UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017
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 Number Number: 1-7615
KIRBY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada | 74-1884980 (I.R.S. Employer Identification No.) | |
(State or other jurisdiction of incorporation or organization) |
55 Waugh Drive, Suite 1000 Houston, TX | 77007 | |
(Address of principal executive offices) | (Zip Code) |
713-435-1000
(Registrant’s telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last report)
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 |
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations 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.
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 5, 2023, 60.0 million shares outstanding of the registrant’s Common Stock, $.10Registrant’s $0.10 par value per share on November 7, 2017 was 59,697,000.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, 2017 | December 31, 2016 | |||||||
($ in thousands) | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,826 | $ | 5,634 | ||||
Accounts receivable: | ||||||||
Trade – less allowance for doubtful accounts | 433,295 | 297,177 | ||||||
Other | 77,913 | 95,327 | ||||||
Inventories – net | 323,403 | 185,402 | ||||||
Prepaid expenses and other current assets | 51,327 | 49,411 | ||||||
Total current assets | 890,764 | 632,951 | ||||||
Property and equipment | 4,583,442 | 4,328,897 | ||||||
Less accumulated depreciation | (1,487,332 | ) | (1,407,523 | ) | ||||
Property and equipment – net | 3,096,110 | 2,921,374 | ||||||
Goodwill | 919,276 | 598,131 | ||||||
Other assets | 294,265 | 137,439 | ||||||
Total assets | $ | 5,200,415 | $ | 4,289,895 |
|
| March 31, |
|
| December 31, |
| ||
|
| ($ in thousands) |
| |||||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 26,699 |
|
| $ | 80,577 |
|
Accounts receivable: |
|
|
|
|
|
| ||
Trade – less allowance for doubtful accounts |
|
| 526,489 |
|
|
| 483,406 |
|
Other |
|
| 109,539 |
|
|
| 114,556 |
|
Inventories – net |
|
| 475,218 |
|
|
| 461,848 |
|
Prepaid expenses and other current assets |
|
| 62,421 |
|
|
| 71,372 |
|
Total current assets |
|
| 1,200,366 |
|
|
| 1,211,759 |
|
|
|
|
|
|
|
| ||
Property and equipment |
|
| 5,532,952 |
|
|
| 5,452,143 |
|
Accumulated depreciation |
|
| (1,867,442 | ) |
|
| (1,818,681 | ) |
Property and equipment – net |
|
| 3,665,510 |
|
|
| 3,633,462 |
|
|
|
|
|
|
|
| ||
Operating lease right-of-use assets |
|
| 155,306 |
|
|
| 154,507 |
|
Goodwill |
|
| 438,748 |
|
|
| 438,748 |
|
Other intangibles, net |
|
| 49,325 |
|
|
| 51,463 |
|
Other assets |
|
| 65,493 |
|
|
| 64,985 |
|
Total assets |
| $ | 5,574,748 |
|
| $ | 5,554,924 |
|
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Bank notes payable |
| $ | 3,983 |
|
| $ | 3,292 |
|
Income taxes payable |
|
| 1,106 |
|
|
| 323 |
|
Accounts payable |
|
| 278,467 |
|
|
| 278,081 |
|
Accrued liabilities |
|
| 173,992 |
|
|
| 204,752 |
|
Current portion of operating lease liabilities |
|
| 32,885 |
|
|
| 36,444 |
|
Deferred revenues |
|
| 124,355 |
|
|
| 119,305 |
|
Total current liabilities |
|
| 614,788 |
|
|
| 642,197 |
|
|
|
|
|
|
|
| ||
Long-term debt, net – less current portion |
|
| 1,075,658 |
|
|
| 1,076,326 |
|
Deferred income taxes |
|
| 638,438 |
|
|
| 625,884 |
|
Operating lease liabilities – less current portion |
|
| 146,445 |
|
|
| 142,140 |
|
Other long-term liabilities |
|
| 14,279 |
|
|
| 23,209 |
|
Total long-term liabilities |
|
| 1,874,820 |
|
|
| 1,867,559 |
|
|
|
|
|
|
|
| ||
Contingencies and commitments |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
| ||
Equity: |
|
|
|
|
|
| ||
Kirby stockholders’ equity: |
|
|
|
|
|
| ||
Common stock, $0.10 par value per share. Authorized 120 million shares, issued 65.5 million shares |
|
| 6,547 |
|
|
| 6,547 |
|
Additional paid-in capital |
|
| 856,680 |
|
|
| 859,345 |
|
Accumulated other comprehensive income – net |
|
| 17,017 |
|
|
| 16,853 |
|
Retained earnings |
|
| 2,509,428 |
|
|
| 2,468,730 |
|
Treasury stock – at cost, 5.5 million shares at March 31, 2023 and 5.6 million at December 31, 2022 |
|
| (306,746 | ) |
|
| (308,598 | ) |
Total Kirby stockholders’ equity |
|
| 3,082,926 |
|
|
| 3,042,877 |
|
Noncontrolling interests |
|
| 2,214 |
|
|
| 2,291 |
|
Total equity |
|
| 3,085,140 |
|
|
| 3,045,168 |
|
Total liabilities and equity |
| $ | 5,574,748 |
|
| $ | 5,554,924 |
|
See accompanying notes to condensed financial statements.
2
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
September 30, 2017 | December 31, 2016 | |||||||
($ in thousands) | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 1,501 | $ | — | ||||
Bank notes payable | 899 | — | ||||||
Income taxes payable | 1,434 | 3,288 | ||||||
Accounts payable | 214,109 | 134,571 | ||||||
Accrued liabilities | 203,826 | 184,478 | ||||||
Deferred revenues | 40,421 | 36,001 | ||||||
Total current liabilities | 462,190 | 358,338 | ||||||
Long-term debt – less current portion | 1,031,028 | 722,802 | ||||||
Deferred income taxes | 756,268 | 705,453 | ||||||
Other long-term liabilities | 74,801 | 90,435 | ||||||
Total long-term liabilities | 1,862,097 | 1,518,690 | ||||||
Contingencies and commitments | — | — | ||||||
Equity: | ||||||||
Kirby stockholders’ equity: | ||||||||
Common stock, $.10 par value per share. Authorized 120,000,000 shares, issued 65,472,000 shares | 6,547 | 5,978 | ||||||
Additional paid-in capital | 799,714 | 432,459 | ||||||
Accumulated other comprehensive income – net | (35,778 | ) | (51,007 | ) | ||||
Retained earnings | 2,415,618 | 2,342,236 | ||||||
Treasury stock – at cost, 5,784,000 shares at September 30, 2017 and 5,921,000 at December 31, 2016 | (313,423 | ) | (320,348 | ) | ||||
Total Kirby stockholders’ equity | 2,872,678 | 2,409,318 | ||||||
Noncontrolling interests | 3,450 | 3,549 | ||||||
Total equity | 2,876,128 | 2,412,867 | ||||||
Total liabilities and equity | $ | 5,200,415 | $ | 4,289,895 |
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
| ($ in thousands, except per share amounts) |
| |||||
Revenues: |
|
|
|
|
|
| ||
Marine transportation |
| $ | 412,495 |
|
| $ | 355,536 |
|
Distribution and services |
|
| 337,949 |
|
|
| 255,246 |
|
Total revenues |
|
| 750,444 |
|
|
| 610,782 |
|
|
|
|
|
|
| |||
Costs and expenses: |
|
|
|
|
|
| ||
Costs of sales and operating expenses |
|
| 542,080 |
|
|
| 450,618 |
|
Selling, general and administrative |
|
| 88,849 |
|
|
| 75,765 |
|
Taxes, other than on income |
|
| 9,186 |
|
|
| 9,590 |
|
Depreciation and amortization |
|
| 51,109 |
|
|
| 49,964 |
|
Gain on disposition of assets |
|
| (2,230 | ) |
|
| (4,849 | ) |
Total costs and expenses |
|
| 688,994 |
|
|
| 581,088 |
|
|
|
|
|
|
| |||
Operating income |
|
| 61,450 |
|
|
| 29,694 |
|
Other income |
|
| 6,443 |
|
|
| 4,308 |
|
Interest expense |
|
| (13,221 | ) |
|
| (10,203 | ) |
|
|
|
|
|
| |||
Earnings before taxes on income |
|
| 54,672 |
|
|
| 23,799 |
|
Provision for taxes on income |
|
| (14,051 | ) |
|
| (6,213 | ) |
|
|
|
|
|
| |||
Net earnings |
|
| 40,621 |
|
|
| 17,586 |
|
Net (earnings) loss attributable to noncontrolling interests |
|
| 77 |
|
|
| (152 | ) |
|
|
|
|
|
| |||
Net earnings attributable to Kirby |
| $ | 40,698 |
|
| $ | 17,434 |
|
|
|
|
|
|
| |||
Net earnings per share attributable to Kirby common stockholders: |
|
|
|
|
|
| ||
Basic |
| $ | 0.68 |
|
| $ | 0.29 |
|
Diluted |
| $ | 0.68 |
|
| $ | 0.29 |
|
See accompanying notes to condensed financial statements.
3
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
($ in thousands, except per share amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Marine transportation | $ | 318,810 | $ | 359,031 | $ | 993,727 | $ | 1,115,677 | ||||||||
Distribution and services | 222,464 | 75,677 | 512,580 | 219,346 | ||||||||||||
Total revenues | 541,274 | 434,708 | 1,506,307 | 1,335,023 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Costs of sales and operating expenses | 378,340 | 282,168 | 1,048,176 | 847,975 | ||||||||||||
Selling, general and administrative | 51,689 | 40,645 | 144,338 | 133,948 | ||||||||||||
Taxes, other than on income | 6,518 | 5,445 | 19,511 | 16,317 | ||||||||||||
Depreciation and amortization | 51,206 | 50,142 | 147,669 | 148,427 | ||||||||||||
Loss (gain) on disposition of assets | 159 | 122 | 199 | (39 | ) | |||||||||||
Total costs and expenses | 487,912 | 378,522 | 1,359,893 | 1,146,628 | ||||||||||||
Operating income | 53,362 | 56,186 | 146,414 | 188,395 | ||||||||||||
Other income (expense) | (113 | ) | (120 | ) | (230 | ) | 194 | |||||||||
Interest expense | (5,388 | ) | (4,507 | ) | (14,310 | ) | (13,213 | ) | ||||||||
Earnings before taxes on income | 47,861 | 51,559 | 131,874 | 175,376 | ||||||||||||
Provision for taxes on income | (19,072 | ) | (19,206 | ) | (49,468 | ) | (65,430 | ) | ||||||||
Net earnings | 28,789 | 32,353 | 82,406 | 109,946 | ||||||||||||
Less: Net earnings attributable to noncontrolling interests | (182 | ) | (343 | ) | (538 | ) | (895 | ) | ||||||||
Net earnings attributable to Kirby | $ | 28,607 | $ | 32,010 | $ | 81,868 | $ | 109,051 | ||||||||
Net earnings per share attributable to Kirby common stockholders: | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.59 | $ | 1.51 | $ | 2.03 | ||||||||
Diluted | $ | 0.52 | $ | 0.59 | $ | 1.50 | $ | 2.02 |
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
| ($ in thousands) |
| |||||
Net earnings |
| $ | 40,621 |
|
| $ | 17,586 |
|
|
|
|
|
|
|
| ||
Other comprehensive income, net of taxes: |
|
|
|
|
|
| ||
Pension and postretirement benefits |
|
| (61 | ) |
|
| 13 |
|
Foreign currency translation adjustments |
|
| 225 |
|
|
| 476 |
|
Total other comprehensive income, net of taxes |
|
| 164 |
|
|
| 489 |
|
|
|
|
|
|
|
| ||
Total comprehensive income, net of taxes |
|
| 40,785 |
|
|
| 18,075 |
|
Net (earnings) loss attributable to noncontrolling interests |
|
| 77 |
|
|
| (152 | ) |
|
|
|
|
|
|
| ||
Comprehensive income attributable to Kirby |
| $ | 40,862 |
|
| $ | 17,923 |
|
See accompanying notes to condensed financial statements.
4
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
($ in thousands) | ||||||||||||||||
Net earnings | $ | 28,789 | $ | 32,353 | $ | 82,406 | $ | 109,946 | ||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||
Pension and postretirement benefits | 507 | 735 | 15,393 | (1,765 | ) | |||||||||||
Foreign currency translation adjustments | (164 | ) | — | (164 | ) | — | ||||||||||
Total other comprehensive income (loss), net of taxes | 343 | 735 | 15,229 | (1,765 | ) | |||||||||||
Total comprehensive income, net of taxes | 29,132 | 33,088 | 97,635 | 108,181 | ||||||||||||
Net earnings attributable to noncontrolling interests | (182 | ) | (343 | ) | (538 | ) | (895 | ) | ||||||||
Comprehensive income attributable to Kirby | $ | 28,950 | $ | 32,745 | $ | 97,097 | $ | 107,286 |
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
| ($ in thousands) |
| |||||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net earnings |
| $ | 40,621 |
|
| $ | 17,586 |
|
Adjustments to reconcile net earnings to net cash provided by operations: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 51,109 |
|
|
| 49,964 |
|
Provision for deferred income taxes |
|
| 12,573 |
|
|
| 5,856 |
|
Amortization of share-based compensation |
|
| 5,808 |
|
|
| 5,965 |
|
Amortization of major maintenance costs |
|
| 6,992 |
|
|
| 7,113 |
|
Other |
|
| (2,302 | ) |
|
| (3,480 | ) |
Decrease in cash flows resulting from changes in operating assets and liabilities, net |
|
| (98,321 | ) |
|
| (50,782 | ) |
Net cash provided by operating activities |
|
| 16,480 |
|
|
| 32,222 |
|
|
|
|
|
|
| |||
Cash flows from investing activities: |
|
|
|
|
|
| ||
Capital expenditures |
|
| (73,199 | ) |
|
| (35,075 | ) |
Acquisitions of businesses |
|
| — |
|
|
| (3,900 | ) |
Proceeds from disposition of assets |
|
| 8,031 |
|
|
| 14,280 |
|
Net cash used in investing activities |
|
| (65,168 | ) |
|
| (24,695 | ) |
|
|
|
|
|
| |||
Cash flows from financing activities: |
|
|
|
|
|
| ||
Borrowings on bank credit facilities, net |
|
| 112,691 |
|
|
| 1,163 |
|
Borrowings on long-term debt |
|
| 240,000 |
|
|
| — |
|
Payments on long-term debt |
|
| (350,000 | ) |
|
| (10,000 | ) |
Payment of debt issuance costs |
|
| (1,236 | ) |
|
| — |
|
Proceeds from exercise of stock options |
|
| 118 |
|
|
| 2,336 |
|
Payments related to tax withholding for share-based compensation |
|
| (3,555 | ) |
|
| (3,093 | ) |
Treasury stock purchases |
|
| (3,184 | ) |
|
| — |
|
Return of investment to noncontrolling interest and other |
|
| (24 | ) |
|
| (348 | ) |
Net cash used in financing activities |
|
| (5,190 | ) |
|
| (9,942 | ) |
Decrease in cash and cash equivalents |
|
| (53,878 | ) |
|
| (2,415 | ) |
|
|
|
|
|
| |||
Cash and cash equivalents, beginning of year |
|
| 80,577 |
|
|
| 34,813 |
|
Cash and cash equivalents, end of period |
| $ | 26,699 |
|
| $ | 32,398 |
|
|
|
|
|
|
| |||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
| ||
Cash paid (received) during the period: |
|
|
|
|
|
| ||
Interest paid |
| $ | 20,293 |
|
| $ | 18,022 |
|
Income taxes paid (refunded), net |
| $ | 694 |
|
| $ | (24 | ) |
Operating cash outflow from operating leases |
| $ | 10,451 |
|
| $ | 11,040 |
|
Non-cash investing activity: |
|
|
|
|
|
| ||
Capital expenditures included in accounts payable |
| $ | (8,197 | ) |
| $ | (487 | ) |
Right-of-use assets obtained in exchange for lease obligations |
| $ | 10,768 |
|
| $ | 6,464 |
|
See accompanying notes to condensed financial statements.
5
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
($ in thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 82,406 | $ | 109,946 | ||||
Adjustments to reconcile net earnings to net cash provided by operations: | ||||||||
Depreciation and amortization | 147,669 | 148,427 | ||||||
Provision for deferred income taxes | 32,783 | 46,264 | ||||||
Amortization of unearned share-based compensation | 8,991 | 8,841 | ||||||
Amortization of major maintenance costs | 15,232 | 14,210 | ||||||
Amortization of debt issuance costs | 786 | 600 | ||||||
Other | 180 | (1,090 | ) | |||||
Increase (decrease) in cash flows resulting from changes in operating assets and liabilities, net | (28,592 | ) | 11,048 | |||||
Net cash provided by operating activities | 259,455 | 338,246 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (133,437 | ) | (169,305 | ) | ||||
Acquisitions of businesses and marine equipment, net of cash acquired | (451,219 | ) | (125,632 | ) | ||||
Proceeds from disposition of assets | 29,743 | 15,136 | ||||||
Net cash used in investing activities | (554,913 | ) | (279,801 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings (payments) on bank credit facilities, net | 297,181 | (49,445 | ) | |||||
Payments on long-term debt | (1,065 | ) | — | |||||
Proceeds from exercise of stock options | 2,076 | 321 | ||||||
Purchase of treasury stock | — | (1,827 | ) | |||||
Acquisition of noncontrolling interests | (7 | ) | (4,160 | ) | ||||
Payments related to tax withholding for share-based compensation | (2,899 | ) | (1,753 | ) | ||||
Other | (636 | ) | (2,085 | ) | ||||
Net cash provided by (used in) financing activities | 294,650 | (58,949 | ) | |||||
Decrease in cash and cash equivalents | (808 | ) | (504 | ) | ||||
Cash and cash equivalents, beginning of year | 5,634 | 5,885 | ||||||
Cash and cash equivalents, end of period | $ | 4,826 | $ | 5,381 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period: | ||||||||
Interest paid | $ | 18,390 | $ | 18,930 | ||||
Income taxes paid | $ | 19,388 | $ | 14,901 | ||||
Capital expenditures included in accounts payable | $ | 8,917 | $ | (2,296 | ) | |||
Non-cash investing activity: | ||||||||
Fair value of property transferred in acquisition | $ | — | $ | 3,681 | ||||
Stock issued in acquisition | $ | 366,554 | $ | — | ||||
Cash acquired in acquisition | $ | 98 | $ | — | ||||
Debt assumed in acquisition | $ | 13,724 | $ | — |
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| Accumulated |
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| Additional |
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| Other |
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|
|
|
|
|
|
|
|
|
| |||||||||
| Common Stock |
|
| Paid-in- |
|
| Comprehensive |
|
| Retained |
|
| Treasury Stock |
|
| Noncontrolling |
|
|
|
| |||||||||||||||
| Shares |
|
| Amount |
|
| Capital |
|
| Income, Net |
|
| Earnings |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Total |
| |||||||||
| (in thousands) |
| |||||||||||||||||||||||||||||||||
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 |
| — |
|
|
| — |
|
|
| (217 | ) |
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| 335 |
|
|
| — |
|
|
| 118 |
|
Issuance of stock for equity awards, net of forfeitures |
| — |
|
|
| — |
|
|
| (8,256 | ) |
|
| — |
|
|
| — |
|
|
| 149 |
|
|
| 8,256 |
|
|
| — |
|
|
| — |
|
Tax withholdings on equity award vesting |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (54 | ) |
|
| (3,555 | ) |
|
| — |
|
|
| (3,555 | ) |
Amortization of share-based compensation |
| — |
|
|
| — |
|
|
| 5,808 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,808 |
|
Treasury stock purchases |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (47 | ) |
|
| (3,184 | ) |
|
| — |
|
|
| (3,184 | ) |
Total comprehensive income, net of taxes |
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
|
| 40,698 |
|
|
| — |
|
|
| — |
|
|
| (77 | ) |
|
| 40,785 |
|
Balance at March 31, 2023 |
| 65,472 |
|
| $ | 6,547 |
|
| $ | 856,680 |
|
| $ | 17,017 |
|
| $ | 2,509,428 |
|
|
| (5,504 | ) |
| $ | (306,746 | ) |
| $ | 2,214 |
|
| $ | 3,085,140 |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
| Common Stock |
|
| Paid-in- |
|
| Comprehensive |
|
| Retained |
|
| Treasury Stock |
|
| Noncontrolling |
|
|
|
| |||||||||||||||
| Shares |
|
| Amount |
|
| Capital |
|
| Income, Net |
|
| Earnings |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Total |
| |||||||||
| (in thousands) |
| |||||||||||||||||||||||||||||||||
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 |
| — |
|
|
| — |
|
|
| 438 |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
|
| 1,898 |
|
|
| — |
|
|
| 2,336 |
|
Issuance of stock for equity awards, net of forfeitures |
| — |
|
|
| — |
|
|
| (7,305 | ) |
|
| — |
|
|
| — |
|
|
| 133 |
|
|
| 7,305 |
|
|
| — |
|
|
| — |
|
Tax withholdings on equity award vesting |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (49 | ) |
|
| (3,093 | ) |
|
| — |
|
|
| (3,093 | ) |
Amortization of share-based compensation |
| — |
|
|
| — |
|
|
| 5,965 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,965 |
|
Total comprehensive income, net of taxes |
| — |
|
|
| — |
|
|
| — |
|
|
| 489 |
|
|
| 17,434 |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| 18,075 |
|
Return of investment to noncontrolling interests |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (200 | ) |
|
| (200 | ) |
Balance at March 31, 2022 |
| 65,472 |
|
| $ | 6,547 |
|
| $ | 853,610 |
|
| $ | (25,477 | ) |
| $ | 2,363,873 |
|
|
| (5,243 | ) |
| $ | (289,098 | ) |
| $ | 2,410 |
|
| $ | 2,911,865 |
|
See accompanying notes to condensed financial statements.
6
KIRBY CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1)Basis for Preparation of the Condensed Financial Statements
The condensed financial statements included herein have been prepared by Kirby Corporation (theand its consolidated subsidiaries (“Kirby” or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including significant accounting policies normally included in annual financial statements, have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
(2)Acquisition
On March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”) which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, forfeitures, minimum statutory tax withholding requirements, classification as either equity or liabilities, and classification on the statement of cash flows. The Company adopted the provisions of ASU 2016-09 on January 1, 2017. ASU 2016-09 requires all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement, thus eliminating additional paid-in capital pools. The Company recognized a cumulative effect adjustment of $8,486,000 to retained earnings on a modified retrospective basis as of January 1, 2017 and will apply the new standard guidance prospectively to all excess tax benefits and tax deficiencies resulting from settlements after January 1, 2017. The standard also requires a policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company will elect to account for forfeitures when they occur. Also, the standard requires that excess tax benefits should be classified along with other income tax cash flows as an operating activity on the statement of cash flows, which differs from the Company’s historical classification of excess tax benefits as cash inflows from financing activities. The Company elected to apply this provision using the prospective transition method. Additionally, the standard requires cash paid by an employer when directly withholding shares for tax withholding purposes to be classified in the statement of cash flows as a financing activity, which differs from the Company’s previous method of classification of such cash payments as an operating activity. The Company applied this provision retrospectively and, for the nine months ended September 30, 2016, reclassified $1,753,000, which increased net cash provided by operating activities and net cash used in financing activities.
Cash consideration paid | $ | 377,967 | ||
Stock consideration through issuance of Company common stock | 366,554 | |||
Fair value of consideration transferred | $ | 744,521 |
Assets: | ||||
Cash | $ | 98 | ||
Accounts receivable | 97,891 | |||
Inventories | 150,000 | |||
Prepaid expenses and other current assets | 3,850 | |||
Property and equipment | 150,652 | |||
Goodwill | 317,861 | |||
Other assets | 163,230 | |||
Total assets | $ | 883,582 |
Liabilities: | ||||
Current portion of long-term debt | $ | 1,501 | ||
Bank notes payable | 1,589 | |||
Income taxes payable | 850 | |||
Accounts payable | 72,200 | |||
Accrued liabilities | 31,803 | |||
Deferred revenues | 18,806 | |||
Long-term debt | 10,634 | |||
Other long-term liabilities | 1,678 | |||
Total liabilities | $ | 139,061 | ||
Net assets acquired | $ | 744,521 |
(3)Revenues
The following table presentssets forth the details of inventories as of September 30, 2017 and December 31, 2016Company’s revenues by major source (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Marine transportation segment: |
|
|
|
|
|
| ||
Inland transportation |
| $ | 337,888 |
|
| $ | 277,910 |
|
Coastal transportation |
|
| 74,607 |
|
|
| 77,626 |
|
| $ | 412,495 |
|
| $ | 355,536 |
| |
Distribution and services segment: |
|
|
|
|
|
| ||
Commercial and industrial |
| $ | 189,392 |
|
| $ | 147,533 |
|
Oil and gas |
|
| 148,557 |
|
|
| 107,713 |
|
|
| $ | 337,949 |
|
| $ | 255,246 |
|
September 30, 2017 | December 31, 2016 | |||||||
Finished goods | $ | 280,393 | $ | 178,740 | ||||
Work in process | 43,010 | 6,662 | ||||||
$ | 323,403 | $ | 185,402 |
Contract liabilities represent advance consideration received from customers, and Decemberare recognized as revenue over time as the related performance obligation is satisfied. Revenues recognized during the three months ended March 31, 2016 was $1,025,773,0002023 and $715,330,000, respectively, which differs from the carrying amounts of $1,033,428,000 and $722,802,000, respectively,2022 that were included in the consolidated financial statements. The fair value was determined using an income approach that relies on inputs such as yield curves. Cashopening contract liability balances were $38.8 million and cash equivalents, accounts receivable, accounts payable and accrued liabilities have carrying values that approximate fair value due to the short-term maturity of these financial instruments.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Compensation cost | $ | 3,067 | $ | 3,296 | $ | 8,991 | $ | 8,841 | ||||||||
Income tax benefit | $ | 1,234 | $ | 1,236 | $ | 3,386 | $ | 3,315 |
Outstanding Non- Qualified or Nonincentive Stock Awards | Weighted Average Exercise Price | |||||||
Outstanding at December 31, 2016 | 601,121 | $ | 65.33 | |||||
Granted | 123,051 | $ | 68.46 | |||||
Exercised | (21,135 | ) | $ | 36.50 | ||||
Forfeited | (17,022 | ) | $ | 62.37 | ||||
Outstanding at September 30, 2017 | 686,015 | $ | 66.85 |
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 | |||||||||||||||||||
$ | 46.74 - $51.23 | 201,276 | 3.9 | $ | 49.97 | 104,306 | $ | 48.79 | ||||||||||||||||||
$ | 64.65 - $74.99 | 415,598 | 4.1 | $ | 69.76 | 237,022 | $ | 70.31 | ||||||||||||||||||
$ | 93.64 - $96.85 | 33,987 | 3.3 | $ | 94.31 | 33,987 | $ | 94.31 | ||||||||||||||||||
$ | 101.46 - $104.37 | 35,154 | 3.1 | $ | 102.60 | 35,154 | $ | 102.60 | ||||||||||||||||||
$ | 46.74 - $104.37 | 686,015 | 4.0 | $ | 66.85 | $ | 3,284,000 | 410,469 | $ | 69.60 | $ | 1,822,000 |
Unvested Restricted Stock Award Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
Nonvested balance at December 31, 2016 | 377,655 | $ | 66.14 | |||||
Granted | 127,130 | $ | 68.50 | |||||
Vested | (105,430 | ) | $ | 68.93 | ||||
Forfeited | (21,169 | ) | $ | 68.99 | ||||
Nonvested balance at September 30, 2017 | 378,186 | $ | 66.00 |
Outstanding Non- Qualified or Nonincentive Stock Options | Weighted Average Exercise Price | |||||||
Outstanding at December 31, 2016 | 205,429 | $ | 64.60 | |||||
Granted | 3,188 | $ | 70.65 | |||||
Exercised | (39,000 | ) | $ | 46.23 | ||||
Forfeited | (12,000 | ) | $ | 87.35 | ||||
Outstanding at September 30, 2017 | 157,617 | $ | 67.54 |
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 | |||||||||||||||||||
$ | 29.60 | 6,000 | 1.6 | $ | 29.60 | 6,000 | $ | 29.60 | ||||||||||||||||||
$ | 41.24 – $56.45 | 53,276 | 2.7 | $ | 52.77 | 53,276 | $ | 52.77 | ||||||||||||||||||
$ | 61.89 – $62.48 | 35,153 | 4.8 | $ | 62.31 | 35,153 | $ | 62.31 | ||||||||||||||||||
$ | 70.65 – $99.52 | 63,188 | 6.3 | $ | 86.50 | 61,594 | $ | 86.91 | ||||||||||||||||||
$ | 29.60 – $99.52 | 157,617 | 4.5 | $ | 67.54 | $ | 1,048,000 | 156,023 | $ | 67.51 | $ | 1,048,000 |
Unvested Restricted Stock Award Shares | Weighted Average Grant Date Fair Value Per Share | |||||||
Nonvested balance at December 31, 2016 | 347 | $ | 64.89 | |||||
Granted | 21,198 | $ | 70.65 | |||||
Vested | (985 | ) | $ | 68.62 | ||||
Nonvested balance at September 30, 2017 | 20,560 | $ | 70.65 |
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Dividend yield | None | None | ||||||
Average risk-free interest rate | 2.0% | 1.5% | ||||||
Stock price volatility | 27% | 30% | ||||||
Estimated option term | Six years | Six years |
Three months ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Gross Amount | Income Tax (Provision) Benefit | Net Amount | Gross Amount | Income Tax (Provision) Benefit | Net Amount | |||||||||||||||||||
Pension and postretirement benefits (a): | ||||||||||||||||||||||||
Amortization of net actuarial loss | $ | 822 | $ | (315 | ) | $ | 507 | $ | 1,193 | $ | (455 | ) | $ | 738 | ||||||||||
Actuarial losses | — | — | — | (2 | ) | (1 | ) | (3 | ) | |||||||||||||||
Foreign currency translation | (164 | ) | — | (164 | ) | — | — | — | ||||||||||||||||
Total | $ | 658 | $ | (315 | ) | $ | 343 | $ | 1,191 | $ | (456 | ) | $ | 735 |
Nine months ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Gross Amount | Income Tax (Provision) Benefit | Net Amount | Gross Amount | Income Tax (Provision) Benefit | Net Amount | |||||||||||||||||||
Pension and postretirement benefits (a): | ||||||||||||||||||||||||
Amortization of net actuarial loss | $ | 2,939 | $ | (1,125 | ) | $ | 1,814 | $ | 3,575 | $ | (1,367 | ) | $ | 2,208 | ||||||||||
Actuarial gains (losses) | 22,014 | (8,435 | ) | 13,579 | (6,437 | ) | 2,464 | (3,973 | ) | |||||||||||||||
Foreign currency translation | (164 | ) | — | (164 | ) | — | — | — | ||||||||||||||||
Total | $ | 24,789 | $ | (9,560 | ) | $ | 15,229 | $ | (2,862 | ) | $ | 1,097 | $ | (1,765 | ) |
(4)Segment Data
The Company’s operations are aggregated into two reportable business segments as follows:
Marine Transportation
Segment (“KMT”) — Provides marine transportationDistribution and Services
Segment (“KDS”) — Provides after-market7
The Company’s two reportable business segments are managed separately based on fundamental differences in their operations. 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 $9.4 million and services segment from the marine transportation segment of $4,967,000 and $15,342,000$7.6 million for the three months ended March 31, 2023 and nine months ending September 30, 2017,2022, respectively, as well as the related intersegment profit of $0.9 million and $7,171,000 and $17,722,000$0.8 million for the three months ended March 31, 2023 and nine months ending September 30, 2016,2022, respectively, have been eliminated from the tables below. The related intersegment profit of $497,000 and $1,534,000 for the three months and nine months ending September 30, 2017, respectively, and $717,000 and $1,772,000 for the three months and nine months ending September 30, 2016, respectively, have also been eliminated from the tables below.
The following table setstables set forth the Company’s revenues and profit or loss by reportable segment for the three months and nine months ended September 30, 2017 and 2016 and total assets as of September 30, 2017 and December 31, 2016 (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Revenues: |
|
|
|
|
|
| ||
Marine transportation |
| $ | 412,495 |
|
| $ | 355,536 |
|
Distribution and services |
|
| 337,949 |
|
|
| 255,246 |
|
| $ | 750,444 |
|
| $ | 610,782 |
| |
Segment profit: |
|
|
|
|
|
| ||
Marine transportation |
| $ | 43,036 |
|
| $ | 16,935 |
|
Distribution and services |
|
| 22,792 |
|
|
| 10,971 |
|
Other |
|
| (11,156 | ) |
|
| (4,107 | ) |
| $ | 54,672 |
|
| $ | 23,799 |
|
|
| March 31, |
|
| December 31, |
| ||
Total assets: |
|
|
|
|
|
| ||
Marine transportation |
| $ | 4,285,085 |
|
| $ | 4,285,647 |
|
Distribution and services |
|
| 1,108,689 |
|
|
| 1,041,841 |
|
Other |
|
| 180,974 |
|
|
| 227,436 |
|
| $ | 5,574,748 |
|
| $ | 5,554,924 |
|
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Marine transportation | $ | 318,810 | $ | 359,031 | $ | 993,727 | $ | 1,115,677 | ||||||||
Distribution and services | 222,464 | 75,677 | 512,580 | 219,346 | ||||||||||||
$ | 541,274 | $ | 434,708 | $ | 1,506,307 | $ | 1,335,023 | |||||||||
Segment profit (loss): | ||||||||||||||||
Marine transportation | $ | 36,042 | $ | 55,460 | $ | 107,062 | $ | 197,981 | ||||||||
Distribution and services | 21,974 | 4,634 | 52,063 | 1,860 | ||||||||||||
Other | (10,155 | ) | (8,535 | ) | (27,251 | ) | (24,465 | ) | ||||||||
$ | 47,861 | $ | 51,559 | $ | 131,874 | $ | 175,376 |
September 30, 2017 | December 31, 2016 | |||||||
Total assets: | ||||||||
Marine transportation | $ | 3,589,535 | $ | 3,613,951 | ||||
Distribution and services | 1,559,937 | 623,268 | ||||||
Other | 50,943 | 52,676 | ||||||
$ | 5,200,415 | $ | 4,289,895 |
The following table presents the details of “Other” segment loss for the three months and nine months ended September 30, 2017 and 2016 (in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
General corporate expenses | $ | (4,495 | ) | $ | (3,786 | ) | $ | (12,512 | ) | $ | (11,485 | ) | ||||
Gain (loss) on disposition of assets | (159 | ) | (122 | ) | (199 | ) | 39 | |||||||||
Interest expense | (5,388 | ) | (4,507 | ) | (14,310 | ) | (13,213 | ) | ||||||||
Other income (expense) | (113 | ) | (120 | ) | (230 | ) | 194 | |||||||||
$ | (10,155 | ) | $ | (8,535 | ) | $ | (27,251 | ) | $ | (24,465 | ) |
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
General corporate expenses |
| $ | (6,608 | ) |
| $ | (3,061 | ) |
Gain on disposition of assets |
|
| 2,230 |
|
|
| 4,849 |
|
Interest expense |
|
| (13,221 | ) |
|
| (10,203 | ) |
Other income |
|
| 6,443 |
|
|
| 4,308 |
|
| $ | (11,156 | ) |
| $ | (4,107 | ) |
The following table presents the details of “Other” total assets (in thousands):
|
| March 31, |
|
| December 31, |
| ||
General corporate assets |
| $ | 178,619 |
|
| $ | 225,265 |
|
Investment in affiliates |
|
| 2,355 |
|
|
| 2,171 |
|
| $ | 180,974 |
|
| $ | 227,436 |
|
8
(5)Long-Term Debt
The following table presents the carrying value and fair value (determined using inputs characteristic of a Level 2 fair value measurement) of debt outstanding (in thousands):
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
Revolving Credit Facility due July 29, 2027 (a) |
| $ | 112,000 |
|
| $ | 112,000 |
|
| $ | — |
|
| $ | — |
|
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 |
|
|
| 482,585 |
|
|
| 500,000 |
|
|
| 477,660 |
|
3.46% senior notes due January 19, 2033 |
|
| 60,000 |
|
|
| 52,216 |
|
|
| 60,000 |
|
|
| 42,647 |
|
3.51% senior notes due January 19, 2033 |
|
| 240,000 |
|
|
| 209,798 |
|
|
| — |
|
|
| — |
|
Credit line due June 30, 2024 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Bank notes payable |
|
| 3,983 |
|
|
| 3,983 |
|
|
| 3,292 |
|
|
| 3,292 |
|
|
| 1,085,983 |
|
|
| 1,030,582 |
|
|
| 1,083,292 |
|
|
| 1,045,874 |
| |
Unamortized debt discounts and issuance costs (b) |
|
| (6,342 | ) |
|
| — |
|
|
| (3,674 | ) |
|
| — |
|
| $ | 1,079,641 |
|
| $ | 1,030,582 |
|
| $ | 1,079,618 |
|
| $ | 1,045,874 |
|
The following table presents borrowings and payments under the bank credit facilities (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Borrowings on bank credit facilities |
| $ | 156,508 |
|
| $ | 89,740 |
|
Payments on bank credit facilities |
|
| (43,817 | ) |
|
| (88,577 | ) |
| $ | 112,691 |
|
| $ | 1,163 |
|
At the beginning of 2022, the Company had 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, that allowed for an $850 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 $5.1 million and available borrowing capacity was $382.9 million as of SeptemberMarch 31, 2023.
The 2027 Term Loan is repayable in quarterly installments, with no repayments until June 30, 20172025, 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 Secured 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 2027 Credit Agreement may be used for general corporate purposes including acquisitions. The 2027 Revolving Credit Facility includes a $25 million commitment which may be used for standby letters of credit.
9
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 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 $10 million credit line were $0.6 million and available borrowing capacity was $9.4 million as of March 31, 2023.
(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 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% 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):
|
| March 31, |
|
| December 31, |
| ||
2023 |
| $ | 29,573 |
|
| $ | 41,227 |
|
2024 |
|
| 31,445 |
|
|
| 32,716 |
|
2025 |
|
| 23,507 |
|
|
| 24,807 |
|
2026 |
|
| 22,483 |
|
|
| 21,467 |
|
2027 |
|
| 20,364 |
|
|
| 19,253 |
|
Thereafter |
|
| 95,718 |
|
|
| 95,582 |
|
Total lease payments |
|
| 223,090 |
|
|
| 235,052 |
|
Less: imputed interest |
|
| (43,760 | ) |
|
| (56,468 | ) |
Operating lease liabilities |
| $ | 179,330 |
|
| $ | 178,584 |
|
The following table summarizes lease costs (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Operating lease cost |
| $ | 10,577 |
|
| $ | 10,850 |
|
Variable lease cost |
|
| 758 |
|
|
| 419 |
|
Short-term lease cost |
|
| 6,219 |
|
|
| 5,481 |
|
Sublease income |
|
| (843 | ) |
|
| (69 | ) |
| $ | 16,711 |
|
| $ | 16,681 |
|
The following table summarizes other supplemental information about the Company’s operating leases:
|
| March 31, |
|
| December 31, |
| ||
Weighted average discount rate |
|
| 4.2 | % |
|
| 4.1 | % |
Weighted average remaining lease term |
| 9 years |
|
| 9 years |
|
10
(7)Stock Award Plans
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):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Compensation cost |
| $ | 5,808 |
|
| $ | 5,965 |
|
Income tax benefit |
| $ | 1,493 |
|
| $ | 1,557 |
|
During the three months ended March 31, 2023, the Company granted 181,670 restricted stock units (“RSUs”) to selected officers and other key employees under the employee stock award plan which vest ratably over five years. During May 2023, the Company granted 30,150 shares of restricted stock to nonemployees directors of the Company under the director stock plan, the majority of which vest six months after the date of grant.
(8)Taxes on Income
At March 31, 2023 and December 31, 2016 (in thousands):
September 30, 2017 | December 31, 2016 | |||||||
General corporate assets | $ | 49,092 | $ | 50,054 | ||||
Investment in affiliates | 1,851 | 2,622 | ||||||
$ | 50,943 | $ | 52,676 |
Earnings before taxes on income and details of the provision for taxes on income for the three months and nine months ended September 30, 2017 and 2016 were as follows (in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Earnings before taxes on income – United States | $ | 47,861 | $ | 51,559 | $ | 131,874 | $ | 175,376 | ||||||||
Provision for taxes on income: | ||||||||||||||||
Federal: | ||||||||||||||||
Current | $ | 3,617 | $ | 1,190 | $ | 13,605 | $ | 14,281 | ||||||||
Deferred | 14,132 | 16,582 | 32,783 | 46,264 | ||||||||||||
State and local | 1,323 | 1,434 | 3,080 | 4,885 | ||||||||||||
$ | 19,072 | $ | 19,206 | $ | 49,468 | $ | 65,430 |
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Earnings before taxes on income: |
|
|
|
|
|
| ||
United States |
| $ | 53,863 |
|
| $ | 23,654 |
|
Foreign |
|
| 809 |
|
|
| 145 |
|
| $ | 54,672 |
|
| $ | 23,799 |
| |
Provision for taxes on income: |
|
|
|
|
|
| ||
Federal: |
|
|
|
|
|
| ||
Current |
| $ | — |
|
| $ | — |
|
Deferred |
|
| 11,733 |
|
|
| 5,257 |
|
State and local: |
|
|
|
|
|
| ||
Current |
|
| 1,267 |
|
|
| 263 |
|
Deferred |
|
| 840 |
|
|
| 599 |
|
Foreign - current |
|
| 211 |
|
|
| 94 |
|
| $ | 14,051 |
|
| $ | 6,213 |
|
11
(9)Earnings Per Share
The following table presents the components of basic and diluted earnings per share for the three months and nine months ended September 30, 2017 and 2016 (in thousands, except per share amounts):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net earnings attributable to Kirby |
| $ | 40,698 |
|
| $ | 17,434 |
|
Undistributed earnings allocated to restricted shares |
|
| (2 | ) |
|
| (3 | ) |
Earnings available to Kirby common stockholders – basic |
|
| 40,696 |
|
|
| 17,431 |
|
Undistributed earnings allocated to restricted shares |
|
| 2 |
|
|
| 3 |
|
Undistributed earnings reallocated to restricted shares |
|
| (2 | ) |
|
| (3 | ) |
Earnings available to Kirby common stockholders – diluted |
| $ | 40,696 |
|
| $ | 17,431 |
|
|
|
|
|
|
|
| ||
Shares outstanding: |
|
|
|
|
|
| ||
Weighted average common stock issued and outstanding |
|
| 59,981 |
|
|
| 60,182 |
|
Weighted average unvested restricted stock |
|
| (3 | ) |
|
| (9 | ) |
Weighted average common stock outstanding – basic |
|
| 59,978 |
|
|
| 60,173 |
|
Dilutive effect of stock options and restricted stock units |
|
| 294 |
|
|
| 290 |
|
Weighted average common stock outstanding – diluted |
|
| 60,272 |
|
|
| 60,463 |
|
|
|
|
|
|
|
| ||
Net earnings per share attributable to Kirby common stockholders: |
|
|
|
|
|
| ||
Basic |
| $ | 0.68 |
|
| $ | 0.29 |
|
Diluted |
| $ | 0.68 |
|
| $ | 0.29 |
|
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net earnings attributable to Kirby | $ | 28,607 | $ | 32,010 | $ | 81,868 | $ | 109,051 | ||||||||
Undistributed earnings allocated to restricted shares | (213 | ) | (239 | ) | (599 | ) | (766 | ) | ||||||||
Income available to Kirby common stockholders - basic | 28,394 | 31,771 | 81,269 | 108,285 | ||||||||||||
Undistributed earnings allocated to restricted shares | 213 | 239 | 599 | 766 | ||||||||||||
Undistributed earnings reallocated to restricted shares | (213 | ) | (238 | ) | (599 | ) | (765 | ) | ||||||||
Income available to Kirby common stockholders - diluted | $ | 28,394 | $ | 31,772 | $ | 81,269 | $ | 108,286 | ||||||||
Shares outstanding: | ||||||||||||||||
Weighted average common stock issued and outstanding | 55,177 | 53,856 | 54,364 | 53,827 | ||||||||||||
Weighted average unvested restricted stock | (412 | ) | (401 | ) | (398 | ) | (378 | ) | ||||||||
Weighted average common stock outstanding - basic | 54,765 | 53,455 | 53,966 | 53,449 | ||||||||||||
Dilutive effect of stock options | 38 | 46 | 55 | 54 | ||||||||||||
Weighted average common stock outstanding - diluted | 54,803 | 53,501 | 54,021 | 53,503 | ||||||||||||
Net earnings per share attributable to Kirby common stockholders: | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.59 | $ | 1.51 | $ | 2.03 | ||||||||
Diluted | $ | 0.52 | $ | 0.59 | $ | 1.50 | $ | 2.02 |
Certain outstanding options to purchase approximately 548,0000.3 million and 520,0000.4 million shares of common stock were excluded in the computation of diluted earnings per share as of September 30, 2017March 31, 2023 and 2016,2022, respectively, as such stock options would have been antidilutive. There were no antidilutive RSUs as of March 31, 2023 and 2022.
(10)Inventories
The following table presents the details of inventories – net (in thousands):
|
| March 31, |
|
| December 31, |
| ||
Finished goods |
| $ | 377,192 |
|
| $ | 358,702 |
|
Work in process |
|
| 98,026 |
|
|
| 103,146 |
|
| $ | 475,218 |
|
| $ | 461,848 |
|
(11)Retirement Plans
The Company sponsors a defined benefit plan for certain of 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.
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. The Company did not incur any one-time charges related to this amendment but the pension plan’s projected benefit obligation decreased by $33,433,000.
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. Based on current pension plan assets and market conditions, the Company does not expect to make a contribution to itsthe Kirby pension plan during 2017.
On February 14, 2018, with the acquisition of Higman Marine, Inc. and its affiliated companies (“Higman”), the Company assumed Higman’s pension plan for its inland vessel personnel and office staff. On March 27, 2018, the Company amended the Higman pension plan to close it to all new entrants and cease all benefit accruals for periods after May 15, 2018 for all participants. The Company made contributions of $7.5 million to the Higman pension plan during the three months ended March 31, 2023.
12
The Company sponsors an unfunded defined benefit health care plan that provides limited postretirement medical benefits to employees who meet 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.
The components of net periodic benefit cost for the Company’s defined benefit plans for the three months and nine months ended September 30, 2017 and 2016 were as follows (in thousands):
|
| Pension Benefits |
| |||||||||||||
|
| Pension Plans |
|
| SERP |
| ||||||||||
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Service cost |
| $ | 892 |
|
| $ | 1,611 |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 4,606 |
|
|
| 3,722 |
|
|
| 11 |
|
|
| 7 |
|
Expected return on plan assets |
|
| (5,723 | ) |
|
| (7,142 | ) |
|
| — |
|
|
| — |
|
Amortization of actuarial loss |
|
| — |
|
|
| 110 |
|
|
| 6 |
|
|
| 7 |
|
Net periodic benefit cost |
| $ | (225 | ) |
| $ | (1,699 | ) |
| $ | 17 |
|
| $ | 14 |
|
Pension Benefits | ||||||||||||||||
Pension Plan | SERP | |||||||||||||||
Three months ended September 30, | Three months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Components of net periodic benefit cost: | ||||||||||||||||
Service cost | $ | 1,742 | $ | 3,351 | $ | — | $ | — | ||||||||
Interest cost | 3,320 | 3,531 | 14 | 16 | ||||||||||||
Expected return on plan assets | (4,595 | ) | (4,202 | ) | — | — | ||||||||||
Amortization of actuarial loss | 981 | 1,372 | 7 | 7 | ||||||||||||
Net periodic benefit cost | $ | 1,448 | $ | 4,052 | $ | 21 | $ | 23 | ||||||||
Pension Benefits | ||||||||||||||||
Pension Plan | SERP | |||||||||||||||
Nine months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Components of net periodic benefit cost: | ||||||||||||||||
Service cost | $ | 8,934 | $ | 10,053 | $ | — | $ | — | ||||||||
Interest cost | 10,409 | 10,594 | 43 | 49 | ||||||||||||
Expected return on plan assets | (13,600 | ) | (12,606 | ) | — | — | ||||||||||
Amortization of actuarial loss | 3,419 | 4,115 | 21 | 20 | ||||||||||||
Net periodic benefit cost | $ | 9,162 | $ | 12,156 | $ | 64 | $ | 69 |
The components of net periodic benefit cost for the Company’s postretirement benefit plan for the three months and nine months ended September 30, 2017 and 2016 were as follows (in thousands):
|
| Other Postretirement Benefits |
| |||||
|
| Postretirement Welfare Plan |
| |||||
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Components of net periodic benefit cost: |
|
|
|
|
|
| ||
Interest cost |
| $ | 6 |
|
| $ | 4 |
|
Amortization of actuarial gain |
|
| (86 | ) |
|
| (98 | ) |
Net periodic benefit cost |
| $ | (80 | ) |
| $ | (94 | ) |
(12)Other Comprehensive Income
The Company’s changes in other comprehensive income were as follows (in thousands):
|
| Three Months Ended March 31, |
| |||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||
|
| Gross |
|
| Income Tax Benefit |
|
| Net Amount |
|
| Gross |
|
| Income Tax Provision |
|
| Net |
| ||||||
Pension and postretirement benefits (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of net actuarial (gain) loss |
| $ | (80 | ) |
| $ | 19 |
|
| $ | (61 | ) |
| $ | 19 |
|
| $ | (6 | ) |
| $ | 13 |
|
Foreign currency translation |
|
| 225 |
|
|
| — |
|
|
| 225 |
|
|
| 476 |
|
|
| — |
|
|
| 476 |
|
Total |
| $ | 145 |
|
| $ | 19 |
|
| $ | 164 |
|
| $ | 495 |
|
| $ | (6 | ) |
| $ | 489 |
|
Other Postretirement Benefits | Other Postretirement Benefits | |||||||||||||||
Postretirement Welfare Plan | Postretirement Welfare Plan | |||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Components of net periodic benefit cost: | ||||||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | ||||||||
Interest cost | 6 | 7 | 20 | 22 | ||||||||||||
Amortization of actuarial gain | (166 | ) | (186 | ) | (501 | ) | (560 | ) | ||||||||
Net periodic benefit cost | $ | (160 | ) | $ | (179 | ) | $ | (481 | ) | $ | (538 | ) |
(a)Actuarial gains are amortized into other income (expense). (See Note 11, Retirement Plans)
13
(13)Contingencies and Commitments
On October 13, 2016, the tug Nathan E. Stewart and barge DBL 55, an articulated tank barge and tugboat unit (“ATB”), owned and operated by Kirby Offshore Marine, LLC, a wholly owned subsidiary of the Company, ran aground at the entrance to Seaforth Channel on Atholone Island, British Columbia. The grounding resulted in a breach of a portion of the Nathan E. Stewart’s fuel tanks causing a discharge of diesel fuel into the water. The United States Coast Guard (“USCG”) and the National Transportation Safety Board (“NTSB”) designated the Company as a party of interest in their investigation as to the cause of the incident. The Canadian authorities including Transport Canada and the Canadian Transportation Safety Board are also investigatinginvestigated the cause of the incident. TheOn October 10, 2018, the Heiltsuk First Nation filed a civil action in the British Columbia Supreme Court against a subsidiary of the Company, is subject to claims from third parties as well as the provincialmaster and federalpilot of the tug, the vessels and the Canadian government seeking unquantified damages as a result of the incident. On May 1, 2019, the Company filed a limitation action in the Federal Court of Canada seeking limitation of liability relating to the incident as provided under admiralty law. The Heiltsuk First Nation’s civil claim has been consolidated into the Federal Court limitation action as of July 26, 2019 and it is expected that the Federal Court of Canada will decide all claims against the Company. The Company is unable to estimate the potential exposure in the civil proceeding. The Company has various insurance policies covering liabilities including pollution, property, marine and general liability and believes that it has satisfactory insurance coverage for the cost of cleanup and salvage operations as well as other potential liabilities arising from the incident.
In addition, the Company is also 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 businessfinancial condition, results of operations, or financial condition.cash flows. Management believes that it has recordedits accrual of such estimated liability is adequate reserves and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies.
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 $30,466,000$18.1 million at September 30, 2017,March 31, 2023, including $11,829,000$11.3 million in letters of credit and $18,637,000$6.8 million in performance bonds. All of these instruments have an expiration date within four years.two years. The Company does not believe demand for payment under these instruments is likely and expects no material cash outlays to occur in connection withregarding these instruments.
14
Item 2.Management’s Discussion and Analysis of the Company, purchased certain assetsFinancial Condition and Results of Sneed Shipbuilding, Inc. for $14,905,000 in cash including its Channelview, Texas shipyard. San Jac is a builder of marine vessels for both inland and offshore applications as well providing repair and maintenance services. The Company intends to build towboats at the shipyard and use the facilities for routine maintenance. The Company has not completed the final purchase price allocation at this time.
Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. Such statements involve risks and uncertainties. Such statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “project” or “continue,” or the negative thereof or other variations thereon or comparable terminology. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornadoes,tornados, COVID-19 or other pandemics, marine accidents, lock delays, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. For a more detailed discussion of factors that could cause actual results to differ from those presented in forward-looking statements, see Item 1A-Risk Factors found in the Company’s Annual Report on Form 10-K10‑K for the year ended December 31, 2016 and Item 1A - Risk Factors in this report.2022. Forward-looking statements are based on currently available information and the Company assumes no obligation to update any such statements.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Weighted average number of common stock - diluted | 54,803 | 53,501 | 54,021 | 53,503 |
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 September 30, 2017, the Company operated a fleet of 848 inland tank barges with 17.4 million barrels of capacity, and operated an average of 215 inland towboats during the 2017 third quarter. The Company’s coastal fleet consisted of 67 tank barges with 6.2 million barrels of capacity and 70 coastal tugboats. The Company also owns and operates five offshore dry-bulk cargo barges and five offshore tugboats and one docking tugboat transporting dry-bulk cargoes 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, fork lifts, pumpsindustrial compressors, high capacity lift trucks, and compressorsrefrigeration 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 the land-based oilfield service and oilrailroad customers.
The following table summarizes key operating results of the Company (in thousands, except per share amounts):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Total revenues |
| $ | 750,444 |
|
| $ | 610,782 |
|
Net earnings attributable to Kirby |
| $ | 40,698 |
|
| $ | 17,434 |
|
Net earnings per share attributable to Kirby common stockholders – diluted |
| $ | 0.68 |
|
| $ | 0.29 |
|
Net cash provided by operating activities |
| $ | 16,480 |
|
| $ | 32,222 |
|
Capital expenditures |
| $ | 73,199 |
|
| $ | 35,075 |
|
The 2023 first quarter included $3.0 million before taxes, $2.4 million after taxes, or $0.04 per share of costs related to strategic review and gas operatorshareholder engagement and producer markets.
Cash provided by operating activities for the 2023 first quarter decreased in comparison to the 2022 first quarter primarily due to an increase in working capital, partially offset by improved net earnings. For the 2017 third2023 first quarter, net earnings attributablecapital expenditures of $73.2 million included $46.6 million in KMT and $26.6 million in KDS and corporate, each more fully described under Cash Flow and Capital Expenditures below.
The Company projects that capital expenditures for 2023 will be in the $300 million to Kirby were $28,607,000, or $0.52 per share,$380 million range. The 2023 construction program will consist of up to approximately $40 million for the construction of inland specialized equipment, approximately $240 million primarily for maintenance capital and improvements to existing marine equipment, including ballast water treatment systems on revenuessome coastal vessels, and facility improvements. The balance of $541,274,000, compared with 2016 third quarterup to approximately $100 million relates to new electric fracturing equipment and facilities improvements in KDS, and information technology projects in corporate.
The Company’s debt-to-capitalization ratio decreased to 25.9% at March 31, 2023 from 26.2% at December 31, 2022, primarily due an increase in total equity, largely due to the net earnings attributable to Kirby of $32,010,000, or $0.59 per share, on revenues$40.7 million, partially offset by treasury stock purchases of $434,708,000. $3.2 million. The Company’s debt outstanding as of March 31, 2023 and December 31, 2022 is detailed in Long-Term Financing below.
15
Marine Transportation
For the 20172023 first nine months, net earnings attributable to Kirby were $81,868,000, or $1.50 per share, on revenues of $1,506,307,000, compared with 2016 first nine months net earnings attributable to Kirby of $109,051,000, or $2.02 per share, on revenues of $1,335,023,000.
The following table summarizes the Company’s marine transportation segment’sfleet:
|
| March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Inland tank barges: |
|
|
|
|
|
| ||
Owned |
|
| 1,004 |
|
|
| 983 |
|
Leased |
|
| 39 |
|
|
| 42 |
|
Total |
|
| 1,043 |
|
|
| 1,025 |
|
Barrel capacity (in millions) |
|
| 23.2 |
|
|
| 22.9 |
|
|
|
|
|
|
|
| ||
Active inland towboats (quarter average): |
|
|
|
|
|
| ||
Owned |
|
| 216 |
|
|
| 207 |
|
Chartered |
|
| 66 |
|
|
| 56 |
|
Total |
|
| 282 |
|
|
| 263 |
|
|
|
|
|
|
|
| ||
Coastal tank barges: |
|
|
|
|
|
| ||
Owned |
|
| 28 |
|
|
| 29 |
|
Leased |
|
| 1 |
|
|
| 1 |
|
Total |
|
| 29 |
|
|
| 30 |
|
Barrel capacity (in millions) |
|
| 3.0 |
|
|
| 3.1 |
|
|
|
|
|
|
|
| ||
Coastal tugboats: |
|
|
|
|
|
| ||
Owned |
|
| 24 |
|
|
| 26 |
|
Chartered |
|
| 1 |
|
|
| 3 |
|
Total |
|
| 25 |
|
|
| 29 |
|
|
|
|
|
|
|
| ||
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 a shipyard for building towboats and performing routine maintenance near the Houston Ship Channel. Further, the Company owns a two-thirds interest in Osprey Line, L.L.C., which transports project cargoes and cargo containers by barge.
During the 2023 first quarter, the Company brought back into service a net five inland tank barges and chartered one tank barge, increasing its capacity by approximately 0.1 million barrels of capacity.
KMT revenues for the 2017 third2023 first quarter increased 16% and first nine months decreased 11% whenoperating income increased 154% compared with the 2016 third quarter and first nine months. The decrease in revenues was primarily due to the industry-wide oversupply of tank barges in both the inland and coastal markets, resulting in lower inland marine transportation term and spot contract pricing, lower coastal marine transportation spot contract pricing and lower coastal equipment utilization. In addition, a continued increase in the number of coastal vessels operating in the spot market led to increased idle time and decreased revenues, partially offset by an increase in the average cost of marine diesel fuel which is largely passed through to the customer and the addition of the nine specialty pressure tank barges and four 30,000 barrel tank barges purchased in July 2017.
Inland tank barge utilization levels after Hurricane Harvey fromaveraged in the mid-80%low to the mid-90% range during the 2023 first quarter compared to the mid-80% to high 80% range during the 2017 second quarter, the high 80% to low 90% range during the 20172022 first quarter. The 2023 first quarter reflected increasing activity levels as a result of higher refinery and petrochemical plant utilization while the low-to-mid 80% range for2022 first quarter was impacted by the 2016 third quarter. ForCOVID-19 Omicron variant as increased cases among the 2017 third quarter and first nine months, demand for barges moving petrochemicals and black oil was stable, while demand for refined petroleum products was lower comparedCompany’s mariners led to demand for the comparable 2016 periods.
16
Coastal tank barge utilization levels declinedaveraged in the mid to the low 60% to mid-60% range from the high 60% to mid-70%high-90% range during the 2017 second quarter, the mid-70% to low 80% range during the 20172023 first quarter and the low-to-mid 80% range in the 2016 third quarter. Utilization in the coastal marine fleet continued to be impacted by the industry-wide oversupply of tank barges. Demand for the transportation of petrochemicals was relatively stable during the 2017 third quarter and first nine months compared to demand for the comparable 2016 periods. Demand for black oil products was weaker in the 2017 third quarter compared to the 2017low-90% range during the 2022 first and second quarters and the 2016 third quarter. Demand for the transportation of refined petroleum products and crude oilThe increase in coastal tank barge utilization during 2023 was lower in the 2017 third quarter and first nine months compared to demand in the same 2016 periods, primarily due to the oversupply of barge capacity.
During the 2017 third2023 first quarter, approximately 55% of KMT inland revenues were under term contracts and 45% were spot contract revenues. During the 2022 first nine months,quarter, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. Inland time charters during the 2023 first quarter represented 60% of the inland revenues under term contracts compared with 58% in the 2022 first quarter. During the 2023 first quarter, approximately 75% of marine transportationKMT coastal inland revenues were under term contracts and 25% were spot contract revenues. For the 2016 third quarter and first nine months, approximately 80% of inland revenues were under term contracts, and 20% were spot contract revenues. Inland time charters during the 2017 third quarter and first nine months represented 48% of the revenues under term contracts compared with 52% and 53% in the 2016 third quarter and first nine months, respectively.
The following table summarizes the average range of pricing changes in term and spot contracts renewed during 2023 compared with 90%to contracts renewed during the 2016 thirdcorresponding quarter of 2022:
Three Months Ended | |||
March 31, 2023 | |||
Inland market: | |||
Term increase | 10% – 12% | ||
Spot increase | 23% – 26% | ||
Coastal market (a): | |||
Term increase | 10% – 12% | ||
Spot increase | 20% – 23% |
Effective January 1, 2017,2023, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 0.6%9%, excluding fuel.
KMT operating margin was 11.3%10.4% for the 2017 third quarter compared with 15.4% for the 2016 third quarter and 10.8% for the 20172023 first nine months compared with 17.7% for the 2016 first nine months.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
2017 | % | 2016 | % | 2017 | % | 2016 | % | |||||||||||||||||||||||||
Marine transportation | $ | 318,810 | 59 | % | $ | 359,031 | 83 | % | $ | 993,727 | 66 | % | $ | 1,115,677 | 84 | % | ||||||||||||||||
Distribution and services | 222,464 | 41 | 75,677 | 17 | 512,580 | 34 | 219,346 | 16 | ||||||||||||||||||||||||
$ | 541,274 | 100 | % | $ | 434,708 | 100 | % | $ | 1,506,307 | 100 | % | $ | 1,335,023 | 100 | % |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||||
Marine transportation revenues | $ | 318,810 | $ | 359,031 | (11 | )% | $ | 993,727 | $ | 1,115,677 | (11 | )% | ||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Costs of sales and operating expenses | 204,711 | 226,543 | (10 | ) | 652,402 | 681,887 | (4 | ) | ||||||||||||||||
Selling, general and administrative | 26,825 | 26,089 | 3 | 82,289 | 85,386 | (4 | ) | |||||||||||||||||
Taxes, other than on income | 5,651 | 4,880 | 16 | 17,598 | 14,671 | 20 | ||||||||||||||||||
Depreciation and amortization | 45,581 | 46,059 | (1 | ) | 134,376 | 135,752 | (1 | ) | ||||||||||||||||
282,768 | 303,571 | (7 | ) | 886,665 | 917,696 | (3 | ) | |||||||||||||||||
Operating income | $ | 36,042 | $ | 55,460 | (35 | )% | $ | 107,062 | $ | 197,981 | (46 | )% | ||||||||||||
Operating margins | 11.3 | % | 15.4 | % | 10.8 | % | 17.7 | % |
Markets Serviced | 2017 Third Quarter Revenue Distribution | 2017 Nine Months Revenue Distribution | Products Moved | Drivers | |||||||
Petrochemicals | 56% | 55% | Benzene, Styrene, Methanol, Acrylonitrile, Xylene, Naphtha, Caustic Soda, Butadiene, Propylene | Consumer non-durables – 70%, Consumer durables – 30% | |||||||
Black Oil | 22% | 24% | 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 | 18% | 18% | Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol | Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization | |||||||
Agricultural Chemicals | 4% | 3% | Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia | Corn, Cotton and Wheat Production, Chemical Feedstock Usage |
Distribution and Services
KDS sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or entire diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications. The Company also rents equipment including generators, fork lifts, pumpsindustrial compressors, high capacity lift trucks, and compressorsrefrigeration trailers for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, and manufactures cementing and pumping equipment as well as coil tubing and well intervention equipment, electric power generation equipment, specialized electric distribution and control equipment, and high capacity energy storage/battery systems for the land-based oilfield service and railroad customers.
For the 2023 first quarter, KDS generated 45% of the Company’s revenues, of which 77% were generated from service and parts and 23% from manufacturing. The results of KDS are largely influenced by the economic cycles of the oil and gas, operatormarine, power generation, on-highway, and producerother related industrial markets.
KDS revenues for the 2023 first quarter increased 32% and operating income increased 108% compared with the 2022 first quarter. In the commercial and industrial market, the increases for the 2023 first quarter were primarily attributable to strong economic activity across the United States which resulted in higher business levels in the marine and on-highway businesses. Increased product sales in Thermo King also contributed favorably to the 2023 first quarter results. These increases were partially offset by continuing supply chain constraints and delays. For the 2023 first quarter, the commercial and industrial market contributed 56% of KDS revenues.
In the oil and gas market, revenues and operating income improved compared to the 2022 first quarter 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 continued to experience increased orders and deliveries of new environmentally friendly pressure pumping equipment and power generation equipment for electric fracturing. For the 2023 first quarter, the oil and gas market contributed 44% of KDS revenues.
KDS operating margin was 6.7% for the 2023 first quarter compared to 4.3% for the 2022 first quarter.
17
Outlook
Refinery and petrochemical utilization levels remain at high levels. This is favorable for the Company’s barge utilization, which is strong in both inland and coastal markets, and for pricing, which continues to increase. Although first quarter results were materially challenged by bad weather in KMT, the business exited the quarter in a solid position and improved results are anticipated through the remainder of 2023. Demand for the Company’s products and services continues to grow despite ongoing supply chain constraints and delays which could impact the Company’s product deliveries and defer completion of marine transportation repair and maintenance. Overall, the Company expects both KMT and KDS to deliver improved financial results in the coming quarters. The Company continues to closely monitor the ever-changing economic landscape related to the impact of higher interest rates and possible recessionary headwinds as it continues to move through 2023.
In the inland marine transportation market, conditions are expected to continue to remain favorable for the remainder of 2023 driven by continued strong barge utilization, continued growth in customer demand, steady volumes from refinery and petrochemical plants, and modest net new barge construction in the industry. As a result, the Company expects further improvements in the spot market, which currently represents approximately 45% of inland revenues. Term contracts are also expected to continue to reset higher to reflect improved market conditions for the duration of the year. In coastal marine, the Company expects modestly improved customer demand through the balance of the year with barge utilization in the low to mid-90% range. Rates are expected to continue to gradually improve, though meaningful gains remain challenged by underutilized barge capacity across the industry. Revenues and operating margins are also expected to be impacted by an approximate doubling of planned shipyard maintenance days with ballast water treatment installations on certain vessels.
KDS results are largely influenced by the cycles of the oil and gas, marine, power generation, on-highway and other related industrial markets. Favorable oilfield fundamentals and steady demand in commercial and industrial are expected to continue throughout 2023. In the oil and gas market, high commodity prices, stable rig counts, and growing well completions activity are expected to yield strong demand for OEM products, parts, and services in the distribution business. In manufacturing, the Company expects demand for environmentally friendly pressure pumping and power generation equipment for electric fracturing to remain strong, with new orders and increased deliveries of new equipment during the year. Supply chain issues and long lead times are expected to persist in the near-term, contributing to some volatility as deliveries of new products shift between quarters and into 2024. In commercial and industrial, strong markets are expected to help drive full year revenue growth, with increased activity in power generation, marine repair, and on-highway.
Acquisition
On March 31, 2022, the Company paid $3.9 million in cash to purchase assets of a gearbox repair company in KDS. Financing of the purchases was through cash provided by operating activities.
Results of Operations
The following table sets forth the Company’s distributionKMT and services segment’sKDS revenues and the percentage of each to total revenues (dollars in thousands):
|
| Three Months Ended March 31, |
| |||||||||||||
|
| 2023 |
|
| % |
|
| 2022 |
|
| % |
| ||||
Marine transportation |
| $ | 412,495 |
|
|
| 55 | % |
| $ | 355,536 |
|
|
| 58 | % |
Distribution and services |
|
| 337,949 |
|
|
| 45 |
|
|
| 255,246 |
|
|
| 42 |
|
|
| $ | 750,444 |
|
|
| 100 | % |
| $ | 610,782 |
|
|
| 100 | % |
18
Marine Transportation
The following table sets forth KMT revenues, costs and expenses, operating income, and operating marginsmargin (dollars in thousands):
|
| Three Months Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| % Change |
| |||
Marine transportation revenues |
| $ | 412,495 |
|
| $ | 355,536 |
|
|
| 16 | % |
|
|
|
|
|
|
|
|
|
| |||
Costs and expenses: |
|
|
|
|
|
|
|
|
| |||
Costs of sales and operating expenses |
|
| 282,023 |
|
|
| 254,359 |
|
|
| 11 |
|
Selling, general and administrative |
|
| 34,987 |
|
|
| 32,336 |
|
|
| 8 |
|
Taxes, other than on income |
|
| 7,307 |
|
|
| 7,820 |
|
|
| (7 | ) |
Depreciation and amortization |
|
| 45,142 |
|
|
| 44,086 |
|
|
| 2 |
|
|
|
| 369,459 |
|
|
| 338,601 |
|
|
| 9 |
|
Operating income |
| $ | 43,036 |
|
| $ | 16,935 |
|
|
| 154 | % |
Operating margins |
|
| 10.4 | % |
|
| 4.8 | % |
|
|
|
Marine Transportation Revenues
The following table shows the marine transportation markets serviced by the Company, KMT revenue distribution, products moved and the drivers of the demand for the threeproducts the Company transports:
Markets | 2023 First Quarter | Products Moved | Drivers | |||
Petrochemicals | 50% | 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 | 21% | Gasoline, No. 2 Oil, Jet Fuel, Heating Oil, Diesel Fuel, Ethanol | Vehicle Usage, Air Travel, Weather Conditions, Refinery Utilization | |||
Agricultural Chemicals | 3% | Anhydrous Ammonia, Nitrogen – Based Liquid Fertilizer, Industrial Ammonia | Corn, Cotton and Wheat Production, Chemical Feedstock Usage |
KMT revenues for the 2023 first quarter increased 16% compared to the 2022 first quarter revenues. The increase for the 2023 first quarter was primarily due to higher term and spot pricing, increased tank barge utilization, and higher fuel rebills in the inland and coastal markets. Also, the 2022 first quarter was impacted by the COVID-19 Omicron variant as increased cases among the Company’s mariners led to crewing challenges, lost revenue and increased operating costs. The 2023 and 2022 first quarters were impacted by poor operating conditions including seasonal wind and fog along the Gulf Coast and lock delays on the Mississippi and Illinois rivers resulting in higher delay days. For the 2023 first quarter, the inland tank barge fleet contributed 82% and the coastal fleet contributed 18% of KMT revenues. For the 2022 first quarter, the inland tank barge fleet contributed 78% and the coastal fleet contributed 22% of KMT revenues.
Inland tank barge utilization levels averaged in the low to mid-90% range during the 2023 first quarter compared to the mid-80% range during the 2022 first quarter. The 2023 first quarter reflected increasing activity levels as a result of higher refinery and petrochemical plant utilization while the 2022 first quarter was impacted by the COVID-19 Omicron variant as increased cases among the Company’s mariners led to crewing challenges.
Coastal tank barge utilization levels averaged in the mid to high-90% range during the 2023 first quarter compared to the low-90% range during the 2022 first quarter. The increase in coastal tank barge utilization during 2023 was primarily due to continued improvements in market and customer demand.
The petrochemical market, which is the Company’s largest market, contributed 50% of KMT revenues for the 2023 first quarter reflecting increased rates, volumes and utilization from Gulf Coast petrochemical plants as a result of improved economic conditions as compared to the 2022 first quarter.
19
The black oil market, which contributed 26% of KMT revenues for the 2023 first quarter, reflected improved demand as refinery utilization and production levels of refined petroleum products and fuel oils increased. During the 2023 first quarter, the Company transported crude oil and natural gas condensate produced from the Permian Basin and 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 21% of KMT revenues for the 2023 first quarter, reflected increased volumes in the inland market with improved refinery utilization and product levels.
The agricultural chemical market, which contributed 3% of KMT revenues for both the 2023 first quarter, reflected improved demand for transportation of both domestically produced and imported products.
For the 2023 first quarter, the inland operations incurred 4,125 delay days, 31% more than the 3,137 delay days that occurred during the 2022 first quarter. Delay days measure the lost time incurred by a tow (towboat and one or more tank barges) during transit when the tow is stopped due to weather, lock conditions, or other navigational factors. Delay days reflected poor operating conditions due to heavy wind and fog along the Gulf Coast and lock delays on the Mississippi and Illinois rivers during the 2023 and 2022 first quarters.
During the 2023 first quarter, approximately 55% of KMT inland revenues were under term contracts and 45% were spot contract revenues. During the 2022 first quarter, approximately 65% of KMT inland revenues were under term contracts and 35% were spot contract revenues. Inland time charters during the 2023 first quarter represented 60% of the inland revenues under term contracts compared with 58% in the 2022 first quarter, respectively. During the 2023 first quarter, approximately 75% of KMT coastal inland revenues were under term contracts and 25% were spot contracts. During the 2022 first quarter, approximately 80% of the coastal revenues were under term contracts and 20% were spot contract revenues. Coastal time charters represented approximately 90% of coastal revenues under term contracts during both the 2023 and 2022 first quarters. Term contracts have contract terms of 12 months or longer, while spot contracts have contract terms of less than 12 months.
The following table summarizes the average range of pricing changes in term and nine months ended September 30, 2017spot contracts renewed during 2023 compared to contracts renewed during the corresponding quarter of 2022:
Three Months Ended | |||
March 31, 2023 | |||
Inland market: | |||
Term increase | 10% – 12% | ||
Spot increase | 23% – 26% | ||
Coastal market (a): | |||
Term increase | 10% – 12% | ||
Spot increase | 20% – 23% |
Effective January 1, 2023, annual escalators for labor and the producer price index on a number of inland multi-year contracts resulted in rate increases on those contracts of approximately 9%, excluding fuel.
Marine Transportation Costs and Expenses
Costs and expenses for the 2023 first quarter increased 9%, respectively, compared to the 2022 first quarter. Costs of sales and operating expenses for the 2023 first quarter increased 11%, respectively, compared with the three months2022 first quarter. The increases during the 2023 first quarter primarily reflect improved business activity levels, inflationary cost pressures and nine months ended Septemberincreased fuel costs. The 2022 first quarter was negatively impacted by incremental costs associated with the COVID-19 Omicron variant.
The inland marine transportation fleet operated an average of 282 towboats during the 2023 first quarter, of which an average of 66 were chartered, compared to 263 during the 2022 first quarter, of which an average of 56 were chartered. The increase was primarily due to increasing business activity levels during the 2023 first quarter. The Company charters in or releases chartered towboats in an effort to balance horsepower needs with current requirements, taking into account variability in demand or anticipated demand, addition or removal of tank barges from the fleet, chartered towboat availability, and weather or water conditions. The Company has historically used chartered towboats for approximately one-fourth of its horsepower requirements.
20
During the 2023 first quarter, the inland operations consumed 12.2 million gallons of diesel fuel compared to 11.5 million gallons consumed during the 2022 first quarter. The average price per gallon of diesel fuel consumed during the 2023 first quarter was $3.31 per gallon compared with $2.50 per gallon for the 2022 first quarter. Fuel escalation and de-escalation clauses are typically included in term contracts and are designed to rebate fuel costs when prices decline and recover additional fuel costs when fuel prices rise; however, there is generally a 30 2016to 120 day delay before contracts are adjusted. Spot contracts do not have escalators for fuel.
Selling, general and administrative expenses for the 2023 first quarter increased 8% compared to the 2022 first quarter due to higher business activity levels and inflationary cost pressures. The increase for the 2023 first quarter was also due to salary and wage increases which went into effect July 1, 2022.
Marine Transportation Operating Income and Operating Margin
KMT operating income for the 2023 first quarter increased 154% compared with the 2022 first quarter. The 2023 first quarter operating margin was 10.4% compared with 4.8% for the 2022 first quarter. The increases in operating income and operating margin were primarily due to higher term and spot contract pricing and increased barge utilization in the inland and coastal markets, each as a result of improving business activity levels, partially offset by increasing fuel prices. The 2022 first quarter was negatively impacted by the COVID-19 Omicron variant as increased cases among the Company’s mariners led to crewing challenges, lost revenue and increased operating costs.
Distribution and Services
The following table sets forth KDS revenues, costs and expenses, operating income, and operating margin (dollars in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||||
Distribution and services revenues | $ | 222,464 | $ | 75,677 | 194 | % | $ | 512,580 | $ | 219,346 | 134 | % | ||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Costs of sales and operating expenses | 173,629 | 55,625 | 212 | 395,774 | 166,088 | 138 | ||||||||||||||||||
Selling, general and administrative | 21,232 | 11,709 | 81 | 52,307 | 40,018 | 31 | ||||||||||||||||||
Taxes, other than on income | 856 | 554 | 55 | 1,879 | 1,607 | 17 | ||||||||||||||||||
Depreciation and amortization | 4,773 | 3,155 | 51 | 10,557 | 9,773 | 8 | ||||||||||||||||||
200,490 | 71,043 | 182 | 460,517 | 217,486 | 112 | |||||||||||||||||||
Operating income | $ | 21,974 | $ | 4,634 | 374 | % | $ | 52,063 | $ | 1,860 | 2699 | % | ||||||||||||
Operating margins | 9.9 | % | 6.1 | % | 10.2 | % | 0.8 | % |
|
| Three Months Ended March 31, |
| |||||||||
| �� | 2023 |
|
| 2022 |
|
| % Change |
| |||
Distribution and services revenues |
| $ | 337,949 |
|
| $ | 255,246 |
|
|
| 32 | % |
|
|
|
|
|
|
|
|
|
| |||
Costs and expenses: |
|
|
|
|
|
|
|
|
| |||
Costs of sales and operating expenses |
|
| 259,864 |
|
|
| 196,519 |
|
|
| 32 |
|
Selling, general and administrative |
|
| 49,197 |
|
|
| 41,922 |
|
|
| 17 |
|
Taxes, other than on income |
|
| 1,851 |
|
|
| 1,728 |
|
|
| 7 |
|
Depreciation and amortization |
|
| 4,245 |
|
|
| 4,106 |
|
|
| 3 |
|
|
|
| 315,157 |
|
|
| 244,275 |
|
|
| 29 |
|
Operating income |
| $ | 22,792 |
|
| $ | 10,971 |
|
|
| 108 | % |
Operating margins |
|
| 6.7 | % |
|
| 4.3 | % |
|
|
|
Distribution and Services Revenues
The following table shows the markets serviced by the Company’s distribution and services segment,KDS, the revenue distribution, for the 2017 third quarter and first nine months, and the customers for each market:
Markets Serviced | 2017 Third Quarter Revenue Distribution | 2017 Nine Months Revenue Distribution | Customers | ||||||
Land-Based | 80% | 76% | Land-Based Oilfield Services, Oil and Gas Operators and Producers, On-Highway Transportation, Construction, Mining, Agriculture | ||||||
Marine | 13% | 17% | 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 | ||||||
Power Generation | 7% | 7% | Standby Power Generation, Pumping Stations |
Markets Serviced | 2023 First Quarter | Customers | ||
Commercial and Industrial | 56% | 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 | 44% | Oilfield Services, Oil and Gas Operators and Producers |
KDS revenues for the 2017 third2023 first quarter increased 32% compared to the 2022 first quarter. In the commercial and industrial market, the increase for the 2023 first nine months increased 194% and 134%, respectively, compared with the 2016 third quarter and first nine months,was primarily attributable to strong economic activity across the United States which resulted in higher business levels in the marine and on-highway businesses. Increased product sales in Thermo King also contributed favorably to the 2023 first quarter results. These increases were partially offset by continuing supply chain constraints and delays. For the 2023 first quarter, the commercial and industrial market contributed 56% of KDS revenues.
In the oil and gas market, revenues improved compared to the 2022 first quarter due to higher oilfield activity which resulted in increased demand for new transmissions and parts in the land-based market fordistribution business. Although the remanufacturemanufacturing business was heavily impacted by supply chain delays, the business continued to experience increased orders and deliveries of new environmentally friendly
21
pressure pumping units and transmission overhauls, an improvement in the manufacturing of oilfield service equipment, including pressure pumping units, and an increase in the demand for the sale and distribution of engines, transmissions and related parts. The 2017 third quarter and first nine months higher revenues also reflected the S&S acquisition on September 13, 2017. S&S benefited from elevated demand for rental equipment and increased service work as a result of pent-up demand following Hurricanes Harvey, Irma and Maria, as well as healthy demand for service work, parts sales and the manufacturing of pressure pumping equipment. In the marine market, customers continued to defer major maintenance projects, particularly in the Midwest and on the East Coast, largely due to the weak inland and coastal tank barge markets and inland dry cargo barge market. In addition, continued weakness in the Gulf of Mexico oilfield services market negatively impacted the marine market. The power generation equipment for electric fracturing. For the 2023 first quarter, the oil and gas market was relatively stable with major generator set upgrades and parts sales for both domestic and international power generation customers.
Distribution and Services Costs and Expenses
Costs and expenses for the 2017 third2023 first quarter and first nine months increased 182% and 112%, respectively,29% compared with the 2016 third quarter and2022 first nine months.quarter. Costs of sales and operating expenses for the 2017 third2023 first quarter and first nine months increased 212% and 138%, respectively,32% compared with the 2016 third2022 first quarter, reflecting higher demand in the marine and first nine months, reflecting theon-highway businesses in commercial and industrial markets as well as increased demand for the remanufacture of pressure pumping units and transmission overhauls, improvement in the manufacturingoil and gas market as a result of higher oilfield service equipment, including pressure pumping units, an increase in the demand for the sale and distribution of engines, transmissions and related parts in the land-based market, and the S&S acquisition on September 13, 2017.
Selling, general and administrative expenses for the 2017 third2023 first quarter andincreased 17% compared to the 2022 first nine months increased 81% and 31%, respectively, compared with the 2016 third quarter, and first nine months, primarily due to increasedcontinued inflationary cost pressures, higher business activity in the land-based market in the 2017 first nine months, as well as the S&S acquisition on September 13, 2017. The 2016 first nine months selling, general and administrative expenses included $1,436,000 of severance charges incurred in the 2016 first quarter, in response to the reduced activity in both the marine and land-based markets, which benefited both the land-based and marine markets during the 2017 third quarter and first nine months.
Distribution and Services Operating Income and Operating Margins
KDS operating income for the distribution and services segment for the 2017 third2023 first quarter and first nine months was $21,974,000 and $52,063,000, respectively, compared to operating income of $4,634,000 and $1,860,000 for the 2016 third quarter and first nine months, respectively. The operating margin for the 2017 third quarter was 9.9% compared with 6.1% for the 2016 third quarter and 10.2% for the 2017 first nine months compared with 0.8% for the 2016 first nine months. The results primarily reflected continued strong demand for the remanufacture of pressure pumping units and transmission overhauls, the manufacturing of oilfield service equipment, the sale of new transmissions and related parts and the earnings contribution of S&S.
Gain (Loss) on Disposition of Assets
The Company reported a net lossgain on disposition of assets of $159,000$2.2 million for the 2017 third2023 first quarter compared with a net gain of $122,000and $4.8 million for the 2016 third2022 first quarter. For the 2017 first nine months, the Company reported a net loss on disposition of assets of $199,000 compared with a net gain of $39,000 for the first nine months of 2016. The net gains and losses were predominantlyprimarily from the sale or retirementsales of marine transportation equipment.
Other Income (Expense)
The following table sets forth impairments, other income, (expense), noncontrolling interests, and interest expense for the three months and nine months ended September 30, 2017 compared with the three months and nine months ended September 30, 2016 (dollars in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||||
Other income (expense) | $ | (113 | ) | $ | (120 | ) | (6 | )% | $ | (230 | ) | $ | 194 | ─ | % | |||||||||
Noncontrolling interests | $ | (182 | ) | $ | (343 | ) | (47 | )% | $ | (538 | ) | $ | (895 | ) | (40 | )% | ||||||||
Interest expense | $ | (5,388 | ) | $ | (4,507 | ) | 20 | % | $ | (14,310 | ) | $ | (13,213 | ) | 8 | % |
|
| Three Months Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| % Change |
| |||
Other income |
| $ | 6,443 |
|
| $ | 4,308 |
|
|
| 50 | % |
Noncontrolling interests |
| $ | 77 |
|
| $ | (152 | ) |
|
| (151 | )% |
Interest expense |
| $ | (13,221 | ) |
| $ | (10,203 | ) |
|
| 30 | % |
Other Income
Other income for the 2017 third2023 and 2022 first quarters include income of $1.2 million and $3.4 million, respectively, for all components of net benefit costs except the service cost component related to the Company’s defined benefit plans. The 2023 first quarter and first nine months increased 20% and 8%, respectively, comparedalso includes interest income associated with the 2016 third quarter and first nine months, primarily the result of lower capitalized interest in the 2017 third quarter and first nine months, and increased interest expense due to additional borrowing under the revolving credit facility to finance the S&S acquisition. During the 2017 and 2016 third quarters, theIRS refund.
Interest Expense
The following table sets forth average debt and average interest rate (excluding capitalized interest) were $724,389,000 and 3.0%, and $772,964,000 and 2.7%, respectively. For(dollars in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Average debt |
| $ | 1,201,841 |
|
| $ | 1,178,916 |
|
Average interest rate |
|
| 4.4 | % |
|
| 3.5 | % |
Interest expense for the 2023 first nine months of 2017 and 2016,quarter increased 30% compared with the average debt and2022 first quarter, primarily due to a higher average interest rate (excludingand slightly higher average debt outstanding. There was no capitalized interest) were $691,374,000 and 3.0%, and $756,425,000 and 2.7%, respectively. The Company recognized additionalinterest excluded from interest expense of $187,000 induring the 2017 second quarter due to the write-off of certain deferred issue costs in connection with an amendment of the Revolving Credit Facility. Interest expense excludes capitalized interest for the 2017 and 2016 third quarters of $208,000 and $786,000, respectively, and for the 2017 and 20162023 or 2022 first nine months of $1,522,000 and $2,287,000, respectively.
22
Financial Condition, Capital Resources and Liquidity
Balance Sheet
The following table sets forth the significant components of the balance sheetsheets (dollars in thousands):
|
| March 31, |
|
| December 31, |
|
| % Change |
| |||
Assets: |
|
|
|
|
|
|
|
|
| |||
Current assets |
| $ | 1,200,366 |
|
| $ | 1,211,759 |
|
|
| (1 | )% |
Property and equipment, net |
|
| 3,665,510 |
|
|
| 3,633,462 |
|
|
| 1 |
|
Operating lease right-of-use assets |
|
| 155,306 |
|
|
| 154,507 |
|
|
| 1 |
|
Goodwill |
|
| 438,748 |
|
|
| 438,748 |
|
|
| — |
|
Other intangibles, net |
|
| 49,325 |
|
|
| 51,463 |
|
|
| (4 | ) |
Other assets |
|
| 65,493 |
|
|
| 64,985 |
|
|
| 1 |
|
|
| $ | 5,574,748 |
|
| $ | 5,554,924 |
|
|
| — | % |
|
|
|
|
|
|
|
|
|
| |||
Liabilities and stockholders’ equity: |
|
|
|
|
|
|
|
|
| |||
Current liabilities |
| $ | 614,788 |
|
| $ | 642,197 |
|
|
| (4 | )% |
Long-term debt, net – less current portion |
|
| 1,075,658 |
|
|
| 1,076,326 |
|
|
| — |
|
Deferred income taxes |
|
| 638,438 |
|
|
| 625,884 |
|
|
| 2 |
|
Operating lease liabilities – less current portion |
|
| 146,445 |
|
|
| 142,140 |
|
|
| 3 |
|
Other long-term liabilities |
|
| 14,279 |
|
|
| 23,209 |
|
|
| (38 | ) |
Total equity |
|
| 3,085,140 |
|
|
| 3,045,168 |
|
|
| 1 |
|
|
| $ | 5,574,748 |
|
| $ | 5,554,924 |
|
|
| — | % |
Current assets as of September 30, 2017March 31, 2023 decreased 1% compared with December 31, 2016 (dollars in thousands):
September 30, 2017 | December 31, 2016 | % Change | ||||||||||
Assets: | ||||||||||||
Current assets | $ | 890,764 | $ | 632,951 | 41 | % | ||||||
Property and equipment, net | 3,096,110 | 2,921,374 | 6 | |||||||||
Goodwill | 919,276 | 598,131 | 54 | |||||||||
Other assets | 294,265 | 137,439 | 114 | |||||||||
$ | 5,200,415 | $ | 4,289,895 | 21 | % | |||||||
Liabilities and stockholders’ equity: | ||||||||||||
Current liabilities | $ | 462,190 | $ | 358,338 | 29 | % | ||||||
Long-term debt – less current portion | 1,031,028 | 722,802 | 43 | |||||||||
Deferred income taxes | 756,268 | 705,453 | 7 | |||||||||
Other long-term liabilities | 74,801 | 90,435 | (17 | ) | ||||||||
Total equity | 2,876,128 | 2,412,867 | 19 | |||||||||
$ | 5,200,415 | $ | 4,289,895 | 21 | % |
Property and equipment, net of accumulated depreciation, at September 30, 2017,March 31, 2023 increased 6%1% compared with December 31, 2016.2022. The increase reflected $124,520,000$81.4 million of capital additions (including an increase in accrued capital expenditures for the 2017 first nine months,of $8.2 million), partially offset by $49.2 million of depreciation expense and $0.2 million of property disposals more fully described under Cash Flows and Capital Expenditures Reflected on the Balance Sheet below, and the fair valuebelow.
Operating lease right-of-use assets as of the property and equipmentMarch 31, 2023 increased 1% compared to December 31, 2022, primarily due to new leases acquired in acquisitions of $220,485,000, less $141,116,000 of depreciation expense for the 2017 first nine months and $29,152,000 of property disposals during the 20172023 first nine months.
Other intangibles, net, as of September 30, 2017 increased 54%March 31, 2023 decreased 4% compared with December 31, 2016, predominantly reflecting2022, primarily due to amortization during the goodwill recorded in the S&S acquisition and in the barge fleeting and marine fueling operation business acquisition.
Other assets at September 30, 2017as of March 31, 2023 increased 114%1% compared with December 31, 2016,2022, primarily reflecting other assets acquired in the S&S acquisition, including intangible assets other than goodwill. The increase also reflected due to additional deferred major maintenance dry-dockdrydock expenditures on ocean-going vesselsincurred during the 20172023 first nine months, netquarter partially offset by amortization of amortization.
Current liabilities as of September 30, 2017 increased 29%March 31, 2023 decreased 4% compared with December 31, 2016, primarily reflecting the current liabilities of S&S. Accounts payable increased 59%, a reflection of the S&S acquisition, as well as increased business activity levels in the land-based market.2022. Accrued liabilities increased 10%, the majority of which was attributabledecreased 15% primarily due to the S&S acquisition, partially offset by a reductionpayment of employee incentive compensation bonuses, property taxes, and interest. Deferred revenue increased 4% primarily due to deposits on equipment expected to be shipped later in insurance claims payable. Deferred revenues increased 12%, primarily reflecting the S&S acquisition, offset by decreased advanced billings2023 in the land-based market and the coastal marine transportation market.
Long-term debt, net – less current portion, as of September 30, 2017 increased 43%March 31, 2023 was flat compared with December 31, 2016,2022, primarily reflecting the maturity of the 3.29% senior notes due February 27, 2023, offset by borrowings under the Company’s3.46% and 3.51% senior notes due January 19, 2033 and the 2027 Revolving Credit Facility in September 2017 to finance the S&S acquisition and the purchase in July 2017 of tank barges and towboats from an undisclosed competitor for $68,000,000. Net deferred debt issue costs were $3,641,000 and $3,184,000 at September 30, 2017 and December 31, 2016, respectively. In addition, as a result of the S&S acquisition, the Company assumed $10,258,000 in long-term debt held by the seller.
Deferred income taxes as of September 30, 2017March 31, 2023 increased 7%2% compared with December 31, 2016. The increase2022, primarily reflectsreflecting the 2017 first nine months deferred tax provision of $32,783,000 and an increase in deferred tax$12.6 million.
Operating lease liabilities – less current portion, as of $8,486,000March 31, 2023 increased 3% compared to December 31, 2022, primarily due to new leases acquired and liability accretion during the adoption of ASU 2016-09 on January 1, 2017. The adoption reduced deferred tax assets by $8,486,000, which reflected the cumulative difference between the tax effect of stock-based compensation recognized for tax purposes and amounts recognized for financial reporting purposes, resulting in the recognition of a cumulative-effect adjustment to retained earnings of $8,486,000.
Other long-term liabilities as of September 30, 2017March 31, 2023 decreased 17%38% compared with December 31, 2016.2022, primarily due to a decrease in pension liabilities and amortization of intangible liabilities.
23
Total equity as of March 31, 2023 increased 1% compared with December 31, 2022. The decreaseincrease was primarily due to a reduction in the pension liability related to a pension plan amendment on April 12, 2017 that lowered the projected benefit obligation of the pension plan by $33,433,000, partially offset by the accrual of pension expense during the 2017 first nine months.
Long-Term Financing
The following table summarizes the Company’s outstanding debt (in thousands):
|
| March 31, |
|
| December 31, |
| ||
Long-term debt, including current portion: |
|
|
|
|
|
| ||
Revolving Credit Facility due July 29, 2027 (a) |
| $ | 112,000 |
|
| $ | — |
|
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 |
|
| 3,983 |
|
|
| 3,292 |
|
|
|
| 1,085,983 |
|
|
| 1,083,292 |
|
Unamortized debt discounts and issuance costs (b) |
|
| (6,342 | ) |
|
| (3,674 | ) |
|
| $ | 1,079,641 |
|
| $ | 1,079,618 |
|
At the beginning of 2022, the Company had in place its 2024 Credit Agreement with a syndicategroup of commercial banks, with JPMorgan Chase Bank, N.A. as the administrative agent bank, that increases the borrowing limit from $550,000,000 to $850,000,000allowed for an $850 million 2024 Revolving Credit Facility and extends thea 2024 Term Loan with a maturity date to June 26, 2022. In addition,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 $300,000,000 increase$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 $5.1 million and available borrowing capacity was $382.9 million as of March 31, 2023.
The 2027 Term Loan is repayable in the aggregate commitmentsquarterly installments, with no repayments until June 30, 2025, in increasing percentages of the banksoriginal 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 the form of revolving credit loanswhole or term loans, subject to the consent of each bank that elects to participate in the increased commitment.part, without penalty. The 2027 Credit Agreement provides for a variable interest rate spread varies withbased on the Company’s senior debt rating and is currently 1.00% over LIBORSecured Overnight Financing Rate (“SOFR”) or equal to an Alternate Base Ratea 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.factors (the “Alternate Base Rate”). The commitment feeinterest rate varies with the Company’s credit rating and is currently 0.10%.137.5 basis points over SOFR or 37.5 basis points over the Alternate Base Rate. The Revolving2027 Credit FacilityAgreement contains certain restrictive financial covenants including an interest coverage ratio and a debt-to-capitalization ratio. In addition to financial covenants, the Revolving2027 Credit FacilityAgreement 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 Revolving2027 Credit FacilityAgreement may be used for general corporate purposes the purchase of existing or new equipment, the purchase of the Company’s common stock, or for businessincluding acquisitions. The Company recognized additional interest expense of $187,000 in the 2017 second quarter due to the write-off of certain deferred issue costs in connection with the amendment of the Revolving Credit Facility. As of September 30, 2017, the Company was in compliance with all Revolving Credit Facility covenants and had $524,410,000 of debt outstanding under the Revolving Credit Facility. The2027 Revolving Credit Facility includes a $25,000,000$25 million commitment which may be used for standby letters of credit. Outstanding letters
24
On February 3, 2022, the Company entered into a note purchase agreement for the issuance of credit under the Revolving Credit Facility were $10,312,000 as of September 30, 2017.
The Company has a $10,000,000$10 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, 2019. 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 September 30, 2017.2024. Outstanding letters of credit under the Credit Line$10 million credit line were $1,247,000$0.6 million and available borrowing capacity was $9.4 million as of September 30, 2017.
As of March 31, 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, of the S&S acquisition,Notes to Condensed Financial Statements (Unaudited) as well as Note 5, Long-Term Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Cash Flow and Capital Expenditures
The Company generated positive operating cash flows during the 2023 first quarter with net cash provided by operating activities of $16.5 million compared with $32.2 million for the 2022 first quarter, a 49% decrease. Higher revenues and operating income in KMT and KDS during the 2023 first quarter were more than offset by an increase in trade accounts receivable, primarily due to higher revenues and timing of collections, and increased inventory levels in KDS due to higher activity and managing supply chain challenges during the 2023 first quarter. Increases in KMT revenues and operating income were driven by higher term and spot contract pricing and increased barge utilization in the inland and coastal markets during the 2023 first quarter. During the 2023 and 2022 first quarters, the Company assumed $12,135,000generated cash of term debt. The term debt has a maturity date$8.0 million and $14.3 million, respectively, from proceeds from the disposition of September 15, 2032assets, and carries an interest rate$0.1 million and $2.3 million, respectively, from proceeds from the exercise of 4%. The term debt has quarterly interest payments plus quarterly principal paymentsstock options.
For the 2023 first quarter, cash generated was used for capital expenditures of $375,000 due through December 2022 and $99,000 due thereafter through the maturity date. The term debt can be paid off prior to maturity without penalty. As of September 30, 2017, the term debt had $11,759,000 outstanding, of which $1,501,000 was classified as current portion of long-term debt.
Treasury Stock Purchases
During the 2023 first quarter, the Company did not purchase any treasurypurchased 46,850 shares of its common stock during the first nine monthsfor $3.2 million, at an average price of 2017.$67.97 per share. As of November 7, 2017,May 5, 2023, the Company had approximately 1,411,0006.0 million shares available under its existing repurchase authorization. Historically, treasury stock purchases have been financed through operating cash flows and borrowingborrowings under the Company’s Revolving Credit Facility.then current 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
Funds generated from operations are available for acquisitions, capital expenditure projects, common stock repurchases, repayments of borrowings, and for other corporate and operating requirements. In addition to net cash flowflows provided by operating activities, as of May 5, 2023 the Company also had available ascash equivalents of November 7, 2017, $321,207,000$45.8 million, availability of $442.9 million under its 2027 Revolving Credit Facility, and $8,753,000$6.9 million available under its Credit Line.
Neither the Company, nor any of its subsidiaries, is obligated on any debt instrument, swap agreement, or any other financial instrument or commercial contract which has a rating trigger, except for the pricing grid on its Revolving2027 Credit Facility.
The Company expects to continue to fund expenditures for acquisitions, capital construction projects, common stock repurchases, repayment of borrowings, and for other operating requirements from a combination of available cash and cash equivalents, funds generated from operating activities, and available financing arrangements.
The 2027 Revolving Credit Facility’sFacility's commitment is in the amount of $850,000,000$500 million and expires June 26, 2022.matures July 29, 2027. The Senior Notes Series A and Senior Notes Series B4.2% senior unsecured notes do not mature until February 27, 2020 and February 27, 2023, respectively,March 1, 2028 and require no prepayments.
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and require no prepayments. The 2027 Term Loan in the amount of $250 million is subject to quarterly installments, beginning June 30, 2025, in increasing percentages of the original principal amount of the loan, with the remaining unpaid balance of approximately $43.8 million payable on July 29, 2027, assuming no prepayments. The 2027 Term Loan is prepayable, in whole or in part, without penalty.
There are numerous factors that may negatively impact the Company’s cash flowflows in 2017.2023. For a list of significant risks and uncertainties that could impact cash flows, see Note 12,14, Contingencies inand Commitments, of the financial statements and Item 1A — Risk Factors in this report,Notes to Condensed Financial Statements (Unaudited), and Item 1A — Risk Factors and Note 13,14, Contingencies and Commitments, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022. Amounts available under the Company’s existing financial arrangements are subject to the Company continuing to meet the covenants of the credit facilities as described in Item 2, Management’s Discussion and AnalysisNote 5, Long-Term Debt, of the Notes to Condensed Financial Condition and Results of Operations underStatements (Unaudited) as well as Note 5, Long-Term Financing.
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 $30,466,000$18.1 million at September 30, 2017,March 31, 2023, including $11,829,000$11.3 million in letters of credit and $18,637,000$6.8 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.
KMT 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 terms of the contract. In general, the fuel escalation clauses are effective over the long-term in allowing the Company to recover changes in fuel costs due to fuel price changes. However, the short-term effectiveness of the fuel escalation clauses can be affected by a number of factors including, but not limited to, specific terms of the fuel escalation formulas, fuel price volatility, navigating conditions, tow sizes, trip routing, and the location of loading and discharge ports that may result in the Company over or under recovering its fuel costs. SpotThe Company’s spot contract rates generally reflect current fuel prices at the time the contract is signed but do not have escalators for fuel.
While inflationary pressures have increased, the last three years, inflationCompany has had a relatively minor effect oncertain mechanisms designed to help mitigate the financial resultsimpacts of the Company. The marine transportation segmentrising 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 limits exposure to inflation. The repair portion of the distribution and services segmentKDS is based on prevailing current market rates.
Item 3.Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to risk from changes in interest rates on certain of its outstanding debt. The outstanding loan balances under the Company’s current bank credit facilities bear interest at variable rates based on prevailing short-term interest rates in the United States, andwhile the previous bank credit facilities also included Europe. A 10% change1% increase in variable interest rates would impact the 20172023 interest expense by $172,000$1.7 million based on balances outstanding at December 31, 2016,2022, and would change the fair value of the Company’s debt by less thanapproximately 1%.
Item 4.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 September 30, 2017.March 31, 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 September 30, 2017,March 31, 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.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.
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. There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2017March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is in the process of integrating S&S and the Company's internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed.
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PART II – OTHER INFORMATION
Item 1.Legal Proceedings
See Note 13, Contingencies and Commitments, of the Notes to Condensed Financial Statements (Unaudited).
Item 1A.Risk Factors
The Company continues to be subject to the risk factors previously disclosed in its “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
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 |
| ||||
January 1 — January 31, 2023 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
February 1 — February 28, 2023 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
March 1 — March 31, 2023 |
|
| 46,850 |
|
| $ | 67.97 |
|
|
| — |
|
|
| — |
|
Total |
|
| 46,850 |
|
| $ | 67.97 |
|
|
| — |
|
|
| — |
|
Purchases of the Company's common stock in March 2023 were made in the open market pursuant to a discretionary authorization by the Board of Directors.
Item 6.Exhibits
EXHIBIT INDEX
Exhibit Number |
| Description of Exhibits |
3.1 | – | |
3.2 | – | |
4.1 | – | See Exhibits 3.1 and 3.2 hereof for provisions of our Restated Articles of Incorporation of the Company with all amendments to date and the Bylaws of the Company with all amendments to date (incorporated, respectively, by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2014 and Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 28, 2022). |
10.1† | – | |
10.2† | – | |
10.3 | – | |
10.4†* | – | |
10.5†* | – | |
10.6†* | – | |
31.1* | – | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) |
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31.2* | – | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) |
32* | – | |
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 Document |
101.CAL* | – | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | – | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | – | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | – | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | – | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
– | 2005 Stock and Incentive Plan | |
– | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) | |
– | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) | |
– | Certification Pursuant to 18 U.S.C. Section 1350 | |
101.INS* | – | XBRL Instance Document |
101.SCH* | – | XBRL Taxonomy Extension Schema Document |
101.CAL* | – | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | – | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | – | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | – | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
† Management contract, compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements 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 | ||
Raj Kumar | |||
Executive Vice President and | |||
Chief Financial Officer | |||
Dated: |
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