels in both the marine transportation and distribution and services segments. In addition, during 2020, the Company received a tax refund of $30,606,000 for its 2018 tax return related to net operating losses being carried back to offset taxable income generated during 2013. During February 2021, the Company received a tax refund of $119,493,000, including accrued interest, for its 2019 tax return.
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 pricing grids on its 2027 Credit Agreement.
The Company expects to continue to be able to fund expenditures for acquisitions, capital construction projects, common stock repurchases,purchases, repayment of borrowings, and for other operating requirements both in the short term and in the long term 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 $850,000,000$500 million and expires March 27, 2024. As of December 31, 2020, the Company had $594,937,000 available under the Revolving Credit Facility. The 3.29% senior unsecured notes do not mature until February 27, 2023, and require no prepayments.July 29, 2027. The 4.2% senior unsecured notes do not mature until March 1, 2028 and require no prepayments. The outstanding balance2027 Term Loan in the amount of the Term Loan$250 million is subject to quarterly installments, currently beginning SeptemberJune 30, 2023,2025, in increasing percentages of the original principal amount of the loan, with $343,750,000 duethe remaining unpaid balance of approximately $43.8 million payable on March 27, 2024.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 flow in 2021.2024. For a list of significant risks and uncertainties that could impact cash flows, see Note 14, Contingencies and Commitments in the financial statements, and Item 1A — Risk Factors. Amounts available under the Company’s existing financing arrangements are subject to the Company continuing to meet the covenants of the credit facilities as described in Note 5, Long-Term Debt in the financial statements.
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 $23,180,000$26.7 million at December 31, 2020,2023, including $13,586,000$12.1 million in letters of credit and $9,594,000$14.6 million in performance bonds. All of these instruments have an expiration date within threetwo 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.
The Company’s marine transportation term contracts typically contain fuel escalation clauses, or the customer pays for the fuel. However, there is generally a 30 to 90120 day delay before contracts are adjusted depending on the specific 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.
The Company currently leases various facilities and equipment under cancelable and noncancelable operating leases. Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of the Company.one year are detailed in Note 6, Leases. Lease payments for towing vessels exclude non-lease components. The marine transportation segment has long-term contracts which generally contain cost escalation clauses whereby certainCompany estimates that non-lease components comprise approximately 70% of charter rental costs, including fuel as noted above, can be passed throughrelated to its customers. Spot contract rates include the cost of fueltowboat crew costs, maintenance and are subject to market volatility. The repair portion of the distribution and services segment is based on prevailing current market rates.
Payments Due By Period | ||||||||||||||||||||
Total | Less Than 1 Year | 2-3 Years | 4-5 Years | After 5 Years | ||||||||||||||||
Long-term debt | $ | 1,475,040 | $ | 40 | $ | 381,250 | $ | 593,750 | $ | 500,000 | ||||||||||
Non-cancelable operating leases — barges | 43,415 | 9,511 | 13,235 | 8,475 | 12,194 | |||||||||||||||
Non-cancelable operating leases — towing vessels (a) | 34,712 | 6,010 | 9,159 | 9,159 | 10,384 | |||||||||||||||
Non-cancelable operating leases — land, buildings and equipment | 164,982 | 24,703 | 39,161 | 27,205 | 73,913 | |||||||||||||||
$ | 1,718,149 | $ | 40,264 | $ | 442,805 | $ | 638,589 | $ | 596,491 |
|
The Company has certain mechanisms designed to help mitigate the impacts of rising costs. For example, KMT has long-term contracts which generally contain cost escalation clauses whereby certain costs, including fuel as noted above, can be largely passed through to its customers. Spot contract rates include the cost of fuel and are subject to market volatility. In KDS, the cost of major components for large manufacturing orders is secured with suppliers at the time a customer order is finalized, which somewhat limits exposure to inflation. The repair portion of KDS is based on prevailing current market rates.
Accounting Standards
For a discussion of recently issued accounting standards, see Note 1, Summary of Significant Accounting Policies.
46
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
|
Item 8. Financial Statements and Supplementary Data
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
47
Item 9A. Controls and Procedures
Disclosure Controls and Procedures. The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)), as of December 31, 2020,2023, as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of December 31, 2020,2023, the disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 20202023 using the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.2023. KPMG LLP, the Company’s independent registered public accounting firm, has audited the Company’s internal control over financial reporting, as stated in their report which is included herein.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting. During the fourth quarter of 2020, certain distribution and services branch locations completed the preparation and implementation of a series of changes to their financial reporting systems and processes. There were no other changes in the Company’s internal control over financial reporting during the quarter ended December 31, 20202023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
The information for these items is incorporated by reference to the definitive proxy statement to be filed by the Company with the Commission pursuant to Regulation 14A within 120 days of the close of the fiscal year ended December 31, 2020,2023, except for the information regarding executive officers which is provided under Item 1.
48
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Kirby Corporation:
Opinion on theConsolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Kirby Corporation and subsidiaries (the Company) as of December 31, 20202023 and 2019,2022, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020,2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202023 and 2019,2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020,2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 202120, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Leases (Topic 842), and related amendments, and its method of accounting for impairment of goodwill as of January 1, 2020 due to the adoption of Accounting Standards Update 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the consolidated financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.
Evaluation of potential impairment indicators for offshore vessel classes
As discussed in Note 1 to the consolidated financial statements, the Company performs an impairment assessment when circumstances indicate that the carrying amount of its long-lived assets may not be recoverable. If a triggering event is identified, the Company compares the carrying amount of the asset group to the estimated undiscounted future cash flows expected to result from the use of the asset group. If the carrying amount of the asset group exceeds the estimated undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset group to its estimated fair value. Recoverability of marine transportation assetsequipment is assessed based on vessel classes.
We identified the evaluation of potential impairment indicators for offshore vessel classescoastal marine transportation equipment as a critical audit matter. Evaluating the Company’s judgments in determining whether there was a triggering event required a high degree of subjective auditor judgment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to identify and assess triggering events that indicate that the carrying amount of an offshore vessel classcoastal marine transportation equipment may not be recoverable. This included controls related
49
to the consideration of forecasted to actual operating resultscontract pricing by vessel class and market conditions in the determination of a triggering event. We assessed the Company’s identification of triggering events, including consideration of executed contract pricing and break-even costs by evaluating future expected revenues from executed contracts with customers.vessel class in addition to other certain qualitative considerations. We compared certain data used by the Company in forecasting future revenues, noting that such data included both internalto relevant executed contracts, historical results, and external elements, to analyst and industry reports. We evaluated the Company’s responses related to the elements considered and whether the Company omitted any significant internal or external elements in its evaluation.
/s/ KPMG LLP
We have served as the Company’s auditor since 1992.
Houston, Texas
February 23, 202120, 2024
50
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Kirby Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Kirby Corporation and subsidiaries’subsidiaries' (the Company) internal control over financial reporting as of December 31, 2020,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20202023 and 2019,2022, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020,2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 23, 202120, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Houston, Texas
February 23, 202120, 2024
51
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
| ($ in thousands) |
| |||||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 32,577 |
|
| $ | 80,577 |
|
Accounts receivable: |
|
|
|
|
|
| ||
Trade — less allowance for doubtful accounts of $7,636 ($7,684 in 2022) |
|
| 526,691 |
|
|
| 483,406 |
|
Other |
|
| 52,025 |
|
|
| 114,556 |
|
Inventories — net |
|
| 454,389 |
|
|
| 461,848 |
|
Prepaid expenses and other current assets |
|
| 69,479 |
|
|
| 71,372 |
|
Total current assets |
|
| 1,135,161 |
|
|
| 1,211,759 |
|
|
|
|
|
|
|
| ||
Property and equipment — net |
|
| 3,861,105 |
|
|
| 3,633,462 |
|
Operating lease right-of-use assets |
|
| 152,216 |
|
|
| 154,507 |
|
Investment in affiliates |
|
| 2,576 |
|
|
| 2,171 |
|
Goodwill |
|
| 438,748 |
|
|
| 438,748 |
|
Other intangibles, net |
|
| 42,927 |
|
|
| 51,463 |
|
Other assets |
|
| 89,464 |
|
|
| 62,814 |
|
Total assets |
| $ | 5,722,197 |
|
| $ | 5,554,924 |
|
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Bank notes payable |
| $ | 8,068 |
|
| $ | 3,292 |
|
Income taxes payable |
|
| 1,486 |
|
|
| 323 |
|
Accounts payable |
|
| 269,378 |
|
|
| 278,081 |
|
Accrued liabilities: |
|
|
|
|
|
| ||
Interest |
|
| 13,114 |
|
|
| 11,630 |
|
Insurance premiums and claims |
|
| 84,825 |
|
|
| 65,088 |
|
Employee compensation |
|
| 69,075 |
|
|
| 55,851 |
|
Taxes — other than on income |
|
| 31,555 |
|
|
| 30,169 |
|
Other |
|
| 30,377 |
|
|
| 42,014 |
|
Current portion of operating lease liabilities |
|
| 33,340 |
|
|
| 36,444 |
|
Deferred revenues |
|
| 134,577 |
|
|
| 119,305 |
|
Total current liabilities |
|
| 675,795 |
|
|
| 642,197 |
|
Long-term debt, net — less current portion |
|
| 1,008,527 |
|
|
| 1,076,326 |
|
Deferred income taxes |
|
| 696,557 |
|
|
| 625,884 |
|
Operating lease liabilities — less current portion |
|
| 138,811 |
|
|
| 142,140 |
|
Other long-term liabilities |
|
| 15,830 |
|
|
| 23,209 |
|
Total long-term liabilities |
|
| 1,859,725 |
|
|
| 1,867,559 |
|
|
|
|
|
|
|
| ||
Contingencies and commitments |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
| ||
Equity: |
|
|
|
|
|
| ||
Kirby stockholders’ equity: |
|
|
|
|
|
| ||
Common stock, $0.10 par value per share. Authorized 120,000,000 shares, issued 65,472,000 |
|
| 6,547 |
|
|
| 6,547 |
|
Additional paid-in capital |
|
| 863,963 |
|
|
| 859,345 |
|
Accumulated other comprehensive income — net |
|
| 35,006 |
|
|
| 16,853 |
|
Retained earnings |
|
| 2,691,665 |
|
|
| 2,468,730 |
|
Treasury stock — at cost, 6,843,000 shares in 2023 and 5,565,000 shares in 2022 |
|
| (411,750 | ) |
|
| (308,598 | ) |
Total Kirby stockholders’ equity |
|
| 3,185,431 |
|
|
| 3,042,877 |
|
Noncontrolling interests |
|
| 1,246 |
|
|
| 2,291 |
|
Total equity |
|
| 3,186,677 |
|
|
| 3,045,168 |
|
Total liabilities and equity |
| $ | 5,722,197 |
|
| $ | 5,554,924 |
|
December 31, | ||||||||
2020 | 2019 | |||||||
($ in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 80,338 | $ | 24,737 | ||||
Accounts receivable: | ||||||||
Trade — less allowance for doubtful accounts of $8,807 ($8,372 in 2019) | 315,283 | 379,174 | ||||||
Other | 284,899 | 104,175 | ||||||
Inventories — at lower of average cost or net realizable value | 309,675 | 351,401 | ||||||
Prepaid expenses and other current assets | 57,776 | 58,092 | ||||||
Total current assets | 1,047,971 | 917,579 | ||||||
Property and equipment: | ||||||||
Marine transportation equipment | 4,999,777 | 4,770,213 | ||||||
Land, buildings and equipment | 615,623 | 553,877 | ||||||
5,615,400 | 5,324,090 | |||||||
Accumulated depreciation | (1,698,330 | ) | (1,546,980 | ) | ||||
Property and equipment — net | 3,917,070 | 3,777,110 | ||||||
Operating lease right-of-use assets | 174,317 | 159,641 | ||||||
Investment in affiliates | 2,689 | 2,025 | ||||||
Goodwill | 657,800 | 953,826 | ||||||
Other intangibles, net | 68,979 | 210,682 | ||||||
Other assets | 55,348 | 58,234 | ||||||
Total assets | $ | 5,924,174 | $ | 6,079,097 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Bank notes payable | $ | 40 | $ | 16 | ||||
Income taxes payable | 474 | 665 | ||||||
Accounts payable | 162,507 | 206,778 | ||||||
Accrued liabilities: | ||||||||
Interest | 11,272 | 12,700 | ||||||
Insurance premiums and claims | 111,359 | 108,405 | ||||||
Employee compensation | 32,918 | 42,875 | ||||||
Taxes — other than on income | 44,366 | 39,286 | ||||||
Other | 24,940 | 33,084 | ||||||
Current portion of operating lease liabilities | 32,750 | 27,324 | ||||||
Deferred revenues | 45,406 | 42,982 | ||||||
Total current liabilities | 466,032 | 514,115 | ||||||
Long-term debt, net — less current portion | 1,468,546 | 1,369,751 | ||||||
Deferred income taxes | 606,844 | 588,204 | ||||||
Operating lease liabilities — less current portion | 163,496 | 139,457 | ||||||
Other long-term liabilities | 131,703 | 95,978 | ||||||
Total long-term liabilities | 2,370,589 | 2,193,390 | ||||||
Contingencies and commitments | — | — | ||||||
Equity: | ||||||||
Kirby stockholders’ equity: | ||||||||
Common stock, $0.10 par value per share. Authorized 120,000,000 shares, issued 65,472,000 in 2020 and 2019 | 6,547 | 6,547 | ||||||
Additional paid-in capital | 844,979 | 835,899 | ||||||
Accumulated other comprehensive income — net | (61,452 | ) | (37,799 | ) | ||||
Retained earnings | 2,593,393 | 2,865,939 | ||||||
Treasury stock — at cost, 5,434,000 shares in 2020 and 5,513,000 shares in 2019 | (299,161 | ) | (301,963 | ) | ||||
Total Kirby stockholders’ equity | 3,084,306 | 3,368,623 | ||||||
Noncontrolling interests | 3,247 | 2,969 | ||||||
Total equity | 3,087,553 | 3,371,592 | ||||||
Total liabilities and equity | $ | 5,924,174 | $ | 6,079,097 |
See accompanying notes to consolidated financial statements.
52
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| ($ in thousands, except per share amounts) |
| |||||||||
Revenues: |
|
|
|
|
|
|
|
|
| |||
Marine transportation |
| $ | 1,721,937 |
|
| $ | 1,616,967 |
|
| $ | 1,322,918 |
|
Distribution and services |
|
| 1,369,703 |
|
|
| 1,167,787 |
|
|
| 923,742 |
|
Total revenues |
|
| 3,091,640 |
|
|
| 2,784,754 |
|
|
| 2,246,660 |
|
|
|
|
|
|
|
|
|
|
| |||
Costs and expenses: |
|
|
|
|
|
|
|
|
| |||
Costs of sales and operating expenses |
|
| 2,180,422 |
|
|
| 2,060,941 |
|
|
| 1,652,961 |
|
Selling, general and administrative |
|
| 335,213 |
|
|
| 302,692 |
|
|
| 266,911 |
|
Taxes, other than on income |
|
| 34,766 |
|
|
| 35,071 |
|
|
| 36,251 |
|
Depreciation and amortization |
|
| 211,156 |
|
|
| 201,443 |
|
|
| 213,718 |
|
Impairments and other charges |
|
| — |
|
|
| — |
|
|
| 340,713 |
|
Gain on disposition of assets |
|
| (5,009 | ) |
|
| (8,279 | ) |
|
| (5,761 | ) |
Total costs and expenses |
|
| 2,756,548 |
|
|
| 2,591,868 |
|
|
| 2,504,793 |
|
Operating income (loss) |
|
| 335,092 |
|
|
| 192,886 |
|
|
| (258,133 | ) |
Other income |
|
| 11,041 |
|
|
| 16,677 |
|
|
| 10,001 |
|
Interest expense |
|
| (52,008 | ) |
|
| (44,588 | ) |
|
| (42,469 | ) |
Earnings (loss) before taxes on income |
|
| 294,125 |
|
|
| 164,975 |
|
|
| (290,601 | ) |
(Provision) benefit for taxes on income |
|
| (71,220 | ) |
|
| (42,214 | ) |
|
| 43,830 |
|
Net earnings (loss) |
|
| 222,905 |
|
|
| 122,761 |
|
|
| (246,771 | ) |
Less: Net (earnings) loss attributable to noncontrolling interests |
|
| 30 |
|
|
| (470 | ) |
|
| (183 | ) |
Net earnings (loss) attributable to Kirby |
| $ | 222,935 |
|
| $ | 122,291 |
|
| $ | (246,954 | ) |
|
|
|
|
|
|
|
|
|
| |||
Net earnings (loss) per share attributable to Kirby common stockholders: |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | 3.74 |
|
| $ | 2.04 |
|
| $ | (4.11 | ) |
Diluted |
| $ | 3.72 |
|
| $ | 2.03 |
|
| $ | (4.11 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
($ in thousands, except per share amounts) | ||||||||||||
Revenues: | ||||||||||||
Marine transportation | $ | 1,404,265 | $ | 1,587,082 | $ | 1,483,143 | ||||||
Distribution and services | 767,143 | 1,251,317 | 1,487,554 | |||||||||
Total revenues | 2,171,408 | 2,838,399 | 2,970,697 | |||||||||
Costs and expenses: | ||||||||||||
Costs of sales and operating expenses | 1,510,818 | 2,030,046 | 2,160,946 | |||||||||
Selling, general and administrative | 258,272 | 277,388 | 304,397 | |||||||||
Taxes, other than on income | 42,000 | 41,933 | 39,251 | |||||||||
Depreciation and amortization | 219,921 | 219,632 | 224,972 | |||||||||
Impairments and other charges | 561,274 | 35,525 | 85,407 | |||||||||
Lease cancellation costs | 0 | 0 | 2,403 | |||||||||
Gain on disposition of assets | (118 | ) | (8,152 | ) | (1,968 | ) | ||||||
Total costs and expenses | 2,592,167 | 2,596,372 | 2,815,408 | |||||||||
Operating income (loss) | (420,759 | ) | 242,027 | 155,289 | ||||||||
Other income | 8,147 | 3,787 | 5,726 | |||||||||
Interest expense | (48,739 | ) | (55,994 | ) | (46,856 | ) | ||||||
Earnings (loss) before taxes on income | (461,351 | ) | 189,820 | 114,159 | ||||||||
(Provision) benefit for taxes on income | 189,759 | (46,801 | ) | (35,081 | ) | |||||||
Net earnings (loss) | (271,592 | ) | 143,019 | 79,078 | ||||||||
Less: Net earnings attributable to noncontrolling interests | (954 | ) | (672 | ) | (626 | ) | ||||||
Net earnings (loss) attributable to Kirby | $ | (272,546 | ) | $ | 142,347 | $ | 78,452 | |||||
Net earnings (loss) per share attributable to Kirby common stockholders: | ||||||||||||
Basic | $ | (4.55 | ) | $ | 2.38 | $ | 1.31 | |||||
Diluted | $ | (4.55 | ) | $ | 2.37 | $ | 1.31 |
See accompanying notes to consolidated financial statements.
53
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| ($ in thousands) |
| |||||||||
Net earnings (loss) |
| $ | 222,905 |
|
| $ | 122,761 |
|
| $ | (246,771 | ) |
Other comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
| |||
Pension and postretirement benefits |
|
| 16,728 |
|
|
| 43,868 |
|
|
| 36,547 |
|
Foreign currency translation adjustments |
|
| 1,425 |
|
|
| (1,049 | ) |
|
| (1,061 | ) |
Total other comprehensive income, net of taxes |
|
| 18,153 |
|
|
| 42,819 |
|
|
| 35,486 |
|
|
|
|
|
|
|
|
|
|
| |||
Total comprehensive income (loss), net of taxes |
|
| 241,058 |
|
|
| 165,580 |
|
|
| (211,285 | ) |
Net (earnings) loss attributable to noncontrolling interests |
|
| 30 |
|
|
| (470 | ) |
|
| (183 | ) |
Comprehensive income (loss) attributable to Kirby |
| $ | 241,088 |
|
| $ | 165,110 |
|
| $ | (211,468 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
($ in thousands) | ||||||||||||
Net earnings (loss) | $ | (271,592 | ) | $ | 143,019 | $ | 79,078 | |||||
Other comprehensive loss, net of taxes: | ||||||||||||
Pension and postretirement benefits | (23,320 | ) | (4,203 | ) | 7,638 | |||||||
Foreign currency translation adjustments | (333 | ) | (85 | ) | (819 | ) | ||||||
Reclassification to retained earnings of stranded tax effects from tax reform | 0 | 0 | (7,925 | ) | ||||||||
Total other comprehensive loss, net of taxes | (23,653 | ) | (4,288 | ) | (1,106 | ) | ||||||
Total comprehensive income (loss), net of taxes | (295,245 | ) | 138,731 | 77,972 | ||||||||
Net earnings attributable to noncontrolling interests | (954 | ) | (672 | ) | (626 | ) | ||||||
Comprehensive income (loss) attributable to Kirby | $ | (296,199 | ) | $ | 138,059 | $ | 77,346 |
See accompanying notes to consolidated financial statements.
54
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| ($ in thousands) |
| |||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| |||
Net earnings (loss) |
| $ | 222,905 |
|
| $ | 122,761 |
|
| $ | (246,771 | ) |
Adjustments to reconcile net earnings (loss) to net cash provided by operations: |
|
|
|
|
|
|
|
|
| |||
Depreciation and amortization |
|
| 211,156 |
|
|
| 201,443 |
|
|
| 213,718 |
|
Provision (credit) for doubtful accounts |
|
| 402 |
|
|
| 1,183 |
|
|
| (138 | ) |
Provision (benefit) for deferred income taxes |
|
| 65,298 |
|
|
| 37,782 |
|
|
| (44,419 | ) |
Gain on disposition of assets |
|
| (5,009 | ) |
|
| (8,279 | ) |
|
| (5,761 | ) |
Impairments and other charges |
|
| — |
|
|
| — |
|
|
| 340,713 |
|
Amortization of share-based compensation |
|
| 14,941 |
|
|
| 13,865 |
|
|
| 15,713 |
|
Amortization of major maintenance costs |
|
| 28,966 |
|
|
| 29,031 |
|
|
| 33,213 |
|
Other |
|
| (3,338 | ) |
|
| (283 | ) |
|
| (640 | ) |
Increase (decrease) in cash flows resulting from changes in: |
|
|
|
|
|
|
|
|
| |||
Accounts receivable |
|
| (50,135 | ) |
|
| (31,550 | ) |
|
| 29,126 |
|
Inventory |
|
| 7,694 |
|
|
| (127,095 | ) |
|
| (19,248 | ) |
Other assets |
|
| (37,688 | ) |
|
| (27,801 | ) |
|
| (38,335 | ) |
Income taxes payable |
|
| 71,604 |
|
|
| 1,975 |
|
|
| 480 |
|
Accounts payable |
|
| (18,271 | ) |
|
| 75,996 |
|
|
| 15,951 |
|
Accrued and other liabilities |
|
| 31,703 |
|
|
| 5,100 |
|
|
| 27,974 |
|
Net cash provided by operating activities |
|
| 540,228 |
|
|
| 294,128 |
|
|
| 321,576 |
|
|
|
|
|
|
|
|
|
|
| |||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| |||
Capital expenditures |
|
| (401,730 | ) |
|
| (172,606 | ) |
|
| (98,015 | ) |
Acquisitions of businesses and marine equipment, net of cash acquired |
|
| (37,500 | ) |
|
| (3,900 | ) |
|
| (9,115 | ) |
Proceeds from disposition of assets and other |
|
| 26,081 |
|
|
| 36,905 |
|
|
| 51,342 |
|
Net cash used in investing activities |
|
| (413,149 | ) |
|
| (139,601 | ) |
|
| (55,788 | ) |
|
|
|
|
|
|
|
|
|
| |||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| |||
Borrowings (payments) on bank credit facilities, net |
|
| 48,776 |
|
|
| 1,358 |
|
|
| (248,105 | ) |
Borrowings on long-term debt |
|
| 240,000 |
|
|
| 310,000 |
|
|
| — |
|
Payments on long-term debt |
|
| (350,000 | ) |
|
| (395,000 | ) |
|
| (60,000 | ) |
Payment of debt issue costs |
|
| (1,254 | ) |
|
| (1,977 | ) |
|
| — |
|
Proceeds from exercise of stock options |
|
| 4,209 |
|
|
| 3,887 |
|
|
| 629 |
|
Payments related to tax withholding for share-based compensation |
|
| (3,908 | ) |
|
| (3,408 | ) |
|
| (2,856 | ) |
Treasury stock purchases |
|
| (112,803 | ) |
|
| (22,901 | ) |
|
| — |
|
Return of investment to noncontrolling interests and other |
|
| (99 | ) |
|
| (722 | ) |
|
| (981 | ) |
Net cash used in financing activities |
|
| (175,079 | ) |
|
| (108,763 | ) |
|
| (311,313 | ) |
Increase (decrease) in cash and cash equivalents |
|
| (48,000 | ) |
|
| 45,764 |
|
|
| (45,525 | ) |
Cash and cash equivalents, beginning of year |
|
| 80,577 |
|
|
| 34,813 |
|
|
| 80,338 |
|
Cash and cash equivalents, end of year |
| $ | 32,577 |
|
| $ | 80,577 |
|
| $ | 34,813 |
|
|
|
|
|
|
|
|
|
|
| |||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
| |||
Cash paid (received) during the period: |
|
|
|
|
|
|
|
|
| |||
Interest paid |
| $ | 49,317 |
|
| $ | 42,816 |
|
| $ | 40,878 |
|
Income taxes paid (refunded), net |
| $ | (65,787 | ) |
| $ | 2,553 |
|
| $ | (116,648 | ) |
Operating cash outflow from operating leases |
| $ | 43,954 |
|
| $ | 44,229 |
|
| $ | 44,089 |
|
Non-cash investing activity: |
|
|
|
|
|
|
|
|
| |||
Capital expenditures included in accounts payable |
| $ | 9,567 |
|
| $ | 2,996 |
|
| $ | 18,633 |
|
Right-of-use assets obtained in exchange for lease obligations |
| $ | 39,153 |
|
| $ | 22,799 |
|
| $ | 33,842 |
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
($ in thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings (loss) | $ | (271,592 | ) | $ | 143,019 | $ | 79,078 | |||||
Adjustments to reconcile net earnings (loss) to net cash provided by operations: | ||||||||||||
Depreciation and amortization | 219,921 | 219,632 | 224,972 | |||||||||
Provision (credit) for doubtful accounts | 3,716 | (873 | ) | 1,289 | ||||||||
Provision for deferred income taxes | 25,163 | 46,839 | 34,881 | |||||||||
Gain on disposition of assets | (118 | ) | (8,152 | ) | (1,968 | ) | ||||||
Impairments and other charges | 561,274 | 35,525 | 85,407 | |||||||||
Amortization of unearned share-based compensation | 14,722 | 13,612 | 19,104 | |||||||||
Amortization of major maintenance costs | 30,214 | 23,962 | 20,760 | |||||||||
Other | (90 | ) | 1,683 | 863 | ||||||||
Increase (decrease) in cash flows resulting from changes in: | ||||||||||||
Accounts receivable | (124,941 | ) | 43,078 | 12,511 | ||||||||
Inventory | 47,076 | 122,773 | (144,685 | ) | ||||||||
Other assets | (29,994 | ) | (25,470 | ) | (38,090 | ) | ||||||
Income taxes payable | 8,826 | (2,503 | ) | (457 | ) | |||||||
Accounts payable | (39,795 | ) | (57,405 | ) | 22,622 | |||||||
Accrued and other liabilities | 558 | (43,907 | ) | 30,712 | ||||||||
Net cash provided by operating activities | 444,940 | 511,813 | 346,999 | |||||||||
Cash flows from investing activities: | ||||||||||||
Capital expenditures | (148,185 | ) | (248,164 | ) | (301,861 | ) | ||||||
Acquisitions of businesses and marine equipment, net of cash acquired | (354,972 | ) | (262,491 | ) | (533,897 | ) | ||||||
Proceeds from disposition of assets and other | 17,310 | 57,657 | 53,142 | |||||||||
Net cash used in investing activities | (485,847 | ) | (452,998 | ) | (782,616 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Borrowings (payments) on bank credit facilities, net | 250,024 | (417,376 | ) | (78,455 | ) | |||||||
Borrowings on long-term debt | 0 | 500,000 | 499,295 | |||||||||
Payments on long-term debt | (150,000 | ) | (125,000 | ) | 0 | |||||||
Payment of debt issue costs | 0 | (2,397 | ) | (4,276 | ) | |||||||
Return of investment to noncontrolling interests | (676 | ) | (817 | ) | (915 | ) | ||||||
Proceeds from exercise of stock options | 353 | 5,743 | 13,264 | |||||||||
Purchase of treasury stock | 0 | 0 | (776 | ) | ||||||||
Payments related to tax withholding for share-based compensation | (3,193 | ) | (2,031 | ) | (4,822 | ) | ||||||
Net cash provided by (used in) financing activities | 96,508 | (41,878 | ) | 423,315 | ||||||||
Increase (decrease) in cash and cash equivalents | 55,601 | 16,937 | (12,302 | ) | ||||||||
Cash and cash equivalents, beginning of year | 24,737 | 7,800 | 20,102 | |||||||||
Cash and cash equivalents, end of year | $ | 80,338 | $ | 24,737 | $ | 7,800 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid (received) during the period: | ||||||||||||
Interest paid | $ | 48,721 | $ | 55,766 | $ | 40,772 | ||||||
Income taxes paid (refunded) | $ | (35,571 | ) | $ | 2,926 | $ | 640 | |||||
Operating cash outflow from operating leases | $ | 43,639 | $ | 39,376 | $ | 0 | ||||||
Non-cash investing activity: | ||||||||||||
Capital expenditures included in accounts payable | $ | (13,280 | ) | $ | 13,875 | $ | (16,441 | ) | ||||
Cash acquired in acquisition | $ | 557 | $ | 0 | $ | 2,313 | ||||||
Right-of-use assets obtained in exchange for lease obligations | $ | 46,511 | $ | 21,195 | $ | 0 |
See accompanying notes to consolidated financial statements.
55
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
| Common |
|
| Additional |
|
| Accumulated |
|
| Retained |
|
| Treasury Stock |
|
| Noncontrolling |
|
|
|
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income |
|
| Earnings |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Total |
| |||||||||
|
| (in thousands) |
| |||||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
|
| 65,472 |
|
| $ | 6,547 |
|
| $ | 844,979 |
|
| $ | (61,452 | ) |
| $ | 2,593,393 |
|
|
| (5,434 | ) |
| $ | (299,161 | ) |
| $ | 3,247 |
|
| $ | 3,087,553 |
|
Stock option exercises |
|
| — |
|
|
| — |
|
|
| 21 |
|
|
| — |
|
|
| — |
|
|
| 12 |
|
|
| 608 |
|
|
| — |
|
|
| 629 |
|
Issuance of stock for equity awards, net of forfeitures |
|
| — |
|
|
| — |
|
|
| (6,201 | ) |
|
| — |
|
|
| — |
|
|
| 113 |
|
|
| 6,201 |
|
|
| — |
|
|
| — |
|
Tax withholdings on equity award vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (52 | ) |
|
| (2,856 | ) |
|
| — |
|
|
| (2,856 | ) |
Amortization of share-based compensation |
|
| — |
|
|
| — |
|
|
| 15,713 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,713 |
|
Total comprehensive loss, net of taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35,486 |
|
|
| (246,954 | ) |
|
| — |
|
|
| — |
|
|
| 183 |
|
|
| (211,285 | ) |
Return of investment to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (972 | ) |
|
| (972 | ) |
Balance at December 31, 2021 |
|
| 65,472 |
|
| $ | 6,547 |
|
| $ | 854,512 |
|
| $ | (25,966 | ) |
| $ | 2,346,439 |
|
|
| (5,361 | ) |
| $ | (295,208 | ) |
| $ | 2,458 |
|
| $ | 2,888,782 |
|
Stock option exercises |
|
| — |
|
|
| — |
|
|
| 757 |
|
|
| — |
|
|
| — |
|
|
| 58 |
|
|
| 3,130 |
|
|
| — |
|
|
| 3,887 |
|
Issuance of stock for equity awards, net of forfeitures |
|
| — |
|
|
| — |
|
|
| (9,789 | ) |
|
| — |
|
|
| — |
|
|
| 178 |
|
|
| 9,789 |
|
|
| — |
|
|
| — |
|
Tax withholdings on equity award vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (54 | ) |
|
| (3,408 | ) |
|
| — |
|
|
| (3,408 | ) |
Amortization of share-based compensation |
|
| — |
|
|
| — |
|
|
| 13,865 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,865 |
|
Treasury stock purchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (386 | ) |
|
| (22,901 | ) |
|
| — |
|
|
| (22,901 | ) |
Total comprehensive income, net of taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 42,819 |
|
|
| 122,291 |
|
|
| — |
|
|
| — |
|
|
| 470 |
|
|
| 165,580 |
|
Return of investment to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (637 | ) |
|
| (637 | ) |
Balance at December 31, 2022 |
|
| 65,472 |
|
| $ | 6,547 |
|
| $ | 859,345 |
|
| $ | 16,853 |
|
| $ | 2,468,730 |
|
|
| (5,565 | ) |
| $ | (308,598 | ) |
| $ | 2,291 |
|
| $ | 3,045,168 |
|
Stock option exercises |
|
| — |
|
|
| — |
|
|
| 453 |
|
|
| — |
|
|
| — |
|
|
| 71 |
|
|
| 3,755 |
|
|
| — |
|
|
| 4,208 |
|
Issuance of stock for equity awards, net of forfeitures |
|
| — |
|
|
| — |
|
|
| (10,776 | ) |
|
| — |
|
|
| — |
|
|
| 194 |
|
|
| 10,776 |
|
|
| — |
|
|
| — |
|
Tax withholdings on equity award vesting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (58 | ) |
|
| (3,908 | ) |
|
| — |
|
|
| (3,908 | ) |
Amortization of share-based compensation |
|
| — |
|
|
| — |
|
|
| 14,941 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,941 |
|
Treasury stock purchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,485 | ) |
|
| (112,803 | ) |
|
| — |
|
|
| (112,803 | ) |
Excise taxes on treasury stock purchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (972 | ) |
|
| — |
|
|
| (972 | ) |
Total comprehensive income, net of taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,153 |
|
|
| 222,935 |
|
|
| — |
|
|
| — |
|
|
| (30 | ) |
|
| 241,058 |
|
Return of investment to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,015 | ) |
|
| (1,015 | ) |
Balance at December 31, 2023 |
|
| 65,472 |
|
| $ | 6,547 |
|
| $ | 863,963 |
|
| $ | 35,006 |
|
| $ | 2,691,665 |
|
|
| (6,843 | ) |
| $ | (411,750 | ) |
| $ | 1,246 |
|
| $ | 3,186,677 |
|
Common Stock | Additional Paid-in- | Accumulated Other Comprehensive | Retained | Treasury Stock | Noncontrolling | |||||||||||||||||||||||||||||||
Shares | Amount | Capital | Income | Earnings | Shares | Amount | Interests | Total | ||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 65,472 | $ | 6,547 | $ | 802,961 | $ | (32,405 | ) | $ | 2,646,937 | (5,783 | ) | $ | (313,220 | ) | $ | 3,403 | $ | 3,114,223 | |||||||||||||||||
Cumulative effect of adoption of ASU 2014-09 | — | 0 | 0 | 0 | (9,722 | ) | — | 0 | 0 | (9,722 | ) | |||||||||||||||||||||||||
Cumulative effect of adoption of ASU 2018-02 | — | 0 | 0 | 0 | 7,925 | — | 0 | 0 | 7,925 | |||||||||||||||||||||||||||
Stock option exercises | 0 | 0 | 2,161 | 0 | 0 | 232 | 11,151 | 0 | 13,312 | |||||||||||||||||||||||||||
Issuance of stock for equity awards, net of forfeitures | 0 | 0 | (879 | ) | 0 | 0 | 15 | 879 | 0 | 0 | ||||||||||||||||||||||||||
Tax withholdings on equity award vesting | 0 | 0 | 0 | 0 | 0 | (61 | ) | (4,822 | ) | 0 | (4,822 | ) | ||||||||||||||||||||||||
Amortization of unearned share-based compensation | — | 0 | 19,104 | 0 | 0 | — | 0 | 0 | 19,104 | |||||||||||||||||||||||||||
Treasury stock purchases | 0 | 0 | 0 | 0 | 0 | (11 | ) | (776 | ) | 0 | (776 | ) | ||||||||||||||||||||||||
Total comprehensive income, net of taxes | — | 0 | 0 | (1,106 | ) | 78,452 | — | 0 | 626 | 77,972 | ||||||||||||||||||||||||||
Return of investment to noncontrolling interests | — | 0 | 0 | 0 | 0 | — | 0 | (915 | ) | (915 | ) | |||||||||||||||||||||||||
Balance at December 31, 2018 | 65,472 | $ | 6,547 | $ | 823,347 | $ | (33,511 | ) | $ | 2,723,592 | (5,608 | ) | $ | (306,788 | ) | $ | 3,114 | $ | 3,216,301 | |||||||||||||||||
Stock option exercises | 0 | 0 | 675 | 0 | 0 | 93 | 5,121 | 0 | 5,796 | |||||||||||||||||||||||||||
Issuance of stock for equity awards, net of forfeitures | 0 | 0 | (1,735 | ) | 0 | 0 | 32 | 1,735 | 0 | 0 | ||||||||||||||||||||||||||
Tax withholdings on equity award vesting | 0 | 0 | 0 | 0 | 0 | (30 | ) | (2,031 | ) | 0 | (2,031 | ) | ||||||||||||||||||||||||
Amortization of unearned share-based compensation | — | 0 | 13,612 | 0 | 0 | — | 0 | 0 | 13,612 | |||||||||||||||||||||||||||
Total comprehensive income, net of taxes | — | 0 | 0 | (4,288 | ) | 142,347 | — | 0 | 672 | 138,731 | ||||||||||||||||||||||||||
Return of investment to noncontrolling interests | — | 0 | 0 | 0 | 0 | — | 0 | (817 | ) | (817 | ) | |||||||||||||||||||||||||
Balance at December 31, 2019 | 65,472 | $ | 6,547 | $ | 835,899 | $ | (37,799 | ) | $ | 2,865,939 | (5,513 | ) | $ | (301,963 | ) | $ | 2,969 | $ | 3,371,592 | |||||||||||||||||
Stock option exercises | 0 | 0 | 26 | 0 | 0 | 15 | 327 | 0 | 353 | |||||||||||||||||||||||||||
Issuance of stock for equity awards, net of forfeitures | 0 | 0 | (5,668 | ) | 0 | 0 | 103 | 5,668 | 0 | 0 | ||||||||||||||||||||||||||
Tax withholdings on equity award vesting | 0 | 0 | 0 | 0 | 0 | (39 | ) | (3,193 | ) | 0 | (3,193 | ) | ||||||||||||||||||||||||
Amortization of unearned share-based compensation | — | 0 | 14,722 | 0 | 0 | — | 0 | 0 | 14,722 | |||||||||||||||||||||||||||
Total comprehensive loss, net of taxes | — | 0 | 0 | (23,653 | ) | (272,546 | ) | — | 0 | 954 | (295,245 | ) | ||||||||||||||||||||||||
Return of investment to noncontrolling interests | — | 0 | 0 | 0 | 0 | — | 0 | (676 | ) | (676 | ) | |||||||||||||||||||||||||
Balance at December 31, 2020 | 65,472 | $ | 6,547 | $ | 844,979 | $ | (61,452 | ) | $ | 2,593,393 | (5,434 | ) | $ | (299,161 | ) | $ | 3,247 | $ | 3,087,553 |
See accompanying notes to consolidated financial statements.
56
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of Kirby Corporation and all majority-owned subsidiaries (the “Company”). All investments in which the Company owns 20% to 50% and exercises significant influence over operating and financial policies are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to reflect the current presentation of financial information. Such reclassifications have no impact on previously reported net earnings (loss), stockholders’ equity, or cash flows.
Accounting Policies
Cash Equivalents. Cash equivalents consist of all short-term, highly liquid investments with maturities of three months or less at date of purchase.
Accounts Receivable. In the normal course of business, the Company extends credit to its customers. The Company regularly reviews the accounts and makes adequate provisions for probable uncollectible balances. It is the Company’s opinion that the accounts have no impairment, other than that for which provisions have been made. Included in accounts receivable-trade as of December 31, 20202023 and 20192022 were $91,850,000$136.3 million and $103,996,000,$139.5 million, respectively, of accruals for revenues earned which have not been invoiced as of the end of each year.
Accrued Insurance.The Company’s marine transportation and distribution and services operations are subject to hazards associated with such businesses. The marine transportation business in particular is subject to property damage and casualty risks associated with operating vessels carrying large volumes of bulk liquid and dry cargo in a marine environment. The Company maintains insurance coverage against these hazards with insurance companies. companies subject to a deductible, below which the Company is liable. The Company uses historic experience and actuarial analysis by outside consultants to estimate an appropriate level of accrued insurance liabilities including estimates on individual claims outstanding and an estimated amount for losses that may have occurred but have not been reported to the Company (“IBNR”) or not yet fully developed. If the actual number of claims and magnitude were substantially greater than assumed, the required level of accrued liabilities for claims incurred but not reported or fully developed could be materially understated. Insurance premiums, IBNR losses and incurred claim losses, up to the Company’s deductible for the years ended December 31, 2023, 2022, and 2021, were $52.5 million, $39.1 million, and $37.8 million, respectively.
The Company records receivables from its insurers for incurred claims above the Company’s deductible. If the solvency of the insurers becomes impaired, there could be an adverse impact on the accrued receivables and the availability of insurance. Included in accounts receivable-other as of December 31, 20202023 and 20192022 were $83,145,000$29.6 million and $72,591,000,$27.7 million, respectively, of receivables from insurance companies to cover claims in excess of the Company’s deductible.
Concentrations of Credit Risk. Financial instruments which potentially subject the Company to concentrations of credit risk are primarily trade accounts receivables. The Company’s marine transportation customers include the major oil refining and petrochemical companies. The distribution and services customers are oilfield service companies, oil and gas operators and producers, on-highway transportation companies, marine transportation companies, commercial fishing companies, construction companies, power generation companies, and the United States government. The Company regularly reviews its accounts and estimates the amount of uncollectible receivables each period and establishes an allowance for uncollectible amounts. The amount of the allowance is based on the age of unpaid amounts, information about the current financial strength of customers, and other relevant information. Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known.
Historically, credit risk with respect to these trade receivables has generally been considered minimal because of the financial strength of the Company’s customers; however, a United States or global recession or other adverse economic condition could impact the collectability of certain customers’ trade receivables which could have a material effect on the Company’s results of operations.
Inventories. Inventories are stated at the lower of average cost or net realizable value.
Property, Maintenance and Repairs. Property is recorded at cost or acquisition date fair value; improvements and betterments are capitalized as incurred. Depreciation is recorded using the straight-line method over the estimated useful lives of the individual assets as follows: marine transportation equipment, 5-405-40 years; buildings, 10-4010-40 years; other equipment, 2-102-10 years; and leasehold improvements, term of lease. When property items are retired, sold, or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts with any gain or loss on the disposition included in the statement of earnings. Maintenance and repairs on vessels built for use on the inland waterways are charged to operating expense as incurred and includes the costs incurred
57
in United States Coast Guard (“USCG”) inspections unless the shipyard extends the life, or improves the operating capacity, or replaces significant components of the vessel, which results in the costs being capitalized.
The following table summarizes the balances of property and equipment – net (in thousands):
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Land |
| $ | 39,567 |
|
| $ | 38,551 |
|
Marine transportation equipment |
|
| 5,029,653 |
|
|
| 4,837,379 |
|
Buildings and other equipment |
|
| 641,871 |
|
|
| 505,942 |
|
Construction in progress |
|
| 112,947 |
|
|
| 70,271 |
|
|
| $ | 5,824,038 |
|
| $ | 5,452,143 |
|
Accumulated depreciation |
|
| (1,962,933 | ) |
|
| (1,818,681 | ) |
Property and equipment – net |
| $ | 3,861,105 |
|
| $ | 3,633,462 |
|
Drydocking on Ocean-Going Vessels. The Company’s ocean-going vessels are subject to regulatory drydocking requirements after certain periods of time to be inspected, have planned major maintenance performed and be recertified by the American Bureau of Shipping (“ABS”). These recertifications generally occur twice in a five-year period. The Company defers the drydocking expenditures incurred on its ocean-going vessels due to regulatory marine inspections by the ABS and amortizes the costs of the shipyard over the period between drydockings, generally 30 or 60 months,, depending on the type of major maintenance performed. Drydocking expenditures that extend the life, or improve the operating capability, or replace significant components of the vessel result in the costs beingare capitalized. The Company recognized amortization of major maintenance costs of $30,214,000,29.0 million, $23,962,00029.0 million, and $20,760,00033.2 million for the years ended December 31,2020,2019, 2023, 2022, and 2018,2021, respectively, in costs of sales and operating expenses. Routine repairs and maintenance on ocean-going vessels are expensed as incurred. Interest is capitalized on the construction of new ocean-going vessels. Interest expense excludes capitalized interest of $1,003,000 and $2,206,000 forFor the years ending December 31,2019 and 2018, respectively. For the year ended December 31, 2023, 2022 and 2021, 31,no2020, 0 interest was capitalized.
Environmental Liabilities. The Company expenses costs related to environmental events as they are incurred or when a loss is considered probable and reasonably estimable.
Goodwill. The excess of the purchase price over the fair value of identifiable net assets acquired in transactions accounted for as a purchase is included in goodwill. The Company conducted its annual goodwill impairment tests at November 30,2020,2019 2023, 2022, and 2018.2021. The Company also conducted an interim goodwill impairment test at March 31,2020.September 30, 2021. Refer to Note 7, Impairments and other charges for more information. The Company will continue to conduct goodwill impairment tests as of November 30 of subsequent years, or whenever events or circumstances indicate that interim impairment testing is necessary. The amount of goodwill impairment, if any, is typically measured based on a combination of projected discounted future operating cash flows using an appropriate discount rate.rate and a market approach for comparable companies. The following table summarizes the changes in goodwill (in thousands):
|
| Marine |
|
| Distribution and |
|
| Total |
| |||
Balance at December 31, 2022 (gross) |
|
| 505,784 |
|
|
| 560,155 |
|
|
| 1,065,939 |
|
Accumulated impairment and amortization |
|
| (237,626 | ) |
|
| (389,565 | ) |
|
| (627,191 | ) |
Balance at December 31, 2022 and 2023 |
| $ | 268,158 |
|
| $ | 170,590 |
|
| $ | 438,748 |
|
Marine Transportation | Distribution and Services | Total | ||||||||||
Balance at December 31, 2017 (gross) | $ | 403,376 | $ | 549,226 | $ | 952,602 | ||||||
Accumulated impairment and amortization | (15,872 | ) | (1,595 | ) | (17,467 | ) | ||||||
Balance at December 31, 2017 | 387,504 | 547,631 | 935,135 | |||||||||
Impairment | (2,702 | ) | 0 | (2,702 | ) | |||||||
Higman acquisition | 4,657 | 0 | 4,657 | |||||||||
Targa acquisition | 16,116 | 0 | 16,116 | |||||||||
Other | 0 | 620 | 620 | |||||||||
Balance at December 31, 2018 (gross) | 424,149 | 549,846 | 973,995 | |||||||||
Accumulated impairment and amortization | (18,574 | ) | (1,595 | ) | (20,169 | ) | ||||||
Balance at December 31, 2018 | $ | 405,575 | $ | 548,251 | $ | 953,826 | ||||||
Balance at December 31, 2019 (gross) | $ | 424,149 | $ | 549,846 | $ | 973,995 | ||||||
Accumulated impairment and amortization | (18,574 | ) | (1,595 | ) | (20,169 | ) | ||||||
Balance at December 31, 2019 | 405,575 | 548,251 | 953,826 | |||||||||
Impairment | 0 | (387,970 | ) | (387,970 | ) | |||||||
Savage acquisition | 81,635 | 0 | 81,635 | |||||||||
Convoy acquisition | 0 | 10,309 | 10,309 | |||||||||
Balance at December 31, 2020 (gross) | 505,784 | 560,155 | 1,065,939 | |||||||||
Accumulated impairment and amortization | (18,574 | ) | (389,565 | ) | (408,139 | ) | ||||||
Balance at December 31, 2020 | $ | 487,210 | $ | 170,590 | $ | 657,800 |
Other Intangibles. Other intangibles include assets for favorable contracts and customer relationships, distributorship and dealership agreements, trade names and non-compete agreements and liabilities for unfavorable leases and contracts. The following table summarizes the balances of other intangible assets and other intangible liabilities (in thousands): thousands):
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Other intangible assets – gross |
| $ | 184,622 |
|
| $ | 203,242 |
|
Accumulated amortization |
|
| (141,695 | ) |
|
| (151,779 | ) |
Other intangible assets – net |
| $ | 42,927 |
|
| $ | 51,463 |
|
|
|
|
|
|
|
| ||
Other intangible liabilities – gross |
| $ | 8,800 |
|
| $ | 13,860 |
|
Accumulated amortization |
|
| (8,800 | ) |
|
| (13,280 | ) |
Other intangible liabilities – net |
| $ | — |
|
| $ | 580 |
|
December 31, | ||||||||
2020 | 2019 | |||||||
Other intangible assets – gross | $ | 203,217 | $ | 332,656 | ||||
Accumulated amortization | (134,238 | ) | (121,974 | ) | ||||
Other intangible assets – net | $ | 68,979 | $ | 210,682 | ||||
Other intangible liabilities – gross | $ | 13,860 | $ | 13,860 | ||||
Accumulated amortization | (10,960 | ) | (7,956 | ) | ||||
Other intangible liabilities – net | $ | 2,900 | $ | 5,904 |
The costs of intangible assets and liabilities are amortized to expense in a systematic and rational manner over their estimated useful lives.For the years ended December 31, 2020, 2019,2023, 2022, and 2018,2021, the amortization expense for intangibles was $9,235,000, $15,040,000$8.1 million, $7.6 million, and $16,760,000,$7.8 million, respectively. Estimated net amortization expense for amortizable intangible assets and liabilities for the next five years (2021
58
(2024 – 2025)2028) is approximately $7,749,000, $7,466,000, $7,947,000, $8,513,000$8.5 million, $8.5 million, $6.3 million, $5.0 million, and $8,513,000, respectively.$3.5 million, respectively, and $11.1 million thereafter. As of December 31, 2020,2023, the weighted average amortization period for intangible assets and liabilities was approximately nine years.seven years.
Revenue Recognition. The majority of marine transportation revenue is derived from term contracts, ranging from one to three years, some of which have renewal options, and the remainder is from spot market movements.contracts. The majority of the term contracts by revenue are for terms of one year. The Company provides marine transportation services for its customers and, in almost all cases, does not assume ownership of the products it transports. A term contract is an agreementThe Company enters into agreements with a specific customerits customers to transport cargo from a designated origin to a designated destination at a set rate (affreightment) or at a daily rate.rate (time charter). The rate may or may not escalate during the term of the contract, however, the base rate generally remains constant and contracts often include escalation provisions to recover changes in specific costs such as fuel. ATime charter or contracts of affreightment of one year or greater are considered term contract revenues and agreements of less than a year are included in spot contract isrevenues. Spot contracts typically involve an agreement with a customer to move cargo from a specific origin to a designated destination for a rate generally negotiated at the time the cargo movement takes place. Spot contract rates are typically at the current “market” rate, including fuel, and are subject to market volatility. The Company uses a voyage accounting method of revenue recognition for its marine transportation revenues which allocates voyage revenue based on the percent of the voyage completed during the period. The performance of the service is invoiced as the transaction occurs and payment is required depending on each specific customer’s credit.
Distribution products and services are generally sold based upon purchase orders or preferential service agreements with the customer that include fixed or determinable prices. Parts sales are recognized when control transfers to the customer, generally when title passes upon shipment to customers. Service revenue is recognized over time as the service is provided using measures of progress utilizing hours worked or costs incurred as a percentage of estimated hours or expected costs. Revenue from rental agreements is generally recognized on a straight-line basis over the rental period. The Company recognizes the revenues on contract manufacturing activities upon shipment and transfer of control to the customer. The transactions in the distribution and services segment (“KDS”) are typically invoiced as parts are shipped or upon the completion of the service job. Contract manufacturing activities are generally invoiced upon shipment and the Company will often get deposits from its customers prior to starting work, or progress payments during the project depending on the credit worthiness of the customer and the size of the project.
Stock-Based Compensation. The Company has share-based compensation plans covering selected officers and other key employees as well as the Company’s Board of Directors. Stock-based grants made under the Company’s stock plans are recordedmeasured at fair value on the date of the grant and the cost for all grants made under the director plan and for grants made under the employee plan prior to February 19, 2018 is generally recognized ratably over the vesting period of the restricted stock unit (“RSU”), stock option, or restricted stock. On February 19, 2018, theThe employee stock award plan, was amended to also allow for the granting of restricted stock units (“RSUs”) to selected officers and other key employees. The amendment includedhowever, includes a provision for the continued vesting of unvested stock options and RSUs for employees who meet certain years of service and age requirements at the time of their retirement. The vesting change resultedprovision results in shorter expense accrual periods on stock options and RSUs granted after February 19, 2018 to employees who are nearing retirement and meet the service and age requirements. Stock option grants are valued at the date of grant as calculated under the Black-Scholes option pricing model. The Company accounts for forfeitures as they occur. The Company’s stock-based compensation plans are more fully described in Note 8, Stock Award Plans.
Taxes on Income. The Company follows the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Treasury Stock. The Company follows the average cost method of accounting for treasury stock transactions.
Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of. The Company performs an impairment assessment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable.
Recoverability on marine transportation assets is assessed based on vessel classes, not on individual assets, because identifiable cash flows for individual marine transportation assets are not available. Projecting customer contract volumes allows estimation of future cash flows by projecting pricing and utilization by vessel class but it is not practical to project which individual marine transportation asset will be utilized for any given contract. Because customers generally do not specify which particular vessel is used, prices are quoted based on vessel classes not individual assets. Nominations of vessels for specific jobs are determined on a day by day basis and are a function of the equipment class required and the geographic position of vessels within that class at that particular time as vessels within a class are interchangeable and provide the same service. The Company’s vessels are mobile assets and equipped to operate in geographic regions throughout the United States and the Company has in the past and expects to continue to move vessels from one region to another when it is necessary due to changing markets and it is economical to do so. Barge vessel classes are based on similar capacities, hull type, and type of product and towing vessels are based on similar hull type and horsepower.
59
If a triggering event is identified, the Company compares the carrying amount of the asset group to the estimated undiscounted future cash flows expected to result from the use of the asset group. If the carrying amount of the asset group exceeds the estimated undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset group to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Fair Value Measurements. The accounting guidance for using fair value to measure certain assets and liabilities establishes a three tier value hierarchy, which prioritizes the inputs to valuation techniques used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little, if any, market data exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing the asset or liability. The fair value of the Company’s debt instruments is described in Note 5, Long-Term Debt.
Accounting Standards
In December 2019,2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12,Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Simplifying the Accounting forImprovements to Income Taxes”Tax Disclosures” (“ASU 2023-09”) which simplifies the accounting for income taxes by removing certain exceptionsrequires entities to disclose additional information in specified categories with respect to the general principles in Topic 740, Income Taxes. The guidancereconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. ASU 2023-09 is effective for fiscal years,annual and interim periods within those fiscal years, beginning after December 15,2020. Early 2023, with early adoption is permitted. The Company is currently evaluating this guidance to determine the impact that the adoption of this standard will have on its consolidated financial statements.
In August 2018,November 2023, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits - Defined Benefit Plans – General (Subtopic 715-20)No. 2023-07, “Segment Reporting (Topic 280): Disclosure Framework – ChangesImprovements to Reportable Segment Disclosures” (“ASU 2023-07”) to improve reportable segment disclosure requirements. The amendments require disclosure of significant segment expenses regularly provided to the Disclosure Requirements for Defined Benefit Plans”chief operating decision maker (“ASU 2018-14”CODM”) which amendsas well as other segment items, extend certain annual disclosures to interim periods, clarify the annualapplicability to single reportable segment entities, permit more than one measure of profit or loss to be reported under certain conditions, and require disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing certain requirements, providing clarification on existing requirements and adding new requirements including adding an explanation of the reasons for significant gainstitle and losses related to changes inposition of the benefit obligation for the period. The guidanceCODM. ASU 2023-07 is effective for fiscal years endingannual periods beginning after December 15,2020. 2024 and for interim periods beginning after December 15, 2025, with early adoption permitted. The Company adopted ASU 2018-14is currently evaluating the impact that the adoption of this standard will have on December its consolidated financial statements.31,2020 on a retrospective basis.
(2) Acquisitions
On July 14, 2023, the Company purchased 6 newly constructed inland pressure barges for $39,350,000 in cash.
Savage | Convoy | |||||||
Accounts receivable | $ | 0 | $ | 5,677 | ||||
Inventories | 0 | 11,771 | ||||||
Prepaid expenses | 1,067 | 177 | ||||||
Property and equipment | 210,065 | 415 | ||||||
Operating lease right-of-use assets | 27,085 | 3,713 | ||||||
Goodwill | 81,635 | 10,309 | ||||||
Other intangibles | 2,300 | 17,170 | ||||||
Total assets | $ | 322,152 | $ | 49,232 | ||||
Accounts payable and accrued liabilities | $ | 68 | $ | 8,339 | ||||
Operating lease liabilities, including current portion | 43,085 | 3,713 | ||||||
Total liabilities | $ | 43,153 | $ | 12,052 | ||||
Net assets acquired | $ | 278,999 | $ | 37,180 |
Prepaid expenses | $ | 1,138 | ||
Property and equipment | 247,122 | |||
Other intangibles | 340 | |||
Total assets | $ | 248,600 | ||
Other long-term liabilities | $ | 4,100 | ||
Net assets acquired | $ | 244,500 |
The Company purchased anfour inland towboattank barges from a leasing company for $3,050,000$0.5 million in cash.cash during the 2023 third quarter. The Company had been leasing the towboatbarges prior to the purchase.
On May 10, 2018,March 31, 2022, the Company completed thepaid $3.9 million in cash to purchase assets of Targa Resources Corp.’s (“Targa”) inland tank barge business from a subsidiarygearbox repair company in KDS. Assets acquired consisted primarily of Targa for $69,250,000 in cash. Targa’s inland tank barge fleet consisted of 16 pressure barges with a total capacity of 258,000 barrels, many of which were under multi-year contracts that the Company assumed from Targa. The 16 tank barges transport petrochemicals on the Mississippi River Systemproperty and the Gulf Intracoastal Waterway. As a result of the acquisition, the Company recorded $16,116,000 of goodwill and $11,000,000 of intangibles with an average amortization period of 15 years. equipment.
All goodwill recorded for the Targa acquisition will be deductible for tax purposes.
On February 14, 2018,October 4, 2021, the Company completedpaid $1.6 million in cash to purchase assets of an energy storage systems manufacturer based in Texas which have been key to the acquisitiondevelopment of Higman Marine, Inc. (“Higman”)new power generation solutions for $421,922,000 in cash. Higman’s fleet consisted of 163 inland tank barges with 4.8 million barrels of capacity, and 75 inland towboats, transporting petrochemicals, black oil, including crude oil and natural gas condensate, and refined petroleum products on the Mississippi River System and the Gulf Intracoastal Waterway. The average age of the inland tank barges was approximately seven years and the inland towboats had an average age of approximately eight years. Financing of the acquisition was through the issuance of the 2028 Notes (as defined in Note 5, Long-Term Debt) issued on February 12, 2018 in preparation for closing of the acquisition.
Cash | $ | 2,313 | ||
Accounts receivable | 27,527 | |||
Prepaid expenses | 5,323 | |||
Property and equipment | 497,951 | |||
Goodwill | 4,657 | |||
Other assets | 30 | |||
Total assets | $ | 537,801 | ||
Accounts payable | $ | 17,012 | ||
Accrued liabilities | 14,127 | |||
Deferred income taxes | 40,524 | |||
Other long-term liabilities | 44,216 | |||
Total liabilities | $ | 115,879 | ||
Net assets acquired | $ | 421,922 |
60
(3) Revenues
The following table sets forth the Company’s revenues by major source (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Marine transportation segment: |
|
|
|
|
|
|
|
|
| |||
Inland transportation |
| $ | 1,416,483 |
|
| $ | 1,277,010 |
|
| $ | 1,005,145 |
|
Coastal transportation |
|
| 305,454 |
|
|
| 339,957 |
|
|
| 317,773 |
|
| $ | 1,721,937 |
|
| $ | 1,616,967 |
|
| $ | 1,322,918 |
| |
Distribution and services segment: |
|
|
|
|
|
|
|
|
| |||
Commercial and industrial |
| $ | 802,474 |
|
| $ | 651,566 |
|
| $ | 578,011 |
|
Oil and gas |
|
| 567,229 |
|
|
| 516,221 |
|
|
| 345,731 |
|
| $ | 1,369,703 |
|
| $ | 1,167,787 |
|
| $ | 923,742 |
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Marine transportation segment: | ||||||||||||
Inland transportation | $ | 1,094,630 | $ | 1,220,878 | $ | 1,119,820 | ||||||
Coastal transportation | 309,635 | 366,204 | 363,323 | |||||||||
$ | 1,404,265 | $ | 1,587,082 | $ | 1,483,143 |
Distribution and services segment: | ||||||||||||
Oil and gas | $ | 200,817 | $ | 659,364 | $ | 1,010,410 | ||||||
Commercial and industrial | 566,326 | 591,953 | 477,144 | |||||||||
$ | 767,143 | $ | 1,251,317 | $ | 1,487,554 |
The Company’s revenue is measured based on consideration specified in its contracts with its customers. The Company recognizes revenue over time as it satisfies performance obligations in its contracts which occur as the Company delivers a service over timeprovides services to its customers, or at the point in time that it transfers control over a part or product transfers to its customer.
Contract Assets and Liabilities. Contract liabilities represent advance consideration received from customers, and are recognized as revenue over time or at a point in time as the related performance obligation is satisfied. Revenues recognized during the years ended December 31, 20202023, 2022, and 20192021, that were included in the opening contract liability balances were $38,455,000$84.0 million, $61.7 million and $76,412,000,$40.9 million, respectively. The Company has recognized all contract liabilities within the deferred revenues financial statement caption on the balance sheet. The Company did 0tnot have any contract assets at December 31, 20202023 or December 31, 2019.
(4) Segment Data
The Company’s operations are aggregated into 2two reportable business segments as follows:
Marine Transportation— Provides marine transportation by United States flagged vessels principally of liquid cargoes throughout the United States inland waterway system, along all three United States coasts, in Alaska and Hawaii and to a lesser extent, in United States coastal transportation of dry-bulk cargoes. The principal products transported include petrochemicals, black oil, refined petroleum products and agricultural chemicals.
Distribution and Services — Provides after-market services and genuine replacement parts for engines, transmissions, reduction gears and related equipment used in oilfield service,services, marine, power generation, on-highway, and other industrial applications. The Company also rents equipment including generators, industrial compressors, railcar movers, and high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, electric power generation equipment, specialized electrical distribution and control equipment, and high capacity energy storage/battery systems for land-based oilfield service and railroad customers.
The Company’s 2two reportable business segments are managed separately based on fundamental differences in their operations. The Company’s accounting policies for the business segments are the same as those described in Note 1, Summary of Significant Accounting Policies. The Company evaluates the performance of its segments based on the contributions to operating income of the respective segments, and before income taxes, interest, gains or losses on disposition of assets, other nonoperating income, noncontrolling interests, accounting changes, and nonrecurring items. Intersegment revenues, based on market-based pricing, of the distributionKDS from KMT of $39.8 million, $31.9 million, and services segment from the marine transportation segment of $27,782,000, $27,441,000,$23.6 million in 2023, 2022, and $29,363,000 in 2020, 2019, and 2018,2021, respectively, as well as the related intersegment profit of $2,778,000, $2,744,000,$4.0 million, $3.2 million, and $2,936,000$2.4 million in 2020, 2019,2023, 2022, and 2018,2021, respectively, have been eliminated from the tables below.
61
The following tables set forth by reportable segment the revenues, profit or loss, total assets, depreciation and amortization, and capital expenditures attributable to the principal activities of the Company (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Revenues: |
|
|
|
|
|
|
|
|
| |||
Marine transportation |
| $ | 1,721,937 |
|
| $ | 1,616,967 |
|
| $ | 1,322,918 |
|
Distribution and services |
|
| 1,369,703 |
|
|
| 1,167,787 |
|
|
| 923,742 |
|
| $ | 3,091,640 |
|
| $ | 2,784,754 |
|
| $ | 2,246,660 |
| |
Segment profit (loss): |
|
|
|
|
|
|
|
|
| |||
Marine transportation |
| $ | 238,943 |
|
| $ | 136,184 |
|
| $ | 63,015 |
|
Distribution and services |
|
| 114,481 |
|
|
| 67,037 |
|
|
| 27,607 |
|
Other |
|
| (59,299 | ) |
|
| (38,246 | ) |
|
| (381,223 | ) |
| $ | 294,125 |
|
| $ | 164,975 |
|
| $ | (290,601 | ) | |
Depreciation and amortization: |
|
|
|
|
|
|
|
|
| |||
Marine transportation |
| $ | 184,225 |
|
| $ | 177,551 |
|
| $ | 185,979 |
|
Distribution and services |
|
| 19,842 |
|
|
| 16,776 |
|
|
| 20,573 |
|
Other |
|
| 7,089 |
|
|
| 7,116 |
|
|
| 7,166 |
|
| $ | 211,156 |
|
| $ | 201,443 |
|
| $ | 213,718 |
| |
Capital expenditures: |
|
|
|
|
|
|
|
|
| |||
Marine transportation |
| $ | 255,411 |
|
| $ | 147,170 |
|
| $ | 84,353 |
|
Distribution and services |
|
| 140,769 |
|
|
| 21,713 |
|
|
| 8,104 |
|
Other |
|
| 5,550 |
|
|
| 3,723 |
|
|
| 5,558 |
|
| $ | 401,730 |
|
| $ | 172,606 |
|
| $ | 98,015 |
|
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Total assets: |
|
|
|
|
|
| ||
Marine transportation |
| $ | 4,454,931 |
|
| $ | 4,285,647 |
|
Distribution and services |
|
| 1,156,384 |
|
|
| 1,041,841 |
|
Other |
|
| 110,882 |
|
|
| 227,436 |
|
| $ | 5,722,197 |
|
| $ | 5,554,924 |
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Revenues: | ||||||||||||
Marine transportation | $ | 1,404,265 | $ | 1,587,082 | $ | 1,483,143 | ||||||
Distribution and services | 767,143 | 1,251,317 | 1,487,554 | |||||||||
$ | 2,171,408 | $ | 2,838,399 | $ | 2,970,697 | |||||||
Segment profit (loss): | ||||||||||||
Marine transportation | $ | 163,638 | $ | 215,842 | $ | 147,416 | ||||||
Distribution and services | (12,191 | ) | 67,201 | 129,305 | ||||||||
Other | (612,798 | ) | (93,223 | ) | (162,562 | ) | ||||||
$ | (461,351 | ) | $ | 189,820 | $ | 114,159 | ||||||
Depreciation and amortization: | ||||||||||||
Marine transportation | $ | 186,798 | $ | 179,742 | $ | 182,307 | ||||||
Distribution and services | 28,255 | 35,998 | 39,349 | |||||||||
Other | 4,868 | 3,892 | 3,316 | |||||||||
$ | 219,921 | $ | 219,632 | $ | 224,972 | |||||||
Capital expenditures: | ||||||||||||
Marine transportation | $ | 133,990 | $ | 217,364 | $ | 284,953 | ||||||
Distribution and services | 4,854 | 18,284 | 10,742 | |||||||||
Other | 9,341 | 12,516 | 6,166 | |||||||||
$ | 148,185 | $ | 248,164 | $ | 301,861 |
December 31, | ||||||||
2020 | 2019 | |||||||
Total assets: | ||||||||
Marine transportation | $ | 4,760,449 | $ | 4,536,368 | ||||
Distribution and services | 805,831 | 1,422,394 | ||||||
Other | 357,894 | 120,335 | ||||||
$ | 5,924,174 | $ | 6,079,097 |
The following table presents the details of “Other” segment profit (loss) (in thousands):
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
General corporate expenses | $ | (11,050 | ) | $ | (13,643 | ) | $ | (35,590 | ) | |||
Gain on disposition of assets | 118 | 8,152 | 1,968 | |||||||||
Impairments and other charges | (561,274 | ) | (35,525 | ) | (85,407 | ) | ||||||
Lease cancellation costs | 0 | 0 | (2,403 | ) | ||||||||
Interest expense | (48,739 | ) | (55,994 | ) | (46,856 | ) | ||||||
Other income | 8,147 | 3,787 | 5,726 | |||||||||
$ | (612,798 | ) | $ | (93,223 | ) | $ | (162,562 | ) |
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
General corporate expenses |
| $ | (23,341 | ) |
| $ | (18,614 | ) |
| $ | (13,803 | ) |
Gain on disposition of assets |
|
| 5,009 |
|
|
| 8,279 |
|
|
| 5,761 |
|
Impairments and other charges |
|
| — |
|
|
| — |
|
|
| (340,713 | ) |
Interest expense |
|
| (52,008 | ) |
|
| (44,588 | ) |
|
| (42,469 | ) |
Other income |
|
| 11,041 |
|
|
| 16,677 |
|
|
| 10,001 |
|
| $ | (59,299 | ) |
| $ | (38,246 | ) |
| $ | (381,223 | ) |
The following table presents the details of “Other” total assets (in thousands):
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
General corporate assets |
| $ | 108,306 |
|
| $ | 225,265 |
|
Investment in affiliates |
|
| 2,576 |
|
|
| 2,171 |
|
| $ | 110,882 |
|
| $ | 227,436 |
|
62
December 31, | ||||||||
2020 | 2019 | |||||||
General corporate assets | $ | 355,205 | $ | 118,310 | ||||
Investment in affiliates | 2,689 | 2,025 | ||||||
$ | 357,894 | $ | 120,335 |
(5) Long-Term Debt
The following table presents the carrying value and fair value of debt outstanding (in thousands):
December 31, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Revolving Credit Facility (a) | $ | 250,000 | $ | 250,000 | $ | 0 | $ | 0 | ||||||||
Term Loan (a) | 375,000 | 375,000 | 375,000 | 375,000 | ||||||||||||
2.72% senior notes due February 27, 2020 | 0 | 0 | 150,000 | 151,547 | ||||||||||||
3.29% senior notes due February 27, 2023 | 350,000 | 364,538 | 350,000 | 353,216 | ||||||||||||
4.2% senior notes due March 1, 2028 | 500,000 | 581,115 | 500,000 | 541,546 | ||||||||||||
Credit Line | 0 | 0 | 0 | 0 | ||||||||||||
Bank notes payable | 40 | 40 | 16 | 16 | ||||||||||||
1,475,040 | 1,570,693 | 1,375,016 | 1,421,325 | |||||||||||||
Unamortized debt discounts and issuance costs (b) | (6,454 | ) | — | (5,249 | ) | — | ||||||||||
$ | 1,468,586 | $ | 1,570,693 | $ | 1,369,767 | $ | 1,421,325 |
|
| December 31, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
Revolving Credit Facility due July 29, 2027 (a) |
| $ | 44,000 |
|
| $ | 44,000 |
|
| $ | — |
|
| $ | — |
|
Term Loan due July 29, 2027 (a) |
|
| 170,000 |
|
|
| 170,000 |
|
|
| 170,000 |
|
|
| 170,000 |
|
3.29% senior notes due February 27, 2023 |
|
| — |
|
|
| — |
|
|
| 350,000 |
|
|
| 352,275 |
|
4.2% senior notes due March 1, 2028 |
|
| 500,000 |
|
|
| 475,920 |
|
|
| 500,000 |
|
|
| 477,660 |
|
3.46% senior notes due January 19, 2033 |
|
| 60,000 |
|
|
| 49,955 |
|
|
| 60,000 |
|
|
| 42,647 |
|
3.51% senior notes due January 19, 2033 |
|
| 240,000 |
|
|
| 200,698 |
|
|
| — |
|
|
| — |
|
Credit Line due June 30, 2024 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Bank notes payable |
|
| 8,068 |
|
|
| 8,068 |
|
|
| 3,292 |
|
|
| 3,292 |
|
|
| 1,022,068 |
|
|
| 948,641 |
|
|
| 1,083,292 |
|
|
| 1,045,874 |
| |
Unamortized debt discounts and issuance costs (b) |
|
| (5,473 | ) |
|
| — |
|
|
| (3,674 | ) |
|
| — |
|
| $ | 1,016,595 |
|
| $ | 948,641 |
|
| $ | 1,079,618 |
|
| $ | 1,045,874 |
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Borrowings on bank credit facilities | $ | 582,277 | $ | 1,351,158 | $ | 2,302,433 | ||||||
Payments on bank credit facilities | (332,253 | ) | (1,768,534 | ) | (2,380,888 | ) | ||||||
$ | 250,024 | $ | (417,376 | ) | $ | (78,455 | ) |
The aggregate payments due on the long-term debt in each of the next five years were as follows (in thousands):
2024 |
| $ | 8,068 |
|
2025 |
|
| 32,500 |
|
2026 |
|
| 56,250 |
|
2027 |
|
| 125,250 |
|
2028 |
|
| 500,000 |
|
Thereafter |
|
| 300,000 |
|
| $ | 1,022,068 |
|
2021 | 40 | |||
2022 | 0 | |||
2023 | 381,250 | |||
2024 | 593,750 | |||
2025 | 0 | |||
Thereafter | 500,000 | |||
$ | 1,475,040 |
TheAt the beginning of 2022, the Company hashad an amended and restated credit agreement (“(the “2024 Credit Agreement”) with a group of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, allowingthat allowed for an $850,000,000850 million unsecured revolving credit facility (“(the “2024 Revolving Credit Facility”) and an unsecured term loan (“(the “2024 Term Loan”) with a maturity date of March 27, 2024. The 2024 Term Loan was prepayable, in whole or in part, without penalty.
On July 29, 2022, the Company entered into a new credit agreement (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 unsecured revolving credit facility (the “2027 Revolving Credit Facility”) and a $250 million unsecured term loan (the “2027 Term Loan”) with a maturity date of July 29, 2027. The 2027 Credit Agreement replaced the 2024 Credit Agreement. In conjunction with entering into the 2027 Credit Agreement, on July 29, 2022, the Company borrowed $35 million under the 2027 Revolving Credit Facility and $250 million under the 2027 Term Loan to repay borrowings under the 2024 Term Loan. In the fourth quarter of 2022, the Company repaid $80.0 million under the 2027 Term Loan prior to scheduled maturities. As a result, no repayments are required until June 30, 2025. Outstanding letters of credit under the 2027 Revolving Credit Facility were $6,000 and available borrowing capacity was $456.0 million as of December 31, 2023.
The 2027 Term Loan is repayable in quarterly installments, with no repayments until June 30, 2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable upon maturity, assuming no prepayment. The 2027 Term Loan is prepayable, in whole or in part, without penalty. The 2027 Credit Agreement provides for a variable interest rate based on the London interbank offered rateSecured Overnight Financing Rate (“LIBOR”SOFR”) or a base rate calculated with reference to the agent bank’s prime rate quoted by The Wall Street Journal, the Federal Reserve Bank of New York Rate plus 0.5%, or the adjusted SOFR rate for a one month interest period plus 1.0%, among other factors (the “Alternate Base Rate”). The interest rate varies with the Company’s credit rating and is currently 112.5137.5 basis points over LIBORSOFR or 12.537.5 basis points over the Alternate Base Rate. The Term Loan is repayable in quarterly installments currently scheduled to commence September 30, 2023, in increasing percentages of the original principal amount of the loan, with $343,750,000 due on March 27, 2024. The Term Loan is prepayable, in whole or in part, without penalty. During 2019, the Company repaid $125,000,000 under the Term Loan prior to the originally scheduled installments. The2027 Credit Agreement contains certain financial covenants including an interest coverage ratio and a debt-to-capitalization ratio. In addition to financial covenants, the 2027 Credit Agreement contains covenants that, subject to exceptions, restrict debt incurrence, mergers and acquisitions, sales of assets, dividends and investments, liquidations and dissolutions, capital leases, transactions with affiliates, and changes in lines of business. The 2027 Credit Agreement specifies certain events of default, upon the occurrence of which the maturity of the outstanding loans may be accelerated, including the failure to pay principal or interest, violation of covenants and default on other indebtedness,
63
among other events. Borrowings under the 2027 Credit Agreement may be used for general corporate purposes including acquisitions. As of December 31, 2020, the Company was in compliance with all Credit Agreement covenants. The 2027 Revolving Credit Facility includes a $25,000,00025 million commitment which may be used for standby letters of credit. Outstanding letters
The Company has $500 million of credit under the Revolving Credit Facility were $5,063,000 as of December 31, 2020.4.2
On February 3, 2022, the Company used the proceeds fromentered into a note purchase agreement for the issuance of $300 million of unsecured senior notes with a group of institutional investors, consisting of $60 million of 3.46% series A notes (“Series A Notes”) and $240 million of 3.51% series B notes (“Series B Notes”), each due January 19, 2033 (collectively, the 2028 Notes to fund the acquisition of Higman.“2033 Notes”). The remaining net proceeds of the sale of the 2028Series A Notes were used forissued on October 20, 2022, and the repayment of indebtedness under the Company’s bank credit facilities.
The Company has a $10,000,000$10.0 million line of credit (“Credit Line”) with Bank of America, N.A. (“Bank of America”) for short-term liquidity needs and letters of credit, with a maturity date of June 30, 2021.2024. The Credit Line allows the Company to borrow at an interest rate agreed to by Bank of America and the Company at the time each borrowing is made or continued. The Company had no borrowings outstanding under the Credit Line as of December 31, 2020.2023. Outstanding letters of credit under the Credit Line were $1,007,000$7.3 million and available borrowing capacity was $2.7 million as of December 31, 2020.
The Company also had $40,000 $8.1 million and $16,0003.3 million of short-term securedunsecured loans outstanding, as of December 31, 20202023 and 2019,2022, respectively, related to its South AmericanColombia operations.
As of December 31, 2020,2023, the Company was in compliance with all covenants under its debt instrumentsinstruments..
(6) Leases
The Company currently leases various facilities and equipment under cancelable and noncancelable operating leases. The accounting for the Company’s leases may require judgments, which include determining whether a contract contains a lease, allocating the consideration between lease and non-lease components, and determining the incremental borrowing rates. Leases with an initial noncancelable term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. The Company has also elected to combine lease and non-lease components on all classes of leased assets, except for leased towing vessels for which the Company estimates approximately 70%70% of the costs relate to service costs and other non-lease components. Variable lease costs relate primarily to real estate executory costs (i.e. taxes, insurance and maintenance).
Future minimum lease payments under operating leases that have initial noncancelable lease terms in excess of one year were as follows (in thousands):
2024 |
| $ | 38,943 |
|
2025 |
|
| 27,638 |
|
2026 |
|
| 24,945 |
|
2027 |
|
| 22,842 |
|
2028 |
|
| 18,318 |
|
Thereafter |
|
| 79,755 |
|
Total lease payments |
|
| 212,441 |
|
Less: imputed interest |
|
| (40,290 | ) |
Operating lease liabilities |
| $ | 172,151 |
|
64
December 31, | ||||||||
2020 | 2019 | |||||||
2021 | $ | 40,224 | $ | 33,374 | ||||
2022 | 33,543 | 25,911 | ||||||
2023 | 28,012 | 23,098 | ||||||
2024 | 23,578 | 19,162 | ||||||
2025 | 21,261 | 15,330 | ||||||
Thereafter | 96,491 | 92,991 | ||||||
Total lease payments | 243,109 | 209,866 | ||||||
Less: imputed interest | (46,863 | ) | (43,085 | ) | ||||
Operating lease liabilities | $ | 196,246 | $ | 166,781 |
The following table summarizes lease costs (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Operating lease cost |
| $ | 42,821 |
|
| $ | 42,319 |
|
| $ | 40,786 |
|
Variable lease cost |
|
| 2,376 |
|
|
| 1,780 |
|
|
| 1,793 |
|
Short-term lease cost |
|
| 30,005 |
|
|
| 25,365 |
|
|
| 17,914 |
|
Sublease income |
|
| (3,223 | ) |
|
| (305 | ) |
|
| (1,032 | ) |
Total lease cost |
| $ | 71,979 |
|
| $ | 69,159 |
|
| $ | 59,461 |
|
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
Operating lease cost | $ | 43,810 | $ | 39,064 | ||||
Variable lease cost | 1,550 | 2,326 | ||||||
Short-term lease cost | 25,387 | 31,340 | ||||||
Sublease income | (1,143 | ) | (420 | ) | ||||
Total lease cost | $ | 69,604 | $ | 72,310 |
The following table summarizes other supplemental information about the Company’s operating leases:
|
| December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Weighted average discount rate |
|
| 4.4 | % |
|
| 4.1 | % |
|
| 3.8 | % |
Weighted average remaining lease term |
| 9 years |
|
| 9 years |
|
| 9 years |
|
December 31, | ||||||||
2020 | 2019 | |||||||
Weighted average discount rate | 4.1 | % | 4.0 | % | ||||
Weighted average remaining lease term | 10 years | 11 years |
(7) Impairments and Other Charges
During the 2020 firstthird quarter Kirby’sof 2021, the Company decided to exit the Hawaii marine transportation market, capitalization declined significantly compared to the 2019 fourth quarter. Over the same period, the overall United States stock market also declined significantly amid market volatility.selling marine transportation equipment including four coastal tank barges, seven coastal tugboats, and certain other assets for aggregate cash proceeds of $17.2 million. In addition, as of September 30, 2021, the Company retired and classified as held for sale, an additional 12 coastal tank barges and four coastal tugboats which were underutilized. The sales and retirements of coastal marine transportation equipment resulted in an aggregate non‑cash impairment charge of $97.5 million to reduce the carrying value of these assets to their estimated sales prices, net of costs to sell.
As a result of uncertainty surrounding the outbreak of COVID-19 and a sharp decline in oil prices during the 2020 first quarter, manysale of the Company’s oil and gas customers responded by quickly cutting 2020 capital spending budgets and activity levels quickly declined. Lower activity levels have resulted in a decline in drilling activity, resulting in lower demand for new and remanufactured oilfieldHawaii marine transportation equipment, and related partsthe decision to retire certain additional underutilized coastal tank barges and service in the distribution and services segment. As a result,tugboats, the Company concluded that a triggering event had occurred and performed interim quantitative impairment tests as of March 31, 2020September 30, 2021 for certain of the distribution and services segment’sKMT’s long-lived assets and goodwill.
The Company determined the estimated fair value of such long-lived assets using a combination of a cost approach, a discounted cash flow analysis, and a market approach. The Company determined the estimated fair value of the reporting unitsunit using a combination of a discounted cash flow analysis and a market approach for comparable companies. This analysisThese analyses included management’s judgment regarding short-term and long-term internal forecasts, updated for recent events, appropriate discount rates, and capital expenditures using inputs characteristic of a Level 3 fair value measurement.
In performing the impairment test of certain long-lived assets within the distribution and services segment,KMT, the Company determined that the carrying value of certain long-lived assets, including propertycertain coastal marine transportation equipment and equipment as well as intangibleoperating lease right-of-use assets, associated with customer relationships, tradenames, and distributorships, were no longer recoverable, resulting in ana non-cash impairment charge of $165,304,00024.2 (including $148,909,000 impairment of intangible assets other than goodwill and $16,395,000 impairment of property and equipment)million during the three months ended September 30, 2021 to reduce such long-lived assets to fair value during the three months ended March 31, 2020.
Based upon the results of the goodwill impairment test, the Company concluded that the carrying value of one reporting unit in the distribution and services segmentKMT exceeded its estimated fair value. For the three months ended March 31, 2020, the goodwill impairment charge of $387,970,000 was calculated as the amount that theThe carrying value of the reporting unit, including goodwill, and after recording impairments of long-lived assets identified above, exceeded its estimated fair value, incorporating all tax impacts caused by the recognition of the impairment loss.
(8) Stock Award Plans
The Company has share-based compensation plans which are described below. The compensation cost that has been charged against earnings for the Company’s stock award plans and the income tax benefit recognized in the statement of earnings for stock awards were as follows (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Compensation cost |
| $ | 14,941 |
|
| $ | 13,865 |
|
| $ | 15,713 |
|
Income tax benefit |
| $ | 3,616 |
|
| $ | 3,533 |
|
| $ | 4,410 |
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Compensation cost | $ | 14,722 | $ | 13,612 | $ | 19,104 | ||||||
Income tax benefit | $ | 4,143 | $ | 3,368 | $ | 5,903 |
The Company has an employee stock award plan for selected officers and other key employees which provides for the issuance of RSUs, stock options, restricted stock awards, and performance awards. On February 19, 2018, the employee stock award plan was amended to also allow for the granting of RSUs to selected officers and other key employees. Restricted stock and RSUs generally vest ratably over five years, however, the amendment includedplan includes a provision for the continued vesting of unvested stock options and RSUs for employees who meet certain
65
years of service and age requirements at the time of their retirement. The vesting change resultedprovision results in shorter expense accrual periods on stock options and RSUs granted after February 19, 2018 to employees who are nearing retirement and meet the service and age requirements.
The exercise price for each option equals the fair market value per share of the Company’s common stock on the date of grant. Substantially all stock options outstanding under the plan have terms of seven years and vest ratably over three years.years. No performance awards payable in stock have been awarded under the plan. At December 31, 2020, 1,100,687 shares were available for future grants under the employee plan and 0no outstanding stock options under the employee plan were issued with stock appreciation rights.
The following is a summary of the stock option activity under the employee plan described above:
|
| Outstanding |
|
| Weighted |
| ||
Outstanding at December 31, 2022 |
|
| 396,165 |
|
| $ | 70.06 |
|
Exercised |
|
| (117,896 | ) |
| $ | 60.84 |
|
Expired |
|
| (23,024 | ) |
| $ | 73.66 |
|
Outstanding at December 31, 2023 |
|
| 255,245 |
|
| $ | 74.00 |
|
Outstanding Non- Qualified or Nonincentive Stock Awards | Weighted Average Exercise Price | |||||||
Outstanding at December 31, 2019 | 486,059 | $ | 71.65 | |||||
Granted | 114,600 | $ | 73.29 | |||||
Exercised | (19,851 | ) | $ | 64.42 | ||||
Canceled or expired | (3,291 | ) | $ | 95.18 | ||||
Outstanding at December 31, 2020 | 577,517 | $ | 72.09 |
The following table summarizes information about the Company’s outstanding and exercisable stock options under the employee plan at December 31, 2020:2023:
|
| Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||||||||||
Range of Exercise |
| Number |
|
| Weighted |
|
| Weighted |
|
| Aggregated |
|
| Number |
|
| Weighted |
|
| Aggregated |
| |||||||
$64.89 |
|
| 15,500 |
|
|
| 1.3 |
|
| $ | 64.89 |
|
|
|
|
|
| 15,500 |
|
| $ | 64.89 |
|
|
|
| ||
$73.29 – $75.50 |
|
| 233,040 |
|
|
| 2.1 |
|
| $ | 74.29 |
|
|
|
|
|
| 233,040 |
|
| $ | 74.29 |
|
|
|
| ||
$84.90 |
|
| 6,705 |
|
|
| 2.3 |
|
| $ | 84.90 |
|
|
|
|
|
| 6,705 |
|
| $ | 84.90 |
|
|
|
| ||
$64.89 – $84.90 |
|
| 255,245 |
|
|
| 2.0 |
|
| $ | 74.00 |
|
| $ | 1,187 |
|
|
| 255,245 |
|
| $ | 74.00 |
|
| $ | 1,187 |
|
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life in Years | Weighted Average Exercise Price | Aggregated Intrinsic Value | Number Exercisable | Weighted Average Exercise Price | Aggregated Intrinsic Value | |||||||||||||||||||||||
$ | 51.23 | 62,315 | 2.1 | $ | 51.23 | - | 62,315 | $ | 51.23 | - | ||||||||||||||||||||
$ | 64.65 – $68.50 | 94,218 | 3.5 | $ | 67.26 | 63,218 | $ | 68.43 | ||||||||||||||||||||||
$ | 73.29 – $75.50 | 380,289 | 4.6 | $ | 74.32 | 157,176 | $ | 74.98 | ||||||||||||||||||||||
$ | 84.90 – $101.46 | 40,695 | 1.0 | $ | 94.31 | 36,225 | $ | 95.47 | ||||||||||||||||||||||
$ | 51.23 – $101.46 | 577,517 | 3.9 | $ | 72.09 | $ | 37,000 | 318,934 | $ | 71.37 | $ | 37,000 |
There were no unvested restricted stock award activityawards under the employee plan described above:
Unvested Restricted Stock Award Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
Nonvested balance at December 31, 2019 | 134,669 | $ | 63.28 | |||||
Vested | (48,450 | ) | $ | 63.24 | ||||
Forfeited | (2,317 | ) | $ | 62.46 | ||||
Nonvested balance at December 31, 2020 | 83,902 | $ | 63.33 |
The following is a summary of RSU activity under the employee plan described above:
|
| Unvested RSUs |
|
| Weighted |
| ||
Nonvested balance at December 31, 2022 |
|
| 558,819 |
|
| $ | 62.13 |
|
Granted |
|
| 184,440 |
|
| $ | 72.23 |
|
Vested |
|
| (161,550 | ) |
| $ | 64.85 |
|
Forfeited |
|
| (27,105 | ) |
| $ | 63.68 |
|
Nonvested balance at December 31, 2023 |
|
| 554,604 |
|
| $ | 64.61 |
|
Unvested RSUs | Weighted Average Grant Date Fair Value Per Unit | |||||||
Nonvested balance at December 31, 2019 | 255,167 | $ | 74.96 | |||||
Granted | 153,460 | $ | 73.04 | |||||
Vested | (64,039 | ) | $ | 75.08 | ||||
Forfeited | (6,170 | ) | $ | 73.91 | ||||
Nonvested balance at December 31, 2020 | 338,418 | $ | 74.09 |
The weighted average grant date fair value of RSUs granted for the years ended December 31, 2020, 2019,2023, 2022, and 20182021 was $73.04, $74.46,$72.23, $66.13, and $75.59,$51.36, respectively.
During January 2021,February 2024, the Company granted 309,506164,793 RSUs to selected officers and other key employees under its employee stock award plan, the majority of which substantially all vest ratably over five years.
The Company has a stock award plan for nonemployee directors of the Company which provides for the issuance of stock options and restricted stock. The director plan provides for automatic grants of restricted stock to nonemployee directors after each annual meeting of stockholders. In addition, the director plan allows for the issuance of stock options or restricted stock in lieu of cash for all or part of the annual director fee at the option of the director. The exercise prices for all options granted under the plan are equal to the fair market value per share of the Company’s common stock on the date of grant. The terms of the options are ten years.years. The restricted
66
stock issued after each annual meeting of stockholders vests six months after the date of grant. Options granted and restricted stock issued in lieu of cash director fees vest in equal quarterly increments during the year to which they relate. At December 31, 2020, 421,2202023, 369,360 shares were available for future grants under the director plan. The director stock award plan is intended as an incentive to attract and retain qualified independent directors.
The following is a summary of the stock option activity under the director plan described above:
|
| Outstanding |
|
| Weighted |
| ||
Outstanding at December 31, 2022 |
|
| 56,480 |
|
| $ | 86.19 |
|
Granted |
|
| 3,865 |
|
| $ | 72.83 |
|
Exercised |
|
| — |
|
| $ | — |
|
Expired |
|
| (30,000 | ) |
| $ | 80.04 |
|
Outstanding at December 31, 2023 |
|
| 30,345 |
|
| $ | 90.57 |
|
Outstanding Non- Qualified or Nonincentive Stock Awards | Weighted Average Exercise Price | |||||||
Outstanding at December 31, 2019 | 115,756 | $ | 73.68 | |||||
Exercised | (12,000 | ) | $ | 41.24 | ||||
Outstanding at December 31, 2020 | 103,756 | $ | 77.44 |
The following table summarizes information about the Company’s outstanding and exercisable stock options under the director plan at December 31, 2020:2023:
|
| Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||||||||||
Range of Exercise |
| Number |
|
| Weighted |
|
| Weighted |
|
| Aggregate |
|
| Number |
|
| Weighted |
|
| Aggregate |
| |||||||
$70.65 – $73.57 |
|
| 7,053 |
|
|
| 6.6 |
|
| $ | 71.85 |
|
|
|
|
|
| 6,278 |
|
| $ | 71.75 |
|
|
|
| ||
$84.90 – $85.30 |
|
| 5,292 |
|
|
| 4.8 |
|
| $ | 85.10 |
|
|
|
|
|
| 5,292 |
|
| $ | 85.10 |
|
|
|
| ||
$99.52 |
|
| 18,000 |
|
|
| 0.3 |
|
| $ | 99.52 |
|
|
|
|
|
| 18,000 |
|
| $ | 99.52 |
|
|
|
| ||
$70.65 – $99.52 |
|
| 30,345 |
|
|
| 2.6 |
|
| $ | 90.57 |
|
| $ | 47 |
|
|
| 29,570 |
|
| $ | 91.04 |
|
| $ | 42 |
|
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life in Years | Weighted Average Exercise Price | Aggregate Intrinsic Value | Number Exercisable | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||||||||||||||||
$ | 56.45 | 13,276 | 0.3 | $ | 56.45 | - | 13,276 | $ | 56.45 | - | ||||||||||||||||||||
$ | 61.89 – $62.48 | 22,000 | 1.6 | $ | 62.21 | 22,000 | $ | 62.21 | ||||||||||||||||||||||
$ | 70.65 – $99.52 | 68,480 | 3.4 | $ | 86.39 | 68,480 | $ | 86.39 | ||||||||||||||||||||||
$ | 56.45 – $99.52 | 103,756 | 2.6 | $ | 77.44 | $ | 0 | 103,756 | $ | 77.44 | $ | 0 |
The following is a summary of the restricted stock award activity under the director plan described above:
|
| Unvested |
|
| Weighted |
| ||
Nonvested balance at December 31, 2022 |
|
| 1,698 |
|
| $ | 65.36 |
|
Granted |
|
| 31,526 |
|
| $ | 72.67 |
|
Vested |
|
| (32,604 | ) |
| $ | 72.29 |
|
Nonvested balance at December 31, 2023 |
|
| 620 |
|
| $ | 72.65 |
|
Unvested Restricted Stock Award Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
Nonvested balance at December 31, 2019 | 1,739 | $ | 83.68 | |||||
Granted | 39,913 | $ | 49.84 | |||||
Vested | (40,748 | ) | $ | 51.28 | ||||
Nonvested balance at December 31, 2020 | 904 | $ | 49.84 |
The weighted average grant date fair value of restricted stock awards granted under the director plan for the years ended December 31, 2020, 2019,2023, 2022, and 20182021 were $49.84, $84.81,$72.67, $64.61, and $85.70,$65.13, respectively.
The total intrinsic value of all stock options exercised under all of the Company’s plans was $745,000, $1,655,000$1.5 million, $0.4 million, and $6,709,000$0.1 million for the years ended December 31, 2020, 2019,2023, 2022, and 2018,2021, respectively. The actual tax benefit realized for tax deductions from stock option exercises was $210,000, $410,000, and $2,073,000 for the years ended December 31, 2020, 2019, and 2018, respectively.
The total fair value of all the restricted stock vestings under all of the Company’s plans was $5,649,000, $5,917,000,$2.5 million, $3.2 million, and $12,936,000$5.3 million for the years ended December 31, 2020, 2019,2023, 2022, and 2018,2021, respectively. The actual tax benefit realized for tax deductions from restricted stock vestings was $1,590,000, $1,464,000,$0.6 million, $0.8 million, and $3,997,000$1.5 million for the years ended December 31, 2020, 2019,2023, 2022, and 2018,2021, respectively.
The total fair value of all the RSU vestings under the Company’s employee plan was $5,172,000$10.9 million, $9.5 million, and $1,727,000$4.4 million for the years ended December 31, 20202023, 2022, and 2019,2021, respectively. The actual tax benefit realized for tax deductions from RSU vestings was $1,455,000$2.6 million, $2.4 million, and $427,000$1.2 million for the years ended December 31, 20202023, 2022, and 2019,2021, respectively. There were 0 RSU vestings for the year ended December 31, 2018.
67
As of December 31, 2020,2023, there was $2,136,000$45,000 of unrecognized compensation cost related to nonvested stock options, $1,468,000 related to restricted stock and $13,298,000$15.3 million related to nonvested RSUs. The restricted stock options areis expected to be recognized over a weighted average period of approximately 1.7 years, restricted stock over approximately 0.60.2 years and RSUs over approximately 3.32.7 years.
There were no stock options granted under the employee plan during the years ended December 31, 2023, 2022, and 2021. The weighted average per share fair value of stock options granted under the director plan during the year ended December 31, 2023 was $32.33 and the fair value of the stock options was $0.1 million. There were no stock options granted under the director plan during the years ended December 31, 2020, 2019,2022 and 2018 was $20.19, $22.77, and $23.53, respectively. The fair value of the stock options granted during the years ended December 31, 2020, 2019, and 2018 was $2,314,000, $2,666,000, and $2,787,000, respectively.2021. The Company currently uses treasury stock shares for restricted stock grants, RSU vestings, and stock option exercises. The fair value of each stock option was determined using the Black-Scholes option pricing model.
The key input variables used in valuing the stock options granted were as follows:
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Dividend yield | NaN | NaN | NaN | |||||||||
Average risk-free interest rate | 1.3 | % | 2.5 | % | 2.7 | % | ||||||
Stock price volatility | 28 | % | 28 | % | 27 | % | ||||||
Estimated option term | 5.3 years | 5.3 years | 5.5 years |
Year Ended December 31, | ||||
2023 | ||||
Dividend yield | None | |||
Average risk-free interest rate | 3.7 | % | ||
Stock price volatility | 35 | % | ||
Estimated option term | 7 years |
(9) Taxes on Income
Earnings (loss) before taxes on income and details of the provision (benefit) for taxes on income were as follows (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Earnings (loss) before taxes on income: |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 293,011 |
|
| $ | 164,590 |
|
| $ | (290,181 | ) |
Foreign |
|
| 1,114 |
|
|
| 385 |
|
|
| (420 | ) |
| $ | 294,125 |
|
| $ | 164,975 |
|
| $ | (290,601 | ) | |
|
|
|
|
|
|
|
|
|
| |||
Provision (benefit) for taxes on income: |
|
|
|
|
|
|
|
|
| |||
U.S. Federal: |
|
|
|
|
|
|
|
|
| |||
Current |
| $ | (41 | ) |
| $ | 513 |
|
| $ | (460 | ) |
Deferred |
|
| 61,205 |
|
|
| 34,980 |
|
|
| (48,843 | ) |
| $ | 61,164 |
|
| $ | 35,493 |
|
| $ | (49,303 | ) | |
U.S. State: |
|
|
|
|
|
|
|
|
| |||
Current |
| $ | 5,498 |
|
| $ | 3,793 |
|
| $ | 1,560 |
|
Deferred |
|
| 4,093 |
|
|
| 2,802 |
|
|
| 4,424 |
|
| $ | 9,591 |
|
| $ | 6,595 |
|
| $ | 5,984 |
| |
Foreign: |
|
|
|
|
|
|
|
|
| |||
Current |
| $ | 465 |
|
| $ | 126 |
|
| $ | (511 | ) |
| $ | 465 |
|
| $ | 126 |
|
| $ | (511 | ) | |
Consolidated: |
|
|
|
|
|
|
|
|
| |||
Current |
| $ | 5,922 |
|
| $ | 4,432 |
|
| $ | 589 |
|
Deferred |
|
| 65,298 |
|
|
| 37,782 |
|
|
| (44,419 | ) |
| $ | 71,220 |
|
| $ | 42,214 |
|
| $ | (43,830 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Earnings (loss) before taxes on income: | ||||||||||||
United States | $ | (461,569 | ) | $ | 190,839 | $ | 117,800 | |||||
Foreign | 218 | (1,019 | ) | (3,641 | ) | |||||||
$ | (461,351 | ) | $ | 189,820 | $ | 114,159 | ||||||
Provision (benefit) for taxes on income: | ||||||||||||
U.S. Federal: | ||||||||||||
Current | $ | (218,613 | ) | $ | (312 | ) | $ | 0 | ||||
Deferred | 37,436 | 45,133 | 27,102 | |||||||||
$ | (181,177 | ) | $ | 44,821 | $ | 27,102 | ||||||
U.S. State: | ||||||||||||
Current | $ | 3,421 | $ | 76 | $ | (243 | ) | |||||
Deferred | (12,273 | ) | 1,706 | 7,619 | ||||||||
$ | (8,852 | ) | $ | 1,782 | $ | 7,376 | ||||||
Foreign: | ||||||||||||
Current | $ | 270 | $ | 198 | $ | 443 | ||||||
Deferred | 0 | 0 | 160 | |||||||||
$ | 270 | $ | 198 | $ | 603 | |||||||
Consolidated: | ||||||||||||
Current | $ | (214,922 | ) | $ | (38 | ) | $ | 200 | ||||
Deferred | 25,163 | 46,839 | 34,881 | |||||||||
$ | (189,759 | ) | $ | 46,801 | $ | 35,081 |
On March 27, 2020,November 13, 2021, the United States Congress passedvoters of the state of Louisiana approved a constitutional amendment that removed the corporate tax deduction for federal income taxes paid and lowered the President signedcorporate income tax rate from 8% to 7.5% effective January 1, 2022. The result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into lawamendment was an increase in the effective Louisiana state income tax rate, net of deduction for federal income tax, from 6.3% to address7.5%. As a result of the COVID-19 pandemic. Oneamendment, the Company recognized a one-time deferred tax provision of $5.7 million during the CARES Act allows net operating losses generated in 2018 through 2020 to be carried back up to five years. Pursuant to this provisionfourth quarter of the CARES Act, the Company recorded a net federal current benefit for taxes on income for the year ended December 31, 20202021 due to carrying back net operating losses generated between 2018remeasuring the Company’s Louisiana and 2020 used to offset taxable income generated between 2013 and 2017. Net operating losses carried back to tax years 2013 through 2017 are applied at a federal tax rate of 35% applicable to those tax years, compared to a 21% tax rate effective at December 31, 2020. Net operating losses generated in 2018 and 2019 were used to offset taxable income generated between 2013 and 2017 taxed at 35% resulting in a tax benefit of $59,659,000 and a decrease in the company’sU.S. deferred tax asset related to federal net operating losses of $assets and liabilities based on the new effective Louisiana state income tax rate.88,292,000
. During the year ended December 31, 2020,2021, the Company received a tax refund of $30,606,000119.5 million, including accrued interest, for its 20182019 tax return related to net operating losses being carried back to offset taxable income generated during 2013. between 2014 and 2017.
At December 31, 2020,2022, the Company had a federal income tax receivable of $188,177,00070.4 million, included in Accounts Receivable – Other on the balance sheet. During February 2021,In April 2023, the Company received aits tax refund of $119,493,000, including$70.4 million plus accrued interest, for its 2019 tax return.interest.
68
The Company’s provision (benefit) for taxes on income varied from the statutory federal income tax rate due to the following:
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
United States income tax statutory rate |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
State and local taxes, net of federal benefit |
|
| 2.6 |
|
|
| 3.1 |
|
|
| (1.7 | ) |
Other – net |
|
| 0.6 |
|
|
| 1.5 |
|
|
| (4.2 | ) |
|
| 24.2 | % |
|
| 25.6 | % |
|
| 15.1 | % |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
United States income tax statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
State and local taxes, net of federal benefit | 1.2 | 0.7 | 6.5 | |||||||||
CARES Act – net operating loss carryback | 21.3 | 0 | 0 | |||||||||
Other – net | (2.4 | ) | 3.0 | 3.2 | ||||||||
41.1 | % | 24.7 | % | 30.7 | % |
The tax effects of temporary differences that give rise to significant portions of the non-current deferred tax assets and liabilities were as follows (in thousands):
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Allowance for doubtful accounts |
| $ | 1,549 |
|
| $ | 1,556 |
|
Inventory |
|
| 10,500 |
|
|
| 11,679 |
|
Insurance accruals |
|
| 6,077 |
|
|
| 4,856 |
|
Deferred compensation |
|
| 11,441 |
|
|
| 7,703 |
|
Unrealized gain on defined benefit plans |
|
| (9,982 | ) |
|
| (5,532 | ) |
Goodwill and other intangibles |
|
| 39,719 |
|
|
| 52,847 |
|
Operating loss carryforwards |
|
| 52,082 |
|
|
| 79,699 |
|
Retirement benefits |
|
| 3,548 |
|
|
| 5,472 |
|
Other |
|
| 13,467 |
|
|
| 9,962 |
|
|
| 128,401 |
|
|
| 168,242 |
| |
Valuation allowances |
|
| (22,073 | ) |
|
| (19,960 | ) |
|
| 106,328 |
|
|
| 148,282 |
| |
Deferred tax liabilities: |
|
|
|
|
|
| ||
Property |
|
| (695,233 | ) |
|
| (671,830 | ) |
Deferred state taxes |
|
| (90,457 | ) |
|
| (87,445 | ) |
Other |
|
| (17,195 | ) |
|
| (14,891 | ) |
|
| (802,885 | ) |
|
| (774,166 | ) | |
| $ | (696,557 | ) |
| $ | (625,884 | ) |
December 31, | ||||||||
2020 | 2019 | |||||||
Deferred tax assets: | ||||||||
Allowance for doubtful accounts | $ | 1,793 | $ | 1,758 | ||||
Inventory | 13,496 | 13,401 | ||||||
Insurance accruals | 4,864 | 4,397 | ||||||
Deferred compensation | 6,040 | 1,109 | ||||||
Unrealized loss on defined benefit plans | 15,929 | 10,253 | ||||||
Goodwill and other intangibles | 44,487 | 0 | ||||||
Operating loss carryforwards | 82,186 | 143,181 | ||||||
Pension benefits | 7,444 | 6,825 | ||||||
Other | 5,480 | 7,392 | ||||||
181,719 | 188,316 | |||||||
Valuation allowances | (18,025 | ) | (20,525 | ) | ||||
163,694 | 167,791 | |||||||
Deferred tax liabilities: | ||||||||
Property | (678,916 | ) | (620,891 | ) | ||||
Deferred state taxes | (74,468 | ) | (63,640 | ) | ||||
Goodwill and other intangibles | 0 | (54,844 | ) | |||||
Other | (17,154 | ) | (16,620 | ) | ||||
(770,538 | ) | (755,995 | ) | |||||
$ | (606,844 | ) | $ | (588,204 | ) |
During 2020,2023, the Company generated a federal taxtaxable income which was completely offset by federal net operating loss mainly caused by taking the full cost deduction of purchased fixed assets.carryforwards. The Company had federal operating loss deferred tax assets of $53,498,000 has been recorded$19.8 million and $47.9 million at December 31, 2020.
The Company had state operating loss deferred tax assets of $23,482,000 in 2020$27.2 million and $17,282,000 in 2019.$26.6 million at December 31, 2023 and 2022, respectively. The valuation allowance for state deferred tax assets as of December 31, 20202023 and 20192022 was $12,819,000$17.0 million and $11,760,000,$14.8 million, respectively, related to the Company’s state net operating loss carryforwards based on the Company’s determination that it is more likely than not that the deferred tax assets will not be realized. Expiration of these state net operating loss carryforwards vary by state through 20402030 and none will expire in fiscal 2021.
As of December 31, 2020,2023 and 2022, the Company had a Canadian net operating loss carryforward of $5,206,000$5.1 million which expires between 2037 and 20402043. A full valuation allowance has been provided for this asset.
The Company or one of its subsidiaries files income tax returns in the United States federal jurisdiction and various state jurisdictions. TheDuring the first quarter of 2023, the Internal Revenue Service (“IRS”) communicated to the Company that it had completed its examination of the Company’s federal income tax returns for the years 20172013 through 2019 2020tax years are currently under examination.. With few exceptions, the Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the 20142017 through 20192022 tax years.
As of December 31, 2020,2023, the Company has provided a liability of $971,000$0.8 million for unrecognized tax benefits related to various income tax issues which includes interest and penalties. The amount that would impact the Company’s effective tax rate, if recognized, is $790,000,$0.7 million, with the difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate being primarily related to the federal tax benefit of state income tax items. It is not reasonably possible to determine if the liability for unrecognized tax benefits will significantly change prior to December 31, 20212024 due to the uncertainty of possible examination results.
69
A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows (in thousands):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Balance at beginning of year |
| $ | 662 |
|
| $ | 737 |
|
| $ | 783 |
|
Additions based on tax positions related to the current year |
|
| — |
|
|
| 13 |
|
|
| 13 |
|
Additions for tax positions of prior years |
|
| — |
|
|
| 66 |
|
|
| 281 |
|
Reductions for tax positions of prior years |
|
| (14 | ) |
|
| (154 | ) |
|
| (340 | ) |
Balance at end of year |
| $ | 648 |
|
| $ | 662 |
|
| $ | 737 |
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Balance at beginning of year | $ | 883 | $ | 1,443 | $ | 1,787 | ||||||
Additions based on tax positions related to the current year | 262 | 51 | 254 | |||||||||
Additions for tax positions of prior years | 114 | 58 | 70 | |||||||||
Reductions for tax positions of prior years | (266 | ) | (669 | ) | (668 | ) | ||||||
Settlements | (210 | ) | 0 | 0 | ||||||||
Balance at end of year | $ | 783 | $ | 883 | $ | 1,443 |
The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. The Company recognized net benefit of $90,000, $71,000, and $209,000 in interest and penalties for the years ended December 31,2020,2019, and 2018, respectively. The Company had $172,0000.2 and $289,000million of accrued liabilities for the payment of interest and penalties at both December 31, 20202023 and 2019, respectively.2022.
(10) Earnings Per Share
The following table presents the components of basic and diluted earnings (loss) per share (in thousands, except per share amounts):
|
| Year Ended December 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Net earnings (loss) attributable to Kirby |
| $ | 222,935 |
|
| $ | 122,291 |
|
| $ | (246,954 | ) |
Undistributed earnings allocated to restricted shares |
|
| (62 | ) |
|
| (33 | ) |
|
| — |
|
Earnings (loss) available to Kirby common stockholders — basic |
|
| 222,873 |
|
|
| 122,258 |
|
|
| (246,954 | ) |
Undistributed earnings allocated to restricted shares |
|
| 62 |
|
|
| 33 |
|
|
| — |
|
Undistributed earnings reallocated to restricted shares |
|
| (62 | ) |
|
| (33 | ) |
|
| — |
|
Earnings (loss) available to Kirby common stockholders — diluted |
| $ | 222,873 |
|
| $ | 122,258 |
|
| $ | (246,954 | ) |
|
|
|
|
|
|
|
|
|
| |||
Shares outstanding: |
|
|
|
|
|
|
|
|
| |||
Weighted average common stock issued and outstanding |
|
| 59,548 |
|
|
| 60,055 |
|
|
| 60,099 |
|
Weighted average unvested restricted stock |
|
| (17 | ) |
|
| (17 | ) |
|
| (46 | ) |
Weighted average common stock outstanding — basic |
|
| 59,531 |
|
|
| 60,038 |
|
|
| 60,053 |
|
Dilutive effect of stock options and restricted stock units |
|
| 326 |
|
|
| 291 |
|
|
| — |
|
Weighted average common stock outstanding — diluted |
|
| 59,857 |
|
|
| 60,329 |
|
|
| 60,053 |
|
|
|
|
|
|
|
|
|
|
| |||
Net earnings (loss) per share attributable to Kirby common stockholders: |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | 3.74 |
|
| $ | 2.04 |
|
| $ | (4.11 | ) |
Diluted |
| $ | 3.72 |
|
| $ | 2.03 |
|
| $ | (4.11 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Net earnings (loss) attributable to Kirby | $ | (272,546 | ) | $ | 142,347 | $ | 78,452 | |||||
Undistributed earnings allocated to restricted shares | 0 | (369 | ) | (324 | ) | |||||||
Income (loss) available to Kirby common stockholders — basic | (272,546 | ) | 141,978 | 78,128 | ||||||||
Undistributed earnings allocated to restricted shares | 0 | 369 | 324 | |||||||||
Undistributed earnings reallocated to restricted shares | 0 | (369 | ) | (323 | ) | |||||||
Income (loss) available to Kirby common stockholders — diluted | $ | (272,546 | ) | $ | 141,978 | $ | 78,129 | |||||
Shares outstanding: | ||||||||||||
Weighted average common stock issued and outstanding | 60,021 | 59,905 | 59,804 | |||||||||
Weighted average unvested restricted stock | (109 | ) | (155 | ) | (247 | ) | ||||||
Weighted average common stock outstanding — basic | 59,912 | 59,750 | 59,557 | |||||||||
Dilutive effect of stock options and restricted stock units | 0 | 159 | 132 | |||||||||
Weighted average common stock outstanding — diluted | 59,912 | 59,909 | 59,689 | |||||||||
Net earnings (loss) per share attributable to Kirby common stockholders: | ||||||||||||
Basic | $ | (4.55 | ) | $ | 2.38 | $ | 1.31 | |||||
Diluted | $ | (4.55 | ) | $ | 2.37 | $ | 1.31 |
Diluted earnings per share was computed using the treasury stock method. Certain outstanding options to purchase approximately 681,000, 187,000,33,000, 381,000, and 384,000567,000 shares of common stock were excluded in the computation of diluted earnings per share as of December 31, 2020, 2019,2023, 2022, and 2018,2021, respectively, as such stock options would have been antidilutive. Certain outstanding RSUs to convert to 11,0007,000 shares of common stock were also excluded in the computation of diluted earnings per share as of December 31, 2020,2021 as such RSUs would have been antidilutive. NaNNo RSUs were antidilutive at December 31, 20192023 and 2022..
(11) Inventories
The following table presents the details of inventories — net (in thousands):
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Finished goods |
| $ | 351,050 |
|
| $ | 358,702 |
|
Work in process |
|
| 103,339 |
|
|
| 103,146 |
|
| $ | 454,389 |
|
| $ | 461,848 |
|
December 31, | ||||||||
2020 | 2019 | |||||||
Finished goods | $ | 255,491 | $ | 291,214 | ||||
Work in process | 54,184 | 60,187 | ||||||
$ | 309,675 | $ | 351,401 |
(12) Retirement Plans
The Company sponsors a defined benefit plan (the “Kirby Pension Plan”) for its inland vessel personnel and shore based tankermen. The plan benefits are based on an employee’s years of service and compensation. The plan assets consist primarily of equity and fixed income securities.
70
On April 12, 2017, the Company amended the Kirby Pension Plan to cease all benefit accruals for periods after May 31, 2017 for certain participants. Participants grandfathered and not impacted were those, as of the close of business on May 31, 2017, who either (a) had completed 15 years of pension service or (b) had attained age 50 and completed 10 years of pension service. Participants non-grandfathered are eligible to receive discretionary 401(k) plan contributions.
On February 14,2018, with the acquisition of Higman Marine, Inc. (“Higman”), the Company assumed Higman’s pension plan (the “Higman Pension Plan”) for its inland vessel personnel and office staff. On March 27,2018, the Company amended the Higman pension planPension Plan to close it to all new entrants and cease all benefit accruals for periods after May 15,2018 for all participants. The Company did not incur any one-time charges related to this amendment but the Higman pension plan’s projected benefit obligation decreased by $3,081,000. The Company made contributions to the Higman pension planPension Plan of $$797,0008.2 in million, $20200.9 million and $0.5 million for the 2019 plan year, $1,438,000 in 2020 for the 2020 plan year, $1,615,000 in 2019 for the 2018 plan year, $1,449,000 in 2019 for the 2019 plan year, $6,717,000 in 2018 for the 2016years ended December 31, 2023, 2022 and 2021, respectively.2017
plan years, and $1,385,000 in 2018 for the 2018 year.
|
| December 31, |
|
| Current | |||||||||
Asset Category |
| 2023 |
|
| 2022 |
|
| Allocation Policy | ||||||
U.S. equity securities |
|
| 51 | % |
|
| 50 | % |
|
| 45 | % | — 50% | — 55% |
International equity securities |
|
| 20 |
|
|
| 20 |
|
|
| 12 | % | — 20% | — 28% |
Debt securities |
|
| 29 |
|
|
| 30 |
|
|
| 20 | % | — 30% | — 40% |
Cash and cash equivalents |
|
| — |
|
|
| — |
|
|
| 0 | % | — 0% | — 0% |
|
| 100 | % |
|
| 100 | % |
|
|
|
|
|
December 31, | Current Minimum, Target and Maximum | |||||||||||
Asset Category | 2020 | 2019 | Allocation Policy | |||||||||
U.S. equity securities | 53 | % | 53 | % | 30% — 50%— 70 | % | ||||||
International equity securities | 20 | 19 | 0% — 20%— 30 | % | ||||||||
Debt securities | 25 | 26 | 15% — 30%— 55 | % | ||||||||
Cash and cash equivalents | 2 | 2 | 0% — 0%— 5 | % | ||||||||
100 | % | 100 | % |
At December 31, 2020 and 2019, $25,032,000 and $25,871,000 respectively,2022, $4.8 million was held in cash as well as debt and equity securities classified within Level 1 of the valuation hierarchy and $138,000 and $125,000, respectively, was held in real estatehierarchy. There were no investments classified within Level 3 of the valuation hierarchy.hierarchy at December 31, 2023 and 2022. All other plan assets are invested in common collective trusts and valued using the net asset value per share practical expedient and therefore not valued within the valuation hierarchy.
The Company’s investment strategy focuses on total return on invested assets (capital appreciation plus dividend and interest income). The primary objective in the investment management of assets is to achieve long-term growth of principal while avoiding excessive risk. Risk is managed through diversification of investments within and among asset classes, as well as by choosing securities that have an establishedinvesting in asset classes offering sufficient liquidity and trading and underlying operating history.
The Company makes various assumptions when determining defined benefit plan costs including, but not limited to, the current discount rate and the expected long-term return on plan assets. Discount rates are determined annually and are based on a yield curve that consists of a hypothetical portfolio of high quality corporate bonds with maturities matching the projected benefit cash flows. The Company assumed that plan assets would generate a long-term rate of return of 6.75%6.75% in 2020both 2023 and 7.0% in 2019.2022. The Company developed its expected long-term rate of return assumption by evaluating input from investment consultants comparing historical returns for various asset classes with its actual and targeted plan investments. The Company believes that its long-term asset allocation, on average, will approximate the targeted allocation.
The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. The plan’s benefit obligations are based on a variety of demographic and economic assumptions, and the pension plan assets’ returns are subject to various risks, including market and interest rate risk, making an accurate prediction of the pension plan contribution difficult. The Company’s pension plan funding was 82%115% of the pension plans’ accumulated benefit obligation at December 31,2020, 2023, including both the Kirby Pension Plan and the Higman Pension Plan.
The Company sponsors an unfunded defined benefit health care plan that provides limited postretirement medical benefits to employees who met minimum age and service requirements, and to eligible dependents. The plan limits cost increases in the Company’s contribution to 4%4% per year. The plan is contributory, with retiree contributions adjusted annually. The plan eliminated coverage for future retirees as of December 31,2011. The Company also has an unfunded defined benefit supplemental executive retirement plan (“SERP”) that was assumed in an acquisition in 1999. That plan ceased to accrue additional benefits effective January 1, 2000.1,
71
2000.
The following table presents the change in benefit obligation and plan assets for the Company’s defined benefit plans and postretirement benefit plan (in thousands) thousands):
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||
|
| Pension Plans |
|
| SERP |
|
| Postretirement Welfare Plan |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Change in benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Benefit obligation at beginning of year |
| $ | 339,509 |
|
| $ | 495,272 |
|
| $ | 833 |
|
| $ | 1,033 |
|
| $ | 432 |
|
| $ | 582 |
|
Service cost |
|
| 3,695 |
|
|
| 6,538 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Interest cost |
|
| 18,356 |
|
|
| 14,779 |
|
|
| 43 |
|
|
| 29 |
|
|
| 22 |
|
|
| 17 |
|
Actuarial (gain) loss |
|
| 13,241 |
|
|
| (158,816 | ) |
|
| 91 |
|
|
| (74 | ) |
|
| 65 |
|
|
| (58 | ) |
Gross benefits paid |
|
| (32,052 | ) |
|
| (12,665 | ) |
|
| (153 | ) |
|
| (155 | ) |
|
| (104 | ) |
|
| (109 | ) |
Settlements |
|
| — |
|
|
| (5,599 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Benefit obligation at end of year |
| $ | 342,749 |
|
| $ | 339,509 |
|
| $ | 814 |
|
| $ | 833 |
|
| $ | 415 |
|
| $ | 432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accumulated benefit obligation at end of year |
| $ | 326,987 |
|
| $ | 325,274 |
|
| $ | 814 |
|
| $ | 833 |
|
| $ | 415 |
|
| $ | 432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted-average assumption used to determine benefit obligation at end of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Discount rate (a) |
| 5.1%/5.2% |
|
|
| 5.5 | % |
|
| 5.1 | % |
|
| 5.5 | % |
|
| 5.1 | % |
|
| 5.5 | % | |
Rate of compensation increase |
| Service-based table |
|
| Service-based table |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||
Health care cost trend rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Initial rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6.25 | % |
|
| 6.50 | % |
Ultimate rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5.0 | % |
|
| 5.0 | % |
Years to ultimate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| 2029 |
|
| 2029 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Change in plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fair value of plan assets at beginning of year |
| $ | 341,061 |
|
| $ | 430,821 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Actual return on plan assets |
|
| 58,734 |
|
|
| (72,402 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Employer contribution |
|
| 8,174 |
|
|
| 906 |
|
|
| 153 |
|
|
| 155 |
|
|
| 104 |
|
|
| 109 |
|
Gross benefits paid |
|
| (32,052 | ) |
|
| (12,665 | ) |
|
| (153 | ) |
|
| (155 | ) |
|
| (104 | ) |
|
| (109 | ) |
Settlements |
|
| — |
|
|
| (5,599 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Fair value of plan assets at end of year |
| $ | 375,917 |
|
| $ | 341,061 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Other Postretirement Benefits | ||||||||||||||||||||||||
Pension Benefits | Postretirement Welfare Plan | |||||||||||||||||||||||
Pension Plans | SERP | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Change in benefit obligation | ||||||||||||||||||||||||
Benefit obligation at beginning of year | $ | 442,861 | $ | 381,483 | $ | 1,225 | $ | 1,246 | $ | 662 | $ | 743 | ||||||||||||
Service cost | 7,671 | 7,364 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Interest cost | 15,630 | 16,493 | 40 | 52 | 22 | 31 | ||||||||||||||||||
Actuarial loss (gain) | 58,851 | 49,478 | 55 | 72 | 84 | (22 | ) | |||||||||||||||||
Gross benefits paid | (11,029 | ) | (11,957 | ) | (146 | ) | (145 | ) | (139 | ) | (90 | ) | ||||||||||||
Settlements | (5,290 | ) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
Benefit obligation at end of year | $ | 508,694 | $ | 442,861 | $ | 1,174 | $ | 1,225 | $ | 629 | $ | 662 | ||||||||||||
Accumulated benefit obligation at end of year | $ | 479,999 | $ | 417,981 | $ | 1,174 | $ | 1,225 | $ | 629 | $ | 662 |
Weighted-average assumption used to determine benefit obligation at end of year | ||||||||||||||||||||||||
Discount rate (a) | 2.8% / 2.9 | % | 3.5 | % | 2.8 | % | 3.5 | % | 2.8 | % | 3.5 | % | ||||||||||||
Rate of compensation increase | Service-based table | Service-based table | 0 | 0 | 0 | 0 | ||||||||||||||||||
Health care cost trend rate | ||||||||||||||||||||||||
Initial rate | 0 | 0 | 0 | 0 | 6.5 | % | 6.75 | % | ||||||||||||||||
Ultimate rate | 0 | 0 | 0 | 0 | 5.0 | % | 5.0 | % | ||||||||||||||||
Years to ultimate | — | — | — | — | 2025 | 2025 |
Change in plan assets | ||||||||||||||||||||||||
Fair value of plan assets at beginning of year | $ | 358,197 | $ | 303,151 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Actual return on plan assets | 51,024 | 63,939 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Employer contribution | 2,235 | 3,064 | 146 | 145 | 139 | 90 | ||||||||||||||||||
Gross benefits paid | (11,029 | ) | (11,957 | ) | (146 | ) | (145 | ) | (139 | ) | (90 | ) | ||||||||||||
Settlements | (5,290 | ) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
Fair value of plan assets at end of year | $ | 395,137 | $ | 358,197 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
During the years endedyear ending December 31,2020 and December 31,2019, the increases in the benefit obligation were primarily due to the decreases in the discount rates each year, partially offset by 2023, actual returns on plan assets performingperformed better than expected and an update ofwhich improved the actuarial tables.funding position.
AtDuring the year ending December 31,2020 and 2022, actual returns on plan assets performed less than expected which deteriorated the funding position but the overall funded position at December 31,2019, both 2022 was improved due to a decrease in the accumulated benefit obligation andprimarily due to an increase in the projected benefit obligations of each of the Company’s pension plans exceeded the fair value of plan assets.discount rate.
72
The following table presents the funded status and amounts recognized in the Company’s consolidated balance sheet for the Company’s defined benefit plans and postretirement benefit plan (in thousands) thousands):
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||
|
| Pension Plans |
|
| SERP |
|
| Postretirement Welfare Plan |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Funded status at end of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fair value of plan assets |
| $ | 375,917 |
|
| $ | 341,061 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Benefit obligations |
|
| (342,749 | ) |
|
| (339,509 | ) |
|
| (814 | ) |
|
| (833 | ) |
|
| (415 | ) |
|
| (432 | ) |
Funded status and amount recognized at end of year |
| $ | 33,168 |
|
| $ | 1,552 |
|
| $ | (814 | ) |
| $ | (833 | ) |
| $ | (415 | ) |
| $ | (432 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amounts recognized in the consolidated balance sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Noncurrent asset |
|
| 42,698 |
|
|
| 18,695 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Current liability |
|
| — |
|
|
| — |
|
|
| (106 | ) |
|
| (106 | ) |
|
| (46 | ) |
|
| (49 | ) |
Long-term liability |
|
| (9,530 | ) |
|
| (17,143 | ) |
|
| (708 | ) |
|
| (727 | ) |
|
| (369 | ) |
|
| (383 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amounts recognized in accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net actuarial (gain) loss |
| $ | (48,033 | ) |
| $ | (25,449 | ) |
| $ | 391 |
|
| $ | 324 |
|
| $ | (1,890 | ) |
| $ | (2,299 | ) |
Prior service cost (credit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Accumulated other compensation income |
| $ | (48,033 | ) |
| $ | (25,449 | ) |
| $ | 391 |
|
| $ | 324 |
|
| $ | (1,890 | ) |
| $ | (2,299 | ) |
Other Postretirement Benefits | ||||||||||||||||||||||||
Pension Benefits | Postretirement Welfare Plan | |||||||||||||||||||||||
Pension Plans | SERP | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Funded status at end of year | ||||||||||||||||||||||||
Fair value of plan assets | $ | 395,137 | $ | 358,197 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Benefit obligations | (508,694 | ) | (442,861 | ) | (1,174 | ) | (1,225 | ) | (629 | ) | (662 | ) | ||||||||||||
Funded status and amount recognized at end of year | $ | (113,557 | ) | $ | (84,664 | ) | $ | (1,174 | ) | $ | (1,225 | ) | $ | (629 | ) | $ | (662 | ) |
Amounts recognized in the consolidated balance sheets | ||||||||||||||||||||||||
Current liability | 0 | 0 | (159 | ) | (159 | ) | (58 | ) | (60 | ) | ||||||||||||||
Long-term liability | (113,557 | ) | (84,664 | ) | (1,015 | ) | (1,066 | ) | (571 | ) | (602 | ) |
Amounts recognized in accumulated other comprehensive income | ||||||||||||||||||||||||
Net actuarial loss (gain) | $ | 81,376 | $ | 52,160 | $ | 480 | $ | 460 | $ | (3,189 | ) | $ | (3,795 | ) | ||||||||||
Prior service cost (credit) | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Accumulated other compensation income | $ | 81,376 | $ | 52,160 | $ | 480 | $ | 460 | $ | (3,189 | ) | $ | (3,795 | ) |
The following table presents the expected cash flows for the Company’s defined benefit plans and postretirement benefit plan (in thousands) thousands):
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||
|
| Pension Plans |
|
| SERP |
|
| Postretirement Welfare Plan |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Expected employer contributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
First year |
| $ | 1,770 |
|
| $ | 8,374 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Expected benefit payments (gross) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Year one |
| $ | 16,696 |
|
| $ | 16,312 |
|
| $ | 108 |
|
| $ | 108 |
|
| $ | 47 |
|
| $ | 50 |
|
Year two |
|
| 17,513 |
|
|
| 16,899 |
|
|
| 103 |
|
|
| 104 |
|
|
| 46 |
|
|
| 49 |
|
Year three |
|
| 18,169 |
|
|
| 17,808 |
|
|
| 98 |
|
|
| 99 |
|
|
| 44 |
|
|
| 47 |
|
Year four |
|
| 19,096 |
|
|
| 18,650 |
|
|
| 93 |
|
|
| 94 |
|
|
| 43 |
|
|
| 45 |
|
Year five |
|
| 19,860 |
|
|
| 19,707 |
|
|
| 88 |
|
|
| 90 |
|
|
| 41 |
|
|
| 43 |
|
Next five years |
|
| 108,717 |
|
|
| 110,417 |
|
|
| 337 |
|
|
| 359 |
|
|
| 167 |
|
|
| 176 |
|
73
Other Postretirement Benefits | ||||||||||||||||||||||||
Pension Benefits | Postretirement Welfare Plan | |||||||||||||||||||||||
Pension Plans | SERP | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Expected employer contributions | ||||||||||||||||||||||||
First year | $ | 2,385 | $ | 2,407 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Expected benefit payments (gross) | ||||||||||||||||||||||||
Year one | $ | 13,902 | $ | 12,063 | $ | 162 | $ | 162 | $ | 59 | $ | 61 | ||||||||||||
Year two | 14,902 | 13,123 | 136 | 158 | 49 | 62 | ||||||||||||||||||
Year three | 16,123 | 14,300 | 110 | 133 | 48 | 51 | ||||||||||||||||||
Year four | 17,284 | 15,572 | 106 | 107 | 47 | 51 | ||||||||||||||||||
Year five | 18,315 | 16,857 | 101 | 103 | 46 | 49 | ||||||||||||||||||
Next five years | 106,400 | 100,587 | 406 | 426 | 202 | 220 |
The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s defined benefit plans were as follows (in thousands) thousands):
|
| Pension Benefits |
| |||||||||||||||||||||
|
| Pension Plans |
|
| SERP |
| ||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
| ||||||
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service cost |
| $ | 3,695 |
|
| $ | 6,538 |
|
| $ | 7,961 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 18,356 |
|
|
| 14,779 |
|
|
| 14,239 |
|
|
| 43 |
|
|
| 29 |
|
|
| 31 |
|
Expected return on plan assets |
|
| (22,910 | ) |
|
| (28,399 | ) |
|
| (26,244 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of actuarial loss |
|
| — |
|
|
| 34 |
|
|
| 4,193 |
|
|
| 23 |
|
|
| 30 |
|
|
| 40 |
|
Net periodic benefit cost |
|
| (859 | ) |
|
| (7,048 | ) |
|
| 149 |
|
|
| 66 |
|
|
| 59 |
|
|
| 71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current year actuarial (gain) loss |
|
| (22,583 | ) |
|
| (58,015 | ) |
|
| (44,583 | ) |
|
| 91 |
|
|
| (74 | ) |
|
| (12 | ) |
Recognition of actuarial loss |
|
| — |
|
|
| (34 | ) |
|
| (4,193 | ) |
|
| (23 | ) |
|
| (30 | ) |
|
| (40 | ) |
Total recognized in other comprehensive income |
|
| (22,583 | ) |
|
| (58,049 | ) |
|
| (48,776 | ) |
|
| 68 |
|
|
| (104 | ) |
|
| (52 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total recognized in net periodic benefit cost and other comprehensive income |
| $ | (23,442 | ) |
| $ | (65,097 | ) |
| $ | (48,627 | ) |
| $ | 134 |
|
| $ | (45 | ) |
| $ | 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted average assumptions used to determine net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Discount rate (a) |
|
| 5.5 | % |
| 3.0% / 3.1% |
|
| 2.8% / 2.9% |
|
|
| 5.5 | % |
|
| 3.0 | % |
|
| 2.8 | % | ||
Expected long-term rate of return on plan assets |
|
| 6.75 | % |
|
| 6.75 | % |
|
| 6.75 | % |
|
| — |
|
|
| — |
|
|
| — |
|
Rate of compensation increase |
| Service-based table |
|
| Service-based table |
|
| Service-based table |
|
|
| — |
|
|
| — |
|
|
| — |
|
Pension Benefits | ||||||||||||||||||||||||
Pension Plans | SERP | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2020 | 2019 | 2018 | |||||||||||||||||||
Components of net periodic benefit cost | ||||||||||||||||||||||||
Service cost | $ | 7,671 | $ | 7,364 | $ | 7,622 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Interest cost | 15,630 | 16,493 | 15,499 | 40 | 52 | 49 | ||||||||||||||||||
Expected return on plan assets | (23,790 | ) | (20,956 | ) | (22,406 | ) | 0 | 0 | 0 | |||||||||||||||
Amortization of actuarial loss | 2,399 | 1,438 | 2,890 | 35 | 28 | 23 | ||||||||||||||||||
Net periodic benefit cost | 1,910 | 4,339 | 3,605 | 75 | 80 | 72 | ||||||||||||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income | ||||||||||||||||||||||||
Current year actuarial loss (gain) | 31,616 | 6,497 | (7,396 | ) | 55 | 73 | (70 | ) | ||||||||||||||||
Recognition of actuarial loss | (2,399 | ) | (1,438 | ) | (2,890 | ) | (35 | ) | (28 | ) | (23 | ) | ||||||||||||
Total recognized in other comprehensive income | 29,217 | 5,059 | (10,286 | ) | 20 | 45 | (93 | ) | ||||||||||||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 31,127 | $ | 9,398 | $ | (6,681 | ) | $ | 95 | $ | 125 | $ | (21 | ) | ||||||||||
Weighted average assumptions used to determine net periodic benefit cost | ||||||||||||||||||||||||
Discount rate (a) | 3.5% / 3.10 | % | 4.4 | % | 3.7 | % | 3.5 | % | 4.4 | % | 3.7 | % | ||||||||||||
Expected long-term rate of return on plan assets | 6.75 | % | 7.0 | % | 7.0 | % | 0 | 0 | 0 | |||||||||||||||
Rate of compensation increase | Service- based table | Service- based table | Service- based table | 0 | 0 | 0 |
The 2023 discount rate for benefit cost is 5.5% for both the Kirby Pension Plan and the Higman Pension Plan. The 2022 discount rate for benefit cost is 3.0% for the Kirby Pension Plan and 3.1% for the Higman Pension Plan. |
The components of net periodic benefit cost and other changes in benefit obligations recognized in other comprehensive income for the Company’s postretirement benefit plan were as follows (in thousands) thousands):
|
| Other Postretirement Benefits |
| |||||||||
|
| Postretirement Welfare Plan |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
| |||
Interest cost |
| $ | 22 |
|
| $ | 17 |
|
| $ | 17 |
|
Amortization of actuarial gain |
|
| (344 | ) |
|
| (394 | ) |
|
| (451 | ) |
Net periodic benefit cost |
|
| (322 | ) |
|
| (377 | ) |
|
| (434 | ) |
|
|
|
|
|
|
|
|
|
| |||
Other changes in benefit obligations recognized in other comprehensive income |
|
|
|
|
|
|
|
|
| |||
Current year actuarial loss (gain) |
|
| 65 |
|
|
| (58 | ) |
|
| 104 |
|
Recognition of actuarial gain |
|
| 344 |
|
|
| 394 |
|
|
| 451 |
|
Total recognized in other comprehensive income |
|
| 409 |
|
|
| 336 |
|
|
| 555 |
|
|
|
|
|
|
|
|
|
|
| |||
Total recognized in net periodic benefit cost and other |
| $ | 87 |
|
| $ | (41 | ) |
| $ | 121 |
|
|
|
|
|
|
|
|
|
|
| |||
Weighted average assumptions used to determine net periodic benefit cost |
|
|
|
|
|
|
|
|
| |||
Discount rate |
|
| 5.5 | % |
|
| 3.0 | % |
|
| 2.8 | % |
Health care cost trend rate: |
|
|
|
|
|
|
|
|
| |||
Initial rate |
|
| 6.50 | % |
|
| 6.25 | % |
|
| 6.50 | % |
Ultimate rate |
|
| 5.0 | % |
|
| 5.0 | % |
|
| 5.0 | % |
Years to ultimate |
| 2029 |
|
| 2027 |
|
| 2025 |
|
74
Other Postretirement Benefits | ||||||||||||
Postretirement Welfare Plan | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Components of net periodic benefit cost | ||||||||||||
Interest cost | $ | 22 | $ | 31 | $ | 24 | ||||||
Amortization of actuarial gain | (522 | ) | (540 | ) | (596 | ) | ||||||
Net periodic benefit cost | (500 | ) | (509 | ) | (572 | ) | ||||||
Other changes in benefit obligations recognized in other comprehensive income | ||||||||||||
Current year actuarial loss (gain) | 84 | (22 | ) | 144 | ||||||||
Recognition of actuarial gain | 522 | 540 | 596 | |||||||||
Total recognized in other comprehensive income | 606 | 518 | 740 | |||||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 106 | $ | 9 | $ | 168 | ||||||
Weighted average assumptions used to determine net periodic benefit cost | ||||||||||||
Discount rate | 3.5 | % | 4.4 | % | 3.7 | % | ||||||
Health care cost trend rate: | ||||||||||||
Initial rate | 6.75 | % | 7.0 | % | 7.0 | % | ||||||
Ultimate rate | 5.0 | % | 5.0 | % | 5.0 | % | ||||||
Years to ultimate | 2025 | 2025 | 2022 |
The Company also contributes to a multiemployer pension plan pursuant to a collective bargaining agreement which covers certain vessel crew members of its coastal operations and expires on April 30,2022. 2025. The Company began participation in the Seafarers Pension Trust (“SPT”) with the Penn Maritime, Inc. acquisition on December 14, 2012.14,2012.
Contributions to the SPT are made currently based on a per day worked basis and charged to expense as incurred and included in costs of sales and operating expenses in the consolidated statement of earnings. During 20202023 and 2019,2022, the Company made contributions of $$617,0000.4 million and $$665,000,0.5 million, respectively, to the SPT. The Company’s contributions to the SPT exceededdid not exceed 5%5% of total contributions to the SPT in 2019.2022. Total contributions for 20202023 are not yet available. The Company did not pay any material surcharges in 2023 and 2022.2020 or 2019.
The federal identification number of the SPT is 13-610032913-6100329 and the Certified Zone Status is Green at December 31,2019. 2022. The Company’s future minimum contribution requirements under the SPT are unavailable because actuarial reports for the 20202023 plan year are not yet complete and such contributions are subject to negotiations between the employers and the unions. The SPT was not in endangered or critical status for the 20192022 plan year, the latest period for which a report is available, as the funded status was in excess of 100%100%. Based on an actuarial valuation performed as of December 31,2019,the most recent communication from the SPT, there would be no withdrawal liability if the Company chose to withdraw from the SPT although the Company currently has no intention of terminating its participation in the SPT.
The Company also contributes to a multiemployer pension plan pursuant to a collective bargaining agreement which covers certain employees of its distribution and services segmentKDS in New Jersey and expires on October 8,2023. 2028. The Company began participation in the Central Pension Fund of the International Union of Operating Engineers and Participating Employers (“CPF”) with the Stewart & Stevenson LLC (“S&S”) acquisition on September 13, 2017.13,2017.
Contributions to the CPF are made currently based on a fixed hourly rate for each hour worked or paid basis (in some cases contributions are made as a percentage of gross pay) and charged to expense as incurred and included in costs of sales and operating expenses in the consolidated statement of earnings. During 20202023 and 2019,2022, the Company made contributions of $$691,0000.6 and $$693,000,0.7 million, respectively, to the CPF. Total contributions for the 20202023 plan year are not yet available. The Company did not pay any material surcharges in 2023 and 2022.2020 or 2019.
The federal identification number of the CPF is 36-605239036-6052390 and the Certified Zone Status is Green at January 31,2020. 2024. The Company’s future minimum contribution requirements under the CPF are unavailable because actuarial reports for the 20202023 plan year, which ended January 31,2021, 2024, are not yet complete and such contributions are subject to negotiations between the employers and the unions. The CPF was not in endangered or critical status for the 20192022 plan year, ending January 31,2020, 2023, the latest period for which a report is available, as the funded status was 98%107%. There would be no withdrawal liability if the Company chose to withdraw from the CPF although the Company currently has no intention of terminating its participation in the CPF.
In addition to the defined benefit plans, the Company sponsors various defined contribution plans for substantially all employees. The aggregate contributions to the plans were $25,514,000, $25,409,000,$26.9 million, $27.9 million, and $22,392,000$25.9 million in 2020, 2019,2023, 2022, and 2018,2021, respectively.
(13) Other Comprehensive Income (Loss)
The Company’s changes in other comprehensive income (loss) were as follows (in thousands):
|
| Year Ended December 31, |
| |||||||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||||||||||||||
|
| Gross |
|
| Income Tax (Provision) Benefit |
|
| Net |
|
| Gross |
|
| Income Tax (Provision) Benefit |
|
| Net |
|
| Gross |
|
| Income Tax Provision |
|
| Net |
| |||||||||
Pension and postretirement benefits (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Amortization of net actuarial (gain) loss |
| $ | (321 | ) |
| $ | 78 |
|
| $ | (243 | ) |
| $ | (330 | ) |
| $ | 81 |
|
| $ | (249 | ) |
| $ | 3,782 |
|
| $ | (952 | ) |
| $ | 2,830 |
|
Actuarial gain |
|
| 22,438 |
|
|
| (5,467 | ) |
|
| 16,971 |
|
|
| 58,147 |
|
|
| (14,030 | ) |
|
| 44,117 |
|
|
| 44,491 |
|
|
| (10,774 | ) |
|
| 33,717 |
|
Foreign currency translation adjustments |
|
| 1,425 |
|
|
| — |
|
|
| 1,425 |
|
|
| (1,049 | ) |
|
| — |
|
|
| (1,049 | ) |
|
| (1,061 | ) |
|
| — |
|
|
| (1,061 | ) |
Total |
| $ | 23,542 |
|
| $ | (5,389 | ) |
| $ | 18,153 |
|
| $ | 56,768 |
|
| $ | (13,949 | ) |
| $ | 42,819 |
|
| $ | 47,212 |
|
| $ | (11,726 | ) |
| $ | 35,486 |
|
75
Year Ended December 31 | ||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||
Gross Amount | Income Tax (Provision) Benefit | Net Amount | Gross Amount | Income Tax (Provision) Benefit | Net Amount | Gross Amount | Income Tax Provision | Net Amount | ||||||||||||||||||||||||||||
Pension and postretirement benefits (a): | ||||||||||||||||||||||||||||||||||||
Amortization of net actuarial loss | $ | 1,912 | $ | (483 | ) | $ | 1,429 | $ | 926 | $ | (236 | ) | $ | 690 | $ | 2,317 | $ | (585 | ) | $ | 1,732 | |||||||||||||||
Actuarial gains (losses) | (31,755 | ) | 7,006 | (24,749 | ) | (6,548 | ) | 1,655 | (4,893 | ) | 7,322 | (1,416 | ) | 5,906 | ||||||||||||||||||||||
Adoption of ASU 2018-02 – reclassification to retained earnings | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (7,925 | ) | (7,925 | ) | |||||||||||||||||||||||||
Foreign currency translation adjustments | (333 | ) | 0 | (333 | ) | (85 | ) | 0 | (85 | ) | (819 | ) | 0 | (819 | ) | |||||||||||||||||||||
Total | $ | (30,176 | ) | $ | 6,523 | $ | (23,653 | ) | $ | (5,707 | ) | $ | 1,419 | $ | (4,288 | ) | $ | 8,820 | $ | (9,926 | ) | $ | (1,106 | ) |
(14) Contingencies and Commitments
In 2009, the Company was named by the Environmental Protection Agency (the “EPA”) as a Potentially Responsible Party (“PRP”) in addition to a group of approximately 250 named PRPs under the Comprehensive Environmental Response, Compensation and Liability Act of 1981 (“CERCLA”) with respect to a Superfund site, the Portland Harbor Superfund site (“Portland Harbor”) in Portland, Oregon. The site was declared a Superfund site in December 2000 as a result of historical heavily industrialized use due to manufacturing, shipbuilding, petroleum storage and distribution, metals salvaging, and electrical power generation activities which led to contamination of Portland Harbor, an urban and industrial reach of the lower Willamette River located immediately downstream of downtown Portland. The Company’s involvement arises from 4four spills at the site after it was declared a Superfund site, as a result of predecessor entities’ actions in the area. To date, there is no information suggesting the extent of the costs or damages to be claimed from the 250 notified PRPs. Based on the nature of the involvement at the Portland Harbor site, the Company believes its potential contribution is de minimis; however, to date neither the EPA nor the named PRPs have performed an allocation of potential liability in connection with the site nor have they provided costs and expenses in connection with the site.
On February 20, 2015, the Company was served as a defendant in a Complaint originally filed on August 14, 2014, in the U.S. District Court of the Southern District of Texas - Houston Division, USOR Site PRP Group vs. A&M Contractors, USES, Inc. et al. This is a civil action pursuant to the provisions of CERCLA and the Texas Solid Waste Disposal Act for recovery of past and future response costs incurred and to be incurred by the USOR Site PRP Group for response activities at the U.S. Oil Recovery Superfund Site. The property was a former sewage treatment plant owned by defendant City of Pasadena, Texas from approximately 1945 until it was acquired by U.S. Oil Recovery in January 2009. Throughout its operating life, the U.S. Oil Recovery facility portion of the USOR Site received and performed wastewater pretreatment of municipal and Industrial Class I and Class II wastewater, characteristically hazardous waste, used oil and oily sludges, and municipal solid waste. Associated operations were conducted at the MCC Recycling facility portion of the USOR Site after it was acquired by U.S. Oil Recovery from the City of Pasadena in January 2009. The EPA and the PRP Group entered into an Administrative Settlement Agreement and Order for Remedial Investigation Study (“Study”) in May 2015. The Study has not been completed by EPA to date. The Company joined as a member of the PRP Group companies at its pro-rata allocated share.
On October 13, 2016, the Company, as a successor to Hollywood Marine, Inc. (“Hollywood Marine”), was issued a General Notice under CERCLA by the EPA in which it was named as a PRP for liabilities associated with the SBA Shipyard Site located near Jennings, Louisiana (the “Site”). The Site was added to the EPA’s National Priorities List of sites under CERCLA in September 2016. SBA used the facility for construction, repair, retrofitting, sandblasting, and cleaning and painting of barges beginning in 1965. NaNThree barge slips and a dry dock are located off the Mermentau River. The slips were used to dock barges during cleaning or repair. In 2001, a group of PRPs that had been former customers of the SBA Shipyard facility formed an organization called the SSIC Remediation, LLC (hereinafter, “the PRP Group Companies”) to address removal actions at the Site. In 2002, EPA approved an Interim Measures/Removal Action of Hazardous/Principal Threat Wastes at SBA Shipyards, Inc. (pursuant to RCRA Section 3008(h)) that was proposed by SBA Shipyard and the PRP Group Companies. Interim removal activities were conducted from March 2001 through January 2005 under an EPA 2002 Order and Agreement. In September 2012, the Louisiana Department of Environmental Quality requested EPA address the Site under CERCLA authority. The Company, as a successor to Hollywood Marine, joined the PRP Group Companies. The PRP Group Companies have submitted a draft Study work plan to EPA for their review and comment. Higman was named as a PRP in connection with its activities at the Site. Higman is not a participant in the PRP Group Companies.
With respect to the above sites, the Company has accrued a liability, if applicable, for its estimated potential liability for its portion of the EPA’s past costs claim based on information developed to date including various factors such as the Company’s liability in proportion to other PRPs and the extent to which such costs are recoverable from third parties.
The collision penetrated the hull of the Kirby 30015T causing its cargo, reformate, to be discharged into the water. The USCG and the National Transportation Safety Board (“NTSB”) designated the owner and pilot of the Genesis River as well as the subsidiary of the Company as parties of interest in their investigation into the cause of the incident. On June 19, 2019, the Company filed a limitation action in the U.S. District Court of the Southern District of Texas - Galveston Division seeking limitation of liability and asserting that the Genesis River and her owner/manager are at fault for damages including removal costs and claims under the Oil Pollution Act of 1990 and maritime law. Multiple claimants have filed claims in the limitation seeking damages under the Oil Pollution Act of 1990.The Company has various insurance policies covering liabilities including pollution, marine and general liability and believes that it has satisfactory insurance coverage for the potential liabilities arising from the incident. The Company believes its accrual of such estimated liability is adequate for the incident and does not expect the incident to have a material adverse effect on its business or financial condition.
76
In addition, the Company is involved in various legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations or cash flows. Management believes its accrual of such estimated liability is adequate and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies.
Certain Significant Risks and Uncertainties. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. However, in the opinion of management, the amounts would be immaterial.
United, through certain of its subsidiaries, is also a dealer of Thermo King refrigeration systems for trucks, railroad cars, and other land transportation markets in Texas and Colorado.
(15) Related Party Transactions
David W. Grzebinski, President and Chief Executive Officer of the Company, is a member of the board of directors for ABS, a not-for-profit that provides global classification services to the marine, offshore and gas industries. The Company paid ABS $2,377,000$1.5 million in 2020, $1,774,0002023, $1.3 million in 2019,2022, and $1,162,000$1.6 million in 20182021 to perform audits and surveys of the Company’s vessels in the ordinary course of business.
Mr. Grzebinski becameis a member of the board of directors of UK Protection & Indemnity Association (“UK P&I”), a mutual marine protection and indemnity organization that provides protection and indemnity insurance for third party liabilities and expenses arising from vessel operations. The Company’s marine fleet is insured on a proratepro rata share basis through UK P&I and Standard Mutual. During 2020, theThe Company paid $3,000,000$3.6 million during 2023 in premiums for coverage in the 2020-20212023-2024 policy period, $3.4 million during 2022 in premiums for coverage in the 2022-2023 policy period, and $3.2 million in 2021 in premiums for coverage in the 2021-2022 policy period in the ordinary course of business.
In January 2019, Amy D. Husted, Vice President, General Counsel and Secretary of the Company, becameis a member of the board of directors of Signal Mutual Indemnity Association Ltd (“Signal”), a group self-insurance not-for-profit organization authorized by the U.S. Department of Labor as a longshore worker’s compensation insurance provider. The Company has been a member of Signal since it was established in 1986. The Company paid Signal $667,0000.7 million in 20202023, $0.5 million in 2022 and $1,391,0000.6 million in 20192021 in the ordinary course of business.
The husband of Ms. Husted is a partner in the law firm ofClark Hill PLC. The Company paid the law firm $1,598,000$0.9 million in 2020, $1,278,0002023, $1.0 million in 2019,2022, and $2,019,000$2.9 million in 20182021 for legal services in connection with matters in the ordinary course of business.
Three Months Ended | ||||||||||||||||
March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | |||||||||||||
Revenues | $ | 643,926 | $ | 541,159 | $ | 496,567 | $ | 489,756 | ||||||||
Costs and expenses | 1,154,114 | 506,718 | 466,340 | 465,113 | ||||||||||||
Gain (loss) on disposition of assets | 492 | (189 | ) | (316 | ) | 131 | ||||||||||
Operating income (loss) | (509,696 | ) | 34,252 | 29,911 | 24,774 | |||||||||||
Other income | 2,723 | 2,290 | 1,172 | 1,962 | ||||||||||||
Interest expense | (12,799 | ) | (12,708 | ) | (11,809 | ) | (11,423 | ) | ||||||||
Earnings (loss) before taxes on income | (519,772 | ) | 23,834 | 19,274 | 15,313 | |||||||||||
Benefit for taxes on income | 172,809 | 1,429 | 8,419 | 7,102 | ||||||||||||
Net earnings (loss) | (346,963 | ) | 25,263 | 27,693 | 22,415 | |||||||||||
Less: Net earnings attributable to noncontrolling interests | (278 | ) | (261 | ) | (204 | ) | (211 | ) | ||||||||
Net earnings (loss) attributable to Kirby | $ | (347,241 | ) | $ | 25,002 | $ | 27,489 | $ | 22,204 | |||||||
Net earnings (loss) per share attributable to Kirby common stockholders: | ||||||||||||||||
Basic | $ | (5.80 | ) | $ | 0.42 | $ | 0.46 | $ | 0.37 | |||||||
Diluted | $ | (5.80 | ) | $ | 0.42 | $ | 0.46 | $ | 0.37 |
Three Months Ended | ||||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | |||||||||||||
Revenues | $ | 744,621 | $ | 771,042 | $ | 666,809 | $ | 655,927 | ||||||||
Costs and expenses | 674,672 | 698,317 | 588,534 | 643,001 | ||||||||||||
Gain (loss) on disposition of assets | 2,157 | 3,118 | (374 | ) | 3,251 | |||||||||||
Operating income | 72,106 | 75,843 | 77,901 | 16,177 | ||||||||||||
Other income (expense) | (568 | ) | 2,381 | 864 | 1,110 | |||||||||||
Interest expense | (13,201 | ) | (15,515 | ) | (14,310 | ) | (12,968 | ) | ||||||||
Earnings before taxes on income | 58,337 | 62,709 | 64,455 | 4,319 | ||||||||||||
Provision for taxes on income | (13,880 | ) | (15,269 | ) | (16,305 | ) | (1,347 | ) | ||||||||
Net earnings | 44,457 | 47,440 | 48,150 | 2,972 | ||||||||||||
Less: Net earnings attributable to noncontrolling interests | (161 | ) | (153 | ) | (163 | ) | (195 | ) | ||||||||
Net earnings attributable to Kirby | $ | 44,296 | $ | 47,287 | $ | 47,987 | $ | 2,777 | ||||||||
Net earnings per share attributable to Kirby common stockholders: | ||||||||||||||||
Basic | $ | 0.74 | $ | 0.79 | $ | 0.80 | $ | 0.05 | ||||||||
Diluted | $ | 0.74 | $ | 0.79 | $ | 0.80 | $ | 0.05 |
Rocky B. Dewbre, a resultdirector of the assumed exerciseCompany, serves as President and Chief Operating Officer of stock options.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
|
Included in Part III of this report on pages 6149 to 101:
Report of Independent Registered Public Accounting Firm (KPMG LLP, Houston, TX, PCAOB ID 185).
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets, December 31, 20202023 and 2019.
Consolidated Statements of Earnings, for the years ended December 31, 2020, 2019,2023, 2022, and 2018.
Consolidated Statements of Comprehensive Income, for the years ended December 31, 2020, 2019,2023, 2022, and 2018.
Consolidated Statements of Cash Flows, for the years ended December 31, 2020, 2019,2023, 2022, and 2018.
Consolidated Statements of Stockholders’ Equity, for the years ended December 31, 2020, 2019,2023, 2022, and 2018.
Notes to Consolidated Financial Statements, for the years ended December 31, 2020, 2019,2023, 2022, and 2018.
2. Financial Statement Schedules
All schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
3. Exhibits
EXHIBIT INDEX
Exhibit | ||
Number | Description of Exhibit | |
3.1 | — | |
3.2 | — | |
4.1 | — | |
See Exhibits 3.1 | ||
4.2 | — | |
Long-term debt instruments are omitted pursuant to Item 601(b)(4) of Regulation S-K. The Registrant will furnish copies of such instruments to the Commission upon request. |
— | ||
10.2 | — | |
10.3† | — | |
10.4† | — | |
10.5† | — | |
10.6† | — | |
10.7†* | — | |
10.8† | — |
78
Exhibit | ||
Number | Description of Exhibit | |
10.9† | — | |
10.10† | — | |
10.11†* | Nonemployee Director Compensation Program effective January 29, 2024 | |
10.12† | — | |
10.13† | — | |
10.14† | — | |
10.15† | — | |
10.16† | — | |
10.17† | ||
10.18† | ||
10.19† | ||
10.20 | — | |
21.1* | — | |
23.1* | — | |
31.1* | — | |
31.2* | — | |
32* | — | |
97* | — | |
101.INS* | — | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* | — | |
Inline XBRL Taxonomy Extension Schema | ||
104* | — | |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
† Management contract, compensatory plan or arrangement.
Item 16. Form 10-K Summary
Not applicable
79
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KIRBY CORPORATION | ||
(REGISTRANT) | ||
By: | /s/ | |
Raj Kumar | ||
Executive Vice President and | ||
Chief Financial Officer | ||
Dated: February |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Capacity | Date | ||
/s/ JOSEPH H. PYNE | Chairman of the Board and Director | February | ||
Joseph H. Pyne | ||||
/s/ DAVID W. GRZEBINSKI | President, Chief Executive Officer, | February | ||
David W. Grzebinski | and Director | |||
(Principal Executive Officer) | ||||
/s/ | Executive Vice President and | February | ||
Raj Kumar | Chief Financial Officer | |||
(Principal Financial Officer) | ||||
/s/ RONALD A. DRAGG | Vice President, Controller and | February | ||
Ronald A. Dragg | Assistant Secretary | |||
(Principal Accounting Officer) | ||||
/s/ ANNE-MARIE N. AINSWORTH | Director | February | ||
Anne-Marie N. Ainsworth | ||||
/s/ RICHARD J. ALARIO | Director | February | ||
Richard J. Alario | ||||
/s/ TANYA S. BEDER | Director | February | ||
Tanya S. Beder | ||||
/s/ BARRY E. DAVIS | Director | February | ||
Barry E. Davis | ||||
/s/ | Director | February | ||
Rocky B. Dewbre | ||||
/s/ | Director | February | ||
Susan W. Dio | ||||
/s/ RICHARD R. STEWART | Director | February | ||
Richard R. Stewart | ||||
/s/ WILLIAM M. WATERMAN | Director | February | ||
William M. Waterman | ||||
/s/ SHAWN D. WILLIAMS | Director | February 20, 2024 | ||
Shawn D. Williams |
80